Hurdles ahead as Chinese textile/apparel quotas end, ST&R warns
Companies importing apparel from China face a number of duty challenges in the final months of 2008, including a number of 'scenarios that illustrate that the environment with respect to textile and apparel imports from China is rapidly becoming more threatening,' trade law firm Sandler, Travis & Rosenberg said Friday.
In an e-mail about the challenges, ST&R said imposition of countervailing duties, antidumping duties and section 421 safeguards could also hinder Chinese apparel imports even as quotas are set to expire Dec. 31.
'The domestic textile industry, the Bush administration and Congress are all taking steps that could increase costs and tighten enforcement,' the e-mail said.
Specifically, the message is that the National Council of Textile Organizations, which advocates for domestic producers, will try to prevent Chinese-made textiles from running riot in the United States come 2009.
'Perhaps the most likely possibility is the imposition of countervailing duties against textile and apparel shipments from China,' ST&R said. 'Since the Department of Commerce lifted its 20-year moratorium on CV cases against China in 2006, numerous such cases have been filed and affirmative determinations have been made in all those that have been completed, with CV rates ranging from 7 percent to 615 percent. Although no CV case to date has targeted textile or apparel products, the National Council of Textile Organizations (which cannot file a CV case on its own) has reportedly received a positive response from U.S. apparel manufacturers approached about their interest in bringing such a case. The NCTO has also identified over 70 Chinese government programs that it believes constitute illegal subsidies. Finally, Congress has signaled its support of CV cases against China by moving to fund the creation of an office within the DOC specifically tasked with handling such investigations.'
ST&R said antidumping monitoring programs on Vietnamese textile imports are due to end soon, and that could lead to more cases requesting duties against import from both Vietnam and China.
'The DOC's program to monitor certain textile and apparel imports from Vietnam, which was designed to determine whether the administration should self-initiate AD duty cases against such products, is currently expected to end next January with no such cases having been launched,' the e-mail said. 'However, this system has been viewed by both the DOC and the NCTO as a dress rehearsal for a similar program against imports from China, and Congress is now moving to make such a program a reality.
'A report on the fiscal year 2009 DOC appropriations bill states that the House Appropriations Committee expects the DOC to 'undertake apparel import monitoring, including socks, focusing on prices of imports from China and Vietnam and whether their state-run industries are illegally pricing products and dumping in the U.S. market.' This monitoring would likely focus on goods currently subject to quota. While the report language does not have the force of law, it does indicate the intent of Congress and the DOC would be expected to comply. The Senate Appropriations Committee report does not include a similar exhortation, but if the final conference report on the bill is silent on the issue the guidance will stand.
'Whether this monitoring program would lead to AD duty cases against China is unclear. The House committee report makes no mention of the DOC self-initiating cases, and the domestic industry could face challenges in filing cases on its own due to concerns about proper legal standing.'
Another challenge could come from the so-called Section 421 of the Trade Act of 1974, which permits the United States to impose product-specific safeguards against China for up to five more years.
'The domestic industry could also pursue import restrictions under Section 421,' ST&R said. 'Although the Bush administration has denied relief in the handful of Section 421 cases filed to date, the next president, who will take office in six months, may take a different approach. There are also several legislative proposals pending that would limit the president's authority to reject Section 421 remedies.
Lastly, the law firm said there is some movement by the NCTO to generate support among domestic producers and third countries for a complaint against alleged Chinese subsidies at the World Trade Organization.