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  • OTVI.USA
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American Shipper

U.S. importers wary of customs rules for post-quota textile entries

U.S. importers wary of customs rules for post-quota textile entries

   U.S. importers of textile and apparel goods are pleading with the U.S. government not to wait until the end of the year to make decisions on the admissibility of goods once quotas expire at the end of the year because apparel buyers must make purchasing decisions far in advance of that date.

   Several industry representatives on the Advisory Committee on Commercial Operations (COAC) of the U.S. Customs Service Friday asked Customs and Border Protection to begin setting rules about how to handle quota-free goods in conjunction with the inter-agency Committee for the Implementation of Textile Agreements, which sets U.S. textile trade policy.

   “There are all sorts of Byzantine combinations of circumstances that need to be answered so people are clear what happens to their merchandise,” Thomas Travis, partner in the trade law firm Sandler, Travis and Rosenberg, told Customs officials.

   Under World Trade Organization rules all but a small handful of countries will no longer be subject to quotas governing the origin, type and amount of fabric and apparel exports.

   Apparel buyers are now busy developing new sourcing strategies and lining up suppliers to take advantage of the first quota-free textile and apparel environment in 45 years. Logistics professionals say they expect a surge of merchandise at the turn of the new year as importers rush to market products that previously had been restricted or were subject to expensive quota charges in foreign countries.

   Customs officials agreed that the issue is so critical for retailers, producers and consumers that it should be on the agenda of the next COAC meeting in June and that CITA officials should attend. Several COAC members participated in a conference call one month ago to develop a list of concerns to share with CITA and for reprogramming automated customs entry systems, Janet Labuda, director of textile enforcement, told the panel.

   The situation is rife with uncertainty for importers because it is not clear how shipments that depart in one year and arrive in the other will be handled. In a worst case, importers could make a decision in June to purchase product from a certain country, only to find out at the end of the year that the CITA has decided to slap an embargo on merchandise from that country to protect domestic manufacturers.

   “Our biggest fear is that we will not be able to get goods released,” said Sandra Fallgatter of J.C. Penney.

   The government needs to develop two sets of instructions for all the possible permutations, one for trade with China and one for the rest of the world, Thomas said. China is still subject to certain quotas and tariffs to safeguard certain U.S. industry for several more years under an agreement China signed to gain full WTO trading rights.

   Jayson Ahern, the assistant commissioner in charge of field operations, told COAC that the agency will work to get information about the quota transition on its Web site as fast as possible in order to help importers have some predictability in their planning.

   Scott Johnson, director of trade compliance for Gap Inc., requested that Customs at least provide a timetable for its decision-making process even if it is not yet prepared to make actual decisions. Under some scenarios envisioned by importers, merchandise might have to be staged for months awaiting entry or may not even be admissible at all, he said.

   It is critical that Customs decide how to handle the new quota-free merchandise as soon as possible, because apparel importers are issuing letters of credit now for goods that will ship at the end of the year, Johnson said. The letter of credit includes an itemized list for suppliers of the manufacturing and transportation documents that must accompany a shipment for customs purposes.

   “If (the requirements) were to change you’d have inaccurate and non-compliant documents with respect to the letter of credit, which could mess up the transaction in its entirety,” Johnson said. “So if we have a projection then we can say we may amend our letter of credit in September, or address our letter of credit in July.

   “If a decision came in November or December it would be extremely disruptive,” he warned.

   Labuda said Customs has come up with general answers for some scenarios. If merchandise is exported in 2004 and entered the same year then importers and brokers can prefile quotas. If merchandise is exported in 2005 there is no need to prefile in 2004. If merchandise is exported in 2004, but entered in 2005 then no pre-filing is can take place because Customs will have eliminated quota pre-processing.

   Another question surrounds the continued use of export visas under the quota. Many exporters may still want to hold onto the visa system to identify different levels of tariffs and preferences for countries that are part of various multilateral and bilateral free trade agreements. Labuda said Customs is going to encourage those that still want to use visas that they must file them electronically.

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