FEBRUARY 29, 2008

Congress Approves 10-Month Extension of Andean Trade Preferences
House and Senate lawmakers passed legislation (H.R.5264) this week extending existing duty-free treatment for certain apparel and a wide range of other goods from four Andean nations (Bolivia, Colombia, Ecuador and Peru) until the end of this year. The House approved the measure on Wednesday, and the Senate voted Thursday. The bill now goes to the President, who is expected to sign it before preferences expire at the end of the day on February 29.

As previously reported in Footnotes, the 10-month extension represents a compromise with the Administration and congressional Republicans, who sought a shorter-term extension of Andean preferences to build pressure for passage of a pending free trade agreement with Colombia this year. According to Administration sources, the next six to eight weeks will see a strong push for passage of that agreement by the White House and key economic agencies. On Tuesday, President Bush joined several former Clinton Administration officials to urge Congress to approve free trade with Colombia. House Democratic leaders have said they cannot support that deal until Colombia shows more progress on reducing violence against trade unionists and putting murderers in jail.

Ways and Means Committee Requests Public Comments on Miscellaneous Tariff Bills
As part of its regular biannual review of U.S. trade laws, the House Ways and Means Trade Subcommittee announced Monday that it is seeking public comments on more than 800 separate bills that would temporarily reduce U.S. customs duties on certain wool, synthetic fibers, chemicals, dyes and other intermediate materials. The announcement provides detailed instructions for comments, and the Subcommittee will review all information received by April 10 and determine which measures should be included in a broader Miscellaneous Tariff Bill (MTB) presented for approval by the full Committee and House for approval. The Subcommittee will pay particular attention to comments expressing opposition to one or more of the bills – especially from potential domestic suppliers. MTBs are generally non-controversial and designed to strengthen American manufacturing competitiveness by lowering duties on inputs that are not made domestically. To facilitate THA member review of the large number of measures for which comments have been requested, Footnotes has prepared a complete list of the bills, highlighting those that may be of particular interest to the legwear industry.

According to Capitol Hill sources, the Senate Finance Committee recently initiated a separate process to develop its own MTB, and Committee staff plans to request proposals for temporary duty reduction from Senators beginning this week. This process may provide another opportunity for businesses that would benefit from duty reductions on certain materials but did not suggest them in time for House consideration to submit them through one of their home state Senators. MTBs passed separately by the House and Senate would be reconciled in conference before final consideration in both chambers.

CAFTA Implementation Deadline for Costa Rica Delayed until October 1
Just ahead of a March 1 deadline for signatory countries to join the CAFTA-DR free trade agreement (FTA), U.S. Trade Representative Susan Schwab and officials from the six other FTA partner countries announced a deal Wednesday that will give Costa Rica an additional seven months to make legislative and regulatory changes necessary to begin enjoying the benefits of the agreement. Concluded in August 2004, the CAFTA-DR is currently in force for all signatory countries except Costa Rica, where protests and opposition delayed ratification until October 2007. The CAFTA-DR establishes a two-year period (which began March 1, 2006) for signatory countries to join the agreement after it first takes effect. A country may join after the two-year deadline, but only if the countries that have already joined agree.

This week’s deal ensures Costa Rica can eventually join the FTA, but further delays permanent tariff cuts and other advantages for U.S. apparel firms that may be trading with that country. According to the latest Commerce Department data, the United States imported more than $52 million in hosiery products from Costa Rica last year, and exported similar goods worth nearly $44 million.

Petroleum, Euro Hit Record Highs as Fed Chairman Hints at Further Rate Cut
Stressing continued downside risks to U.S. economic growth in Wednesday testimony before the House Financial Services Committee, Fed Chairman Ben Bernanke hinted at an additional rate cut when the Federal Open Market Committee meets again on March 18. Lower interest rates could ease tightening credit, but are also likely to further weaken the dollar relative to other currencies and raise the price of imported commodities and raw materials – including oil. In Wednesday trading, light sweet crude futures touched a record $102.08 a barrel on the New York Mercantile Exchange (NYMEX) before dropping to close at $100.76. The same day saw the Euro gain against the dollar, reaching a new high of $1.5057.

Rising oil prices will continue to push freight rates and the cost of polyester, nylon, spandex and other petroleum-based synthetic fibers sharply higher. However, the falling dollar may give a cost advantage to some domestic manufacturers as new export opportunities open and U.S. retailers reconsider orders from Europe and elsewhere abroad. The following chart lists average closing prices for petroleum (light sweet crude) and natural fibers futures contracts traded on the NYMEX and the Australian Securities Exchange (ASX) for February 22 through 28. A revised version of this chart will appear in each subsequent edition of Footnotes.

FUTURES PRICES FOR HOSIERY INPUTS
(February 22 -- February 28, 2008)

Padilla Meets with Honduran Trade Minister on CAFTA-DR, Sock Safeguard
Undersecretary of Commerce for International Trade Chris Padilla met with Honduran Trade Minister Fredis Cerrato on Wednesday to discuss implementation of the CAFTA-DR free trade agreement and the planned safeguard tariff on cotton socks from Honduras announced by the U.S. Committee for the Implementation of Textile Agreements (CITA) on January 18. According to Commerce Department officials, CITA will soon hold another round of consultations with Honduras on the safeguard. The consultation period for textile safeguard actions established under the CAFTA-DR expires on March 28. After that date, CITA will have 30 days to decide on the level of the tariff to be imposed. The tariff imposed could be as high as 13.5 percent. Speaking to local Spanish-language reporters following the meeting, Padilla stressed that such a safeguard is permitted under the CAFTA-DR and “would be a temporary measure” undertaken “in the most cautious way so that it will not result in any way in a reduction in investment in Honduras.”

According to Commerce Department figures, the United States posted a nearly $3.7 billion trade surplus with Honduras and the other CAFTA-DR countries in 2007, up from $1 billion in 2006. U.S. exports to the region grew at a record pace during that period, growing more than 14 percent to $22.4 billion.

Commerce Considers Short Supply Petition on Viscose Rayon Fiber
In response to a petition filed by a domestic manufacturer under the U.S.-Australia free trade agreement (FTA), the U.S. Committee for the Implementation of Textile Agreements (CITA) has requested public comments on whether certain viscose rayon fiber can be supplied by the domestic or Australian industries in commercial quantities in a timely manner. Comments are due to CITA by March 27.

Alleging that certain viscose rayon fiber cannot be supplied by the domestic or Australian industries, the U.S. firm has specifically asked CITA to consider whether the U.S. – Australia FTA rule of origin for 52% viscose/48% polyester blended yarn should be modified to allow the use of non-U.S. and non-Australian viscose rayon fiber. If CITA agrees with the U.S. manufacturer following an investigation and review of any public comments, it may recommend that the President proclaim the modification after reaching an agreement with the Government of Australia.

The burden of proof is on the petitioner to demonstrate “short supply”. The requested modification to the FTA rules of origin likely would lower the cost or enable the production of 52% viscose/48% polyester blended yarn in the United States – but possibly at the expense of potential domestic suppliers.

Foreign Trade Zones Board Requests Public Comments on Application for Subzone Status
In response to an application filed by the Dallas/Fort Worth International Airport Board on February 19, the Foreign Trade Zones Board (FTZB) has requested public comments on whether special-purpose subzone status should be granted to the apparel warehousing and distribution facility of The Apparel Group, Ltd (TAG). Such status would exempt TAG from customs duty payments on foreign products that are re-exported (about 4% of shipments). On domestic sales, duty payments would be deferred until the foreign merchandise is entered for U.S. consumption. Certain logistical/supply chain management efficiencies would also be realized through subzone status. The application indicates that the savings from foreign trade zone procedures would help improve the facility’s international competitiveness. Comments are due to the FTZB by April 28.