MARCH 7, 2008

Senate Passes Product Safety Legislation
On a vote of 79-13, Senate lawmakers passed product safety legislation March 6 that would broaden the authority of the U.S. Consumer Product Safety Commission (CPSC) and increase penalties for product safety violations. Unlike a measure backed by business and passed unanimously by the House last year (H.R. 4040), the Senate bill (S. 2663) sponsored by Senator Mark Pryor (D-AR) could expose manufacturers, private labelers, distributors and retailers to increased liability if found to violate laws administered by the CPSC – including the Flammable Fabrics Act. Congressional staff believes these and other more controversial provisions in the Senate bill will be addressed as that measure is reconciled with the House bill in conference. However, the extent of any changes is not yet clear.

Manufacturers have expressed particular concern about provisions of the Senate bill that would increase maximum civil penalties for product safety violations to $20 million (twice that included in the House-passed measure), authorize state attorneys general to enforce laws administered by the CPSC (possibly resulting in various interpretations of product safety laws across multiple jurisdictions), and extend whistleblower protection for employees of manufacturers, private labelers, distributors, and retailers.

Baucus Puts TAA, Enforcement First at Hearing on Administration’s Trade Priorities
In testimony Thursday before the Senate Finance Committee on the Administration’s trade priorities, U.S. Trade Representative Susan Schwab continued to press for passage of pending free trade agreements (FTAs) with Colombia, Panama and Korea. However, Committee Chairman Max Baucus (D-MT) made clear in his prepared statement and remarks throughout the hearing that unless Trade Adjustment Assistance (TAA) is expanded and reauthorized, the Committee will not consider any FTAs. He also repeatedly stressed the need for tougher trade remedy laws and border enforcement, as outlined in the Trade Enforcement Act (S.1919) he and others introduced in November.

Legislation that would expand and reauthorize TAA passed the House last year, but has not yet been considered in the Senate. Baucus wants to increase funding for the program and broaden its mandate to cover service workers, among other changes. The Bush Administration has threatened to veto the House TAA bill, and has sought to use its concerns about the measure as leverage to secure passage of one or more of the pending FTAs. However, the success of that strategy now appears increasingly in doubt.

FTC Announces Review of Textile Labeling, Green Regulations
On March 5, the Federal Trade Commission (FTC) announced a schedule for the next phase in its ongoing systematic review of industry rules and guides – including planned consideration of regulations under the Textile Fiber Products Identification Act and the Wool Products Labeling Act in 2009. The FTC will review three rules this year, including guidelines for the use of environmental marketing claims. While the scope of the review and possible changes to those guidelines is not yet clear, the process could have important implications for sock and other legwear manufacturers pursuing niche markets in eco-friendly products. The Commission will hold a workshop on April 30 to examine developments in green packaging claims and the consumer perception of such claims, and has requested public comments on the environmental marketing guidelines by May 19.

Oil Prices Continue to Rise as OPEC Declines to Raise Output
Oil prices continued their upward spiral over the last five days as OPEC declined to raise output at its March 5 meeting and investors continued to take shelter in commodities as a hedge against inflation and a low dollar. Light sweet crude for April delivery touched a new record high of $105.97 a barrel in Thursday trading on the New York Mercantile Exchange (NYMEX). Meanwhile, the dollar continued its slide against the Euro and other major currencies following a new Federal Reserve report showing broad weakness in the U.S. economy and declines in demand for factory goods.

Rising oil costs will continue to put pressure on prices for polyester, nylon, spandex and other petroleum-based synthetic fibers. However, government actions will also play a role. Moves this week by the Indian government to raise tariffs on naphtha – an important ingredient in polyester and nylon production – could increase the cost of synthetic fiber garments from that country by two to three percent, according to one estimate. India is among the leading suppliers of manmade fiber hosiery to the United States.

FUTURES PRICES FOR SELECT HOSIERY INPUTS
(Thursday, February 28 - Wednesday, March 5, 2008)

Coast Guard Restrictions on Indonesia Vessels Could Cause Delays
A recent Coast Guard determination that Indonesia is not maintaining effective antiterrorism measures at its ports could cause unanticipated delays in shipments from or through that country. Indonesia is an important U.S. supplier of cotton and manmade fiber hosiery and a possible transit point for such products bound for the United States from elsewhere in Asia. According to a February 25 Coast Guard advisory, effective March 10 any vessel that has visited a port in Indonesia (with certain exceptions) during its last five port calls must take specified additional security measures and report them to the Coast Guard prior to arrival in the United States. Failure to fulfill these requirements will result in a denial or delay of the entry of that vessel. THA members importing products from or through Indonesia may wish to contact their freight forwarder or third-party logistics provider to ensure operators of vessels carrying their products are taking appropriate actions to comply with the requirements.

Venezuela Moves Bolster National Security Argument for Colombia FTA
Moves by Venezuelan President Hugo Chavez to mass troops along his country’s border with Colombia following an incursion by Colombian soldiers into neighboring Ecuador have bolstered the Bush Administration’s national security arguments in favor of the U.S.-Colombia free trade agreement (FTA) in the midst of a broader push for congressional passage of the deal. In a March 4 statement critical of Venezuela’s actions, President Bush again called on Congress to pass the FTA, saying the deal “is more than a matter of smart economics, it is a matter of national security.” Congressional staff is not optimistic that the House and Senate will approve any new trade agreement this year, but admit Congress is more likely to move ahead if the Administration succeeds in turning the FTA into a national security issue.

The FTA would eliminate more than 80 percent of U.S. and Colombian tariffs on industrial and consumer products over ten years. Textile and apparel goods that meet certain rules set out in the agreement would be duty-free immediately. The FTA has already been passed by Colombia’s National Assembly and now awaits legislative approval in the United States.

China Losing Competitiveness According to AmCham Survey
More than half of the over 66 U.S. and other foreign companies invested in China and surveyed in a March 4 report prepared for the American Chamber of Commerce in Shanghai by Booz Allen Hamilton believe the country is losing manufacturing competitiveness relative to other low-cost locations – including Vietnam and India. According to the report, foreign companies producing in China are maintaining profits despite the rise in currency, increasing wages and a rapidly changing marketplace. However, they no longer consider China a low-cost, manufacturing-for-export center and have diversified operations in order to maintain profit margins. The report concludes that companies that both sell to the Chinese market and manufacture for export have two-thirds higher profits than those just focused on one of those objectives.