APRIL 28, 2008 (OFFICIAL UPDATE)

Administration Announces Short-Term Tariff on Honduras Socks
As previewed in the April 11 edition of Footnotes, the Bush Administration announced late Friday that it will impose a five percent safeguard tariff on cotton socks from Honduras. The tariff will go into effect for goods entered or withdrawn for consumption from July 1 through December 31, 2008. The Administration first proclaimed its intent to impose a safeguard tariff on cotton socks from Honduras on January 18, and Friday’s announcement ends more than three months of internal agency deliberations and consultations between the U.S. and Honduran governments.

Under the CAFTA-DR Free Trade Agreement (FTA), the Administration could have imposed a tariff of up to 13.5 percent for as long as three years, and the small size and short duration of the safeguard provoked immediate criticism from Representative Robert Aderholt (R-AL) and other Members of Congress who voted for the CAFTA with the understanding the Administration would make full use of safeguards and other measures to protect domestic sock and other textile manufacturing. In a statement, Aderholt said he was “deeply disappointed and very frustrated” by the size and duration of the tariff. “I will continue to be a thorn in the side of the Administration when it comes to fighting to protect our sock industry,” he said.

However, Administration sources note that this will be the first time such a safeguard has ever been imposed under any U.S. FTA, and emphasized that a high tariff in place for a longer period could have prompted Honduras to exercise its rights under CAFTA to retaliate by imposing higher tariffs on imports of other products from the United States.

APRIL 25, 2008

CPSC to Host Roundtable on Effects of Proposed Ban on Children’s Products Containing Lead
House and Senate staff just began meeting informally last week to reconcile separate product safety bills passed by each chamber earlier this year, but the Consumer Product Safety Commission (CPSC) is already preparing for congressional approval of final legislation, expected before Memorial Day. The Commission will hold a one-day roundtable on May 13 to brief industry on what the legislation might mean for children’s products containing lead, including certain apparel. The House bill (H.R.4040) calls for a ban, effective 60 days after enactment, on all products of which any component contains more than 600 parts per million of lead. That level would drop to 250 parts per million lead after two years, and to 100 parts per million after four years. The Senate bill (S.2663) calls for a ban, effective one year after enactment, on all products with a lead content greater than 0.03 percent of the total weight of the item. In three years, that level would drop to 0.01 percent.

At the roundtable, CPSC staff will discuss the lead provisions of both bills, preview likely enforcement and laboratory testing procedures, and note related requirements by other countries. Industry representatives will be asked to discuss the use of lead in consumer products (for example, paints and coatings, plastics, and textiles), potential substitutes for lead in their products, best practices that can be implemented to eliminate or reduce the use of lead, and differences between domestic manufacturing plants and their practices and those outside the United States.

Labor Department Announces Payroll Cost Saving Changes to FMLA
In a move that could cut costs for legwear manufacturers and other businesses, the U.S. Department of Labor last month issued proposed changes to its interpretation and implementation of the Family and Medical Leave Act (FMLA).
Specifically, the Department announced its intention clarify eligibility for FMLA leave by further defining “serious health conditions,” requiring that two visits to a health care provider must occur within the “more than three days” leave period to determine the health condition severity, and permitting employers to contact healthcare providers to confirm information provided by employees. Under the proposed changes, companies would be able to require employees to renew a doctor’s certificate indicating a “serious medical condition” every year, rather than current practice of requiring an open-ended certificate. In addition, employees could be required to give notice of “unscheduled intermittent leave” according to the employer’s call-in procedure (typically in advance) as opposed to the current law allowing employees to call two days after taking leave. Employers could also ask employees who take FMLA intermittent leave to provide certification that they are able to resume work and perform the essential functions of their jobs.

It is not yet clear when – or whether – the proposed changes will take effect. They have already been sharply criticized by several Members of Congress, labor unions and worker advocacy groups. While it is unlikely congressional opponents would be able to marshal the two-thirds majority necessary to pass a joint resolution disapproving the changes and override a presidential veto, they could stall or halt by denying funding for implementation. The FMLA requires businesses with 50 or more employees to provide 12 weeks of unpaid leave to employees when needed to handle family emergencies. A 2005 study by the Employment Policy Foundation found the 7 million employees who used the law cost businesses $21 billion in 2004.

Oil and Dollar Continue March Toward Opposite Extremes as Traders Await Possible Fed Interest Rate Cut Next Week
Oil prices trended higher and the dollar continued to fall against other major currencies this week as OPEC signaled it had no immediate plans to increase production and a European Central Bank official hinted at higher Euro zone interest rates in the near future. Light sweet crude for June delivery rose 23 cents to settle at $118.30 a barrel in Wednesday trading on the New York Mercantile Exchange (NYMEX). Next week’s expected interest rate cut by the Federal Reserve is likely to continue to drive investment in oil futures as traders try to hedge against the declining dollar. And since oil is priced in dollars worldwide, a falling U.S. currency provides little incentive for oil-exporting countries to increase output.

Economic analysts expect higher input prices and weak growth to remain at least through the end of this year. Rising oil prices likely will continue to drive up the cost of polyester, nylon and other petroleum-based fibers, and cotton prices also look set to rise as U.S. farmers shift to more lucrative grains. A recent World Trade Organization (WTO) report found that global trade growth declined in 2007 and may slow even further in 2008. The report concludes world trade grew by 5.5 percent last year, down from 8.5 percent in 2006, and may increase by only 4.5 percent this year. The WTO attributes the slowdown to a sharp economic deceleration in the United States and other key developed countries, which is being only partially offset by continuing strong growth in emerging economies.

FUTURES PRICES FOR SELECT HOSIERY INPUTS
(Thursday, April 17 - Wednesday, April 23, 2008)

EPA Increases Industry Input Over Chemical List
This month, the U.S. Environmental Protection Agency (EPA) announced changes to the way it assesses the potential adverse human health risks of exposure to over 540 environmental contaminants – including chlorine and other chemicals used in hosiery dyes and manufacturing processes. Revisions to the agency’s Integrated Risk Information System (IRIS) include an expanded process for recommending assessment of new substances, earlier involvement by the White House (Office of Management and Budget) and the Departments of Energy and Defense, public “listening sessions” to allow for broader participation and engagement by interested parties, and more rigorous scientific peer review.

These changes should help legwear and other manufacturers by involving a White House office responsible for ensuring cost-effective regulation at an early stage and creating a more predictable, streamlined, and transparent process for reviewing risk assessments for existing listed contaminants and initiating consideration of new products. However, they have already reaped scorn from Senate Environment and Public Works Committee Chairman Barbara Boxer (D-CA), who has called for an April 29 hearing to examine the IRIS changes and the EPA’s entire toxics program. Boxer has expressed concern that allowing the risk assessment process to be under the control of the White House will enable chemical manufacturers and federal agencies to inject “corporate influence” into determinations that will affect public health.

Commerce Advances Sustainable Manufacturing Initiative
In a Federal Register notice published April 18, the Commerce Department outlined near-term steps to advance its Sustainable Manufacturing Initiative. Launched last year, the Initiative is designed to strengthen the competitiveness of American firms seeking to build sustainable practices into their manufacturing process – either to cut costs, ensure compliance with domestic and international environmental regulations or enhance the marketability of their products. To identify the most pressing sustainable manufacturing challenges facing U.S. industry and coordinate public and private sector efforts to address those challenges, the Department initiated a public-private dialogue and hosted a public meeting in September 2007. Based on recommendations received at that meeting, Commerce is establishing an interagency task force on sustainable manufacturing, creating a central online clearinghouse for government programs and resources that support sustainable business, planning domestic trade missions to promote sustainable manufacturing, and creating metrics for sustainable manufacturing. The online clearinghouse features an e-mail list where interested companies and individuals may register for news and other updates on the Initiative.

Supreme Court to Hear Appeal in Case that Could Undermine Value of Antidumping Laws
At the request of the Bush Administration, the U.S. Supreme Court has agreed to review a lower court ruling that could undermine the value of U.S. antidumping laws. Foreign manufacturers who export goods to the United States at prices below their cost of production are considered to be “dumping,” and legal proceedings initiated by a U.S. industry harmed by that practice might result in the imposition of higher antidumping duties on the imported goods. In a case involving enriched uranium, the lower court ruled that imports of finished goods that had previously been exported overseas for further processing could be considered goods or services. For instance, if socks were sent to a manufacturer abroad for the purpose of having ribbons sewn onto them and then exported back to the United States, those goods could be classified as a service on re-entry. And since only goods are subject to antidumping laws, the ruling could prevent the imposition of antidumping duties in certain cases. The Committee to Support U.S. Trade Laws – an association of industry groups – is actively supporting the Bush Administration’s appeal. The Supreme Court is expected to hear the case in October.

Decision to Lift Ban on U.S. Beef Lifts Prospects for Korea FTA
As the Bush Administration sought to shore up support for the NAFTA and a pending U.S. free trade agreement (FTA) with Colombia this week, events elsewhere may strengthen prospects for another pending trade deal with Korea. At an April 22 meeting in New Orleans, President Bush and his Canadian and Mexican counterparts defended the Colombia FTA and highlighted the dangers of renegotiating NAFTA provisions – as both Democratic presidential candidates have repeatedly said they would consider. Canada and Mexico are top export markets for U.S. legwear, with sales valued at more than $124 million last year. As reported previously in Footnotes, procedural moves by House Speaker Nancy Pelosi (D-CA) have postponed any near-term vote on Colombia, but congressional staff continues to believe there could be a vote after the November elections.

While prospects for passage this year remain dim, the U.S. –Korea FTA gained new supporters last week following an April 18 agreement to fully reopen South Korea’s market to all U.S beef and beef products. Citing risks of mad cow disease, Korea banned U.S. beef imports in 2003, and cattle-state Senators – including Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Charles Grassley (R-IA) – had refused to consider the FTA until Korea reopened its market. However, the agreement continues to face strong resistance in the House. Responding to this week’s announcement, Ways and Means Trade Subcommittee Chairman Sander Levin (D-MI) said the problem with the deal “has always been broader than beef - it is the agreement’s basic acquiescence to Korea’s one-way street in manufacturing trade that is also unacceptable.” Senators Hillary Clinton (D-NY) and Barack Obama (D-IL) have also made clear that they would not support the FTA. Korea continues to maintain very high duties on U.S. legwear exports, while enjoying better access to the American market. In 2007, the country was the second largest source of U.S. hosiery imports, with 12 percent share of the import market.

House Members Introduce Legislation To Clarify Export System
Representatives Don Manzullo (R-IL) and Adam Smith (D-WA) introduced legislation (H.R.5828) April 17 that seeks to modernize the U.S. Automated Export System (AES) and address what the sponsors believe is a system that too often punishes inadvertent mistakes made by exporters, including exporters, customs brokers, and freight forwarders of hosiery products, while allowing actual violators to go unpunished. The goal of the proposed changes is to eliminate the number of exporters who accidentally ship prohibited goods or ship to a prohibited location by issuing notices and compliance orders detailing to the exporter incorrect information or other discrepancies with paperwork. The legislation also requires further training of Department of Commerce and other relevant government personnel (including officials with the Departments of State, Homeland Security, Defense and Treasury) to ensure well-trained staff are available to participate in seminars, training meetings and symposiums whose purpose is to educate exporters about U.S. export laws and regulations and the AES in particular.