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May 16, 2008
First Sale Rule Upheld In Veto-Proof Farm Bill
This year’s highly controversial Farm Bill, likely to become law despite a presidential veto threat, will directly impact legwear manufacturers. Included in the latest version of the legislation, approved by the House Wednesday and the Senate Thursday, are provisions that would effectively prevent U.S. Customs and Border Patrol (CBP) from implementing its planned elimination of the so-called “first sale rule” and extend and simplify textile trade preferences for the Caribbean.
As reported in previous editions of Footnotes, Congress and industry leaders have expressed serious concerns about CBP’s proposal to eliminate the first sale rule. A popular valuation rule in place for more than two decades, this rule often lowers duties paid on imported textiles, apparel and other products. Eliminating it would increase the cost of importing legwear and a wide range of other manufactured goods from Asia, Europe and elsewhere that do not receive duty-free treatment under a U.S. free trade agreement or preference program. Within the proposed Farm Bill and related documents, several provisions would prevent Customs from taking any immediate action to revoke the first sale rule by imposing certain roadblocks to near-term action. Specifically, the bill’s report language states that Congress will not authorize funding for CBP to eliminate the rule during the current legislative session (through the end of 2008). The language advises Customs to delay any action until January 1, 2011.
The Farm Bill also extends for two years trade preferences that allow certain legwear and other textiles and apparel imported from the Caribbean to enter the United States duty free. Those preferences are currently set to expire on September 30, 2008. In addition, as previewed in the February 15 edition of Footnotes, the bill would amend certain provisions of the U.S. law granting expanded trade preferences to Haiti. Those amendments would make it easier for legwear and other apparel produced in that country to enter the United States duty-free by simplifying origin rules and expanding incentives to use U.S. inputs.
While President Bush has threatened to veto the Farm Bill, the House passed the measure Wednesday afternoon by a margin of 318-106 and the Senate also passed the measure Thursday afternoon by a margin of 81-15– giving the measure a strong veto-proof majority in both houses. If the President vetoes the bill, both houses would have to vote on the measure again. Depending on how quickly he acts, those votes could be taken and the bill could be come law as early as the end of next week.
CPSC Seeks Public Comments on Strategies to Improve Product Safety Standards
The Consumer Product Safety Commission (CPSC) is seeking public comments by May 30 on four strategies for dealing with safety issues posed by consumer products, including imported products. Particularly relevant to the hosiery industry is the Commission’s stated interest in identifying better systems to engage the private sector and foreign governments, with a view to strengthening compliance with relevant safety standards and promoting the adoption of more effective techniques to identify potential product hazards. CPSC is also accepting comments on how to build better safety assurances into production processes for hosiery and other products.
The proposed strategies are a part of the Commission’s broader effort to prepare for forthcoming product safety legislation. That legislation is not likely to pass Congress in final form until after the Memorial Day recess, but both the House and Senate have now appointed conferees to reconcile separate product safety bills approved by each chamber earlier this year. In addition to the strategies, CPSC held a one-day roundtable on Tuesday to brief industry on what the new product safety legislation might mean for children’s products containing lead – including certain apparel. Many apparel producers are already meeting lead standards that meet or exceed the provisions of the legislation as part of new lead requirements implemented by Wal-Mart Stores in February.
Retail Sales Indicate Economy Better Than Expected; Despite Trade Slump
Despite record gasoline prices, a slump in home values and declines in productivity, American consumers are coping with the economic slowdown better than expected. Retail sales data for April and March, released this week by the Commerce Department, show sales rose 0.5 percent in April, more than twice what economists had forecast. While clothing retailers – including those selling legwear products - reported similar monthly sales as compared to April 2007, the report illustrated that in a weak economy, Americans are shopping more at discount-oriented general merchandisers such as Wal-Mart and Costco and cutting back on visits to costlier department stores.
Data out this week from the Departments of Commerce and Labor and the Federal Reserve showed a lower trade deficit, yet higher import prices. The U.S. Census Bureau, under the Department of Commerce, announced on May 9 that total March exports of $148.5 billion and imports of $206.7 billion resulted in a goods and services trade deficit of $58.2 billion, down from $61.7 billion in February. Industrial production, reported by the Federal Reserve of Thursday, declined 0.7 percent in April. So far, manufacturing has done better than in past economic slowdowns, attributed mainly to stronger export markets. As the world’s manufacturers try to maintain forecasted sales goals, the Labor Department announced a 1.8 percent increase in import pricing in April. Textile mill import prices rose 5.8 percent in April, compared to the same timeframe last year. The rise in import pricing is mainly attributed to rising oil prices, despite a slowdown earlier in the week. On Thursday, light, sweet crude for June delivery was trading at $126.27 per barrel on the New York Mercantile Exchange. Experts project that despite President Bush’s visit to the Middle East this week, in part, to encourage the Organization of the Petroleum Exporting Countries (OPEC) governors to curb oil prices, the price of oil will continue to rise.
FUTURES PRICES FOR SELECT HOSIERY INPUTS
(Thursday, May 8 -- Wednesday, May 14, 2008)
House Committee To Review Costly Container Scanning Requirement
The House Homeland Security Committee has announced plans to revise a controversial statute passed in August 2007, which requires all U.S.-bound cargo containers to be scanned at foreign ports by 2012. Congressional and industry officials said last week they are anxiously awaiting an overdue report from the Department of Homeland Security (DHS) on container scanning pilot programs at Southampton Container Terminals in the United Kingdom, Port Qasim in Pakistan and Puerto Cortez, Honduras. Pakistan and Honduras are leading suppliers of cotton hosiery to the United States. The DHS report is now expected in June.
U.S. importers are concerned the 100 percent pre-shipment radiation scanning requirement is not possible to implement and could significantly delay and increase the cost of imported legwear, hosiery inputs and other products. Deputy Customs & Border Patrol (CBP) Commissioner Jayson Ahern appeared to confirm those concerns in April 2 testimony before the House Appropriations Homeland Security Subcommittee, stating that the scanning requirement is not “realistically feasible” in large ports, such as Hong Kong. House Homeland Security Chairman Bennie Thompson (D-MS) led the controversial effort to include the 100 percent scanning mandate in last year’s 9/11 Bill, despite fierce opposition from business groups, the Bush Administration, and the European Union. In a November hearing, Thompson stated that he would be open to the possibility of delaying implementation of the program, admitting further study is needed to examine the feasibility of implementing the requirement.
House to Consider Legislation Strengthening Trade Enforcement
Capitol Hill sources report House Ways and Means Committee staff are in the early stages of drafting a new trade enforcement bill which, among other things, would include provisions designed to promote more effective enforcement of textile and apparel trade agreements and eliminate export barriers in foreign markets. According to Committee staff, the House measure will not be patterned after a similar Senate bill (S.1919), which has already been drafted. Democratic leaders pledged last year to pass strong trade enforcement legislation that would level the playing field for U.S. manufacturers before the end of 2008. But because the House and Senate are not cooperating on the enforcement bill, industry lobbyists believe it will be difficult to achieve that goal.
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