May 5, 2008

May Day War Protest Shuts West Coast Ports
A one-day strike by an estimated 10,000 members of the International Longshore and Warehouse Union (ILWU) shut down 29 ports from Southern California to the Pacific Northwest on Thursday. Called to protest the war in Iraq, the strike affected facilities accounting for more than half of all U.S. waterborne trade. Port officials said they did not expect any significant cargo backups or bottlenecks, but cast doubt on the union’s motives. The strike came just two months before the expiration of an existing labor agreement. ILWU members are among the highest-paid blue-collar workers in the nation, with average full time wages of $136,000.

EU to Begin Implementing REACH in May, New Law Requires Manufacturers to Register Chemical Substances
Next month, the European Commission will begin implementing a complex and burdensome new chemical law that could stifle U.S. legwear and other exports to Europe just as a lower dollar is opening new sales opportunities. The European Union’s new Regulation for the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) generally requires manufacturers and importers of legwear and other goods containing any chemical substances in quantities greater than one ton per year to register the properties of the substances with the European Chemicals Agency (ECHA) in order to continue producing in or exporting to that market. For hosiery and other apparel manufacturers, those substances are dyes and other chemicals “intended to be released from articles during normal and reasonably foreseeable conditions of use.”

To continue exporting products containing any chemical identified on a special list of 100,204 existing substances in quantities greater than one ton per year to the European Union after December 1, manufacturers must pre-register that chemical between June 1 and December 1, 2008 according to procedures described on the Web site of the ECHA. However, only manufacturers or importers established in Europe can register, unless the overseas manufacturer or exporter hires an “only representative” established in the EU to fulfill that obligation. Hiring such a representative would be costly, but those costs could be spread among various foreign suppliers who hire the same person and would permit manufacturers who are not yet but are considering exporting to the EU in the future to take advantage of the pre-registration period. Manufacturers that fail to pre-register or whose products are not included on the list of existing substances will have to go through a lengthy approval process that will either disrupt or delay exports to Europe. Pre-registration does not mean approval of the chemical substance, but starts a multi-year evaluation process that varies in length depending on the amount of a chemical in an imported product and its possible toxicity.

The compliance costs associated with this program are expected to be significant. There will be fees associated with pre-registration and other approvals, and the ECHA has announced it will produce and disseminate a complete schedule of charges prior to June 1. There also may be significant costs as manufacturers try to determine whether they meet the criteria and the level of chemicals that may be released from their products. Footnotes will continue to provide additional information on this topic as it becomes available. However, legwear manufacturers exporting or considering exporting to Europe that have not already done so should consult with appropriate legal counsel and their European importer as soon as possible to ensure they comply with REACH requirements in the most efficient and cost-effective manner possible.

According to the Commerce Department, the United States exported a total of $1.9 billion in textiles to the EU in 2007. The U.S. exported nearly $16 million worth of hosiery items to the EU in 2007, amounting to more than four percent of the U.S. hosiery export market.

FTC ‘Green Guides’ Workshop Informs Future Changes to Federal Eco-Labeling Rules
Industry groups and NGOs identified their priorities for further Federal Trade Commission (FTC) guidance on environmental product packaging claims at the FTC’s April 30 public workshop on “Eco in the Marketplace.” The workshop followed the Commission’s November 27 announcement that it will update its Green Guides, which apply to any claim about the environmental attributes of a product, package or service in connection with the sale, offering for sale, or marketing of such product.

During the workshop, industry participants complained the FTC’s failure to enforce its existing guidance has contributed to the growth of unsubstantiated environmental claims. Many companies that have tried to apply that guidance faithfully cited major disadvantages in the marketplace from competitors who ignore the rules. Industry participants also highlighted the need for the Commission to align U.S. environmental rules with international standards (specifically the ISO 14021:1999 standards), improve enforcement actions, and qualify environmental marketing terms, like “recyclable,” “sustainable,” “renewable,” and “x-free.” Some suggested that the FTC publish a recognizable system for rating the different components of a product’s life cycle so manufacturers can more effectively describe where the specific product falls within the framework.

The FTC has posted a transcript and video of the workshop on its Web site, and will continue to accept public comments on possible revisions to its Green Guides through May 19.

Better than Expected Economic News as Growth Increases, Oil Prices Fall and Fed Cuts Interest Rates
The dismal economic news of the last few months took a brief but partial turn for the better Wednesday on word of rising economic growth, falling oil prices and a fresh Federal Reserve interest rate cut. Early that day, the Commerce Department reported U.S. gross domestic product (GDP) – the sum of all goods and services produced in the country – grew at a stronger than expected annual pace of 0.6 percent in the last quarter. While still very low, the announcement showed the U.S. economy is not yet in recession. After rising to another new record high on Monday, oil prices also fell Wednesday after the Energy Department reported U.S. crude stocks grew by more than expected last week. Light sweet crude for June delivery fell $2.17 cents to settle at $113.46 a barrel on the New York Mercantile Exchange (NYMEX). The Fed’s decision to further lower the federal funds rate – the key overnight rate at which banks loan money to one another – by a quarter percentage point capped off the day.

However, there was more bad news to go with the good. The Commerce Department reported household spending in the last quarter, the biggest part of the U.S. economy, grew at its slowest pace since 2001, and the Fed signaled its Wednesday rate cut would be its last for a while. Word of the cut also sent the dollar to new lows against leading overseas currencies. The dollar dropped 0.3 percent against the Euro to $1.5624 in New York trading. Overall, the dollar has declined by 12 percent against the euro since September 18, when the Fed first began it current round of interest rate cuts. It touched $1.6019 per euro on April 22, the weakest since the 15-nation European currency debuted in 1999.

FUTURES PRICES FOR SELECT HOSIERY INPUTS
(Thursday, April 24 - Wednesday, April 30, 2008)

Ways and Means to Eliminate AGOA “Abundant Supply” Requirements through Miscellaneous Tariff Bill
As the number of bills likely to pass before the November elections continues to dwindle, the House Ways and Means Trade Subcommittee announced last week that it plans to include language eliminating the controversial “abundant supply” provisions of the African Growth and Opportunity Act (AGOA) in this year's Miscellaneous Tariff Bill (MTB). AGOA grants duty-free treatment to certain legwear and other apparel produced in specific countries of sub-Saharan Africa, and its “abundant supply” provisions require manufacturers in eligible lesser developed countries to exhaust all African-made fabric and yarns before any third-country fabric – mostly from China – can be used in apparel that enters the United States duty-free. Eliminating the provisions would make it easier for those producers to export to the United States at lower prices, but also correct what proponents believe were inaccurate estimates of the amount of local fabric available in Africa at the time the abundant supply provisions were passed.

MTBs are meant to be non-controversial and generally reduce or eliminate duties on inputs to U.S. legwear and other manufacturing industries that are no longer produced domestically. Trade Subcommittee Chairman Sander M. Levin (D-MI) and Ranking Member Wally Herger (R-CA) have requested public comments on the AGOA abundant supply and other possible MTB provisions by June 2.

Rangel Hopes to Add Haiti Trade Provision to Farm Bill
The Ways and Means Committee is also seeking to attach another trade measure to this year’s must pass Farm Bill. According to Capitol Hill sources, Committee Chairman Charlie Rangel (D-NY) has proposed an amendment to Farm Bill legislation still in development that would extend and expand existing U.S. trade preferences for Haiti. Under legislation passed by Congress in 2006, the United States grants duty-free treatment to certain legwear and other apparel made in Haiti. Rangel’s amendment reportedly is designed to increase Haitian textile and apparel exports by extending preferences for up to a decade and by allowing Haitian manufacturers to use low-cost yarn and fabric form around the globe, instead of just from American suppliers.

Rangel and others are concerned Haiti preferences have failed to deliver fully on their economic promise. Expanded duty-free treatment has so far added about 5,000 jobs to that country's apparel sector, raising total employment to about 20,000 workers. However, the law didn't spur expected investment, partly because benefits were set to expire after five years. While the amendment likely will be accepted by U.S. industry, it is not clear whether it will be successfully included in the Farm Bill. Action on that measure is moving fast, and Rangel’s provisions are just some of many lawmakers would like to tack on to the nearly $300 billion bill.