Customs Update: Chinese safeguards
(Published in the Journal of Commerce Online May 17, 2005)

The United States on May 13 agreed to limit imports of cotton shirts, cotton trousers, and both cotton and man-made fiber underwear made in China.

The move comes as the Bush Administration faces increasing political and industry pressure to curb a surge of Chinese apparel imports after quotas were eliminated Jan. 1.

As part of the formal process, the Committee for the Implementation of Textile Agreements (CITA) on May 13 announced that by the end of this month, it will request consultations with China regarding cotton knit shirts and blouses (338/339), cotton pants (347/348), and cotton and man-made fiber underwear (352/652).

Once the request for consultations is presented, there is a ninety (90) day window for the discussions to be concluded. Quotas on these goods are expected to be reimposed as soon as the formal request is presented to the Chinese.

There is serious doubt as to the success of the negotiations in light of China's initial response castigating CITA's most recent actions and its less than welcoming attitude to earlier attempts to address what has been characterized by some as the glut of Chinese textile goods into the U.S. market since quotas ceased at the end of 2004. (The Europeans are facing the same complaint and have begun their consultation process as well.) On a more positive note, there is information to suggest what the Chinese are willing to do is raise their export tax, but whether that will be sufficient is highly doubtful.

There are some who think CITA acted because the White House wants to show Congress that President Bush is willing to get tough on trade issues, in the hopes the Central American Free Trade Agreement will gain the votes needed for passage. Others suggest this is an attempt to reach out to the South where much of the remaining textile manufacturing base exists, again a sort of naked grab for votes. Then, there is the festering issue of the Yuan and whether the Chinese will allow it to float freely or continue its artificial exchange rate against the U.S. dollar as a means to keep its economy robust.

There are also varying opinions as to how the quota will be calculated, but one thing is clear: this situation is going to get much more complicated before it gets resolved. American importers are cautioned to consider how they are sourcing their garments and textile products so as to limit the damage this reimposition of quotas is likely to cause.