Trade & Policy Round-Up for December
Updated: Dec 16, 2021
Below is a collection of stories related to trade and government policy that may impact the sewn products industry around the world.
Uyghur Forced Labor Prevention Act On December 8th, the U.S. House of Representatives passed a bill that would ban a wide array of imported products made in China’s Xinjiang region and impose economic sanctions on China for goods made from the forced labor of Muslim Uyghurs.
News outlets (and lawmaker twitter accounts) are now reporting that the House unanimously voted Tuesday night (December 14th) to approve a new version of the bill that reconciles differences between the original House version and legislation passed by the Senate earlier this year. The would-be law is now expected to receive swift approval from the Senate and the President. Read more.
Ocean Shipping Reform Passes House December 8th was a busy day for the U.S. House of Representatives. It also passed the bipartisan Ocean Shipping Reform Act of 2021 (OSRA21). The legislation is meant to support the growth and development of U.S. exports and provide critical updates to the international maritime transportation system. Among other things, it requires the Federal Maritime Commission to draft and enforce new rules aimed at establishing more reciprocal trade with countries like China. The bill now must be taken up by the Senate before it can become law.
Note: While OSRA21 has received support from manufacturers and retailers in the sewn products industry, our friends at the American Apparel & Footwear Association were quick to reiterate that urgent tariff relief is still necessary, and there is much more the Administration and U.S. Congress could be doing to alleviate the current stress on American businesses. Read more.
Antidumping Duties on Polyester Yarn
On December 14th, the U.S. Department of Commerce International Trade Administration issued the official antidumping duty orders on polyester textured yarn from Indonesia, Malaysia, Thailand, and Vietnam. The orders come after investigations determined that polyester textured yarn from these countries is being imported and sold in the United States at less-than-fair-value and are materially injuring the U.S. industry. Commerce will now direct U.S. Customs and Border Protection to assess antidumping duties equal to the amount by which the normal value of the merchandise exceeds the export price of the subject merchandise for all relevant entries of polyester textured yarn. More information is available in the Federal Register Notice.
Related: India’s Directorate General of Trade Remedies recently concluded a similar investigation within its own market and recommended the imposition of anti-dumping duties on polyester yarn from China, Indonesia, and Vietnam. However, the country’s Minister of Commerce and Industry indicated he was “not keen” on the idea. Read more.
U.S. Imposes Restrictions on Exports to Cambodia As of December 9, 2021, the U.S. Bureau of Industry and Security (BIS) is imposing new restrictions on exports to Cambodia, and in-country transfers within Cambodia, of sensitive (defense-related) products subject to the Export Administration Regulations. As stated in the Federal Register Notice, this action is a response to “deepening Chinese military influence in Cambodia, which undermines and threatens regional security, as well as growing corruption and human rights abuses by the Government of Cambodia.” BIS asserts recent actions by the Cambodian government are contrary to the national security and foreign policy interests of the United States. Read more.
China GSP Misinformation
This is an interesting one. Last month, you may have seen several news outlets and trade policy groups share an update that, as of December 1, 2021, 32 countries — 27 EU nations, the United Kingdom, Canada, Turkey, Ukraine, and Liechtenstein — would no longer provide preferential tariff treatment to China under their Generalized Systems/Schemes of Preferences (GSP). While some pundits worried the removal would accelerate the trend of labor-intensive manufacturers including apparel moving out of China to cheaper destinations such as Vietnam or Bangladesh, others (namely Chinese media outlets) argued that the move was a positive sign of the country’s economic success (i.e., China is doing so well, the rest of the world doesn’t think it needs special treatment anymore). Media spin aside, the biggest problem with this story is that the original premise is wrong. China doesn’t receive GSP benefits from those countries. The real story is the General Administration of Customs China (GACC) released a statement stating that, as of December 1, 2021, it would no longer issue GSP certificates of origin for goods exported to these countries, which it had been doing for the past several years for the convenience of Chinese exporters (even though they weren’t receiving GSP benefits). So, from what we can tell, very little is going to change. A couple good explanations of this are available here and here.
New Indian Tax Structure for Manmade Fibers
The government of India has announced a new uniform goods and services tax (GST) rate of 12% on manmade fiber (MMF), MMF yarn, MMF fabrics and apparel. Previously, the MMF textile value chain had an inverted tax structure, with these products taxed at 18%, 12% and 5%, respectively. The changed rates will come into effect from January 1, 2022. Read more.
In its reasoning for the change, the government explained the taxation of inputs at higher rates than finished products created a buildup of credits and cascading costs. It further led to accumulation of taxes at various stages of the MMF value chain and blockage of crucial working capital for the industry. However, the Retailers Association of India (RAI) is urging the Finance Minister, state governments, and GST Council to reconsider the proposed hike in GST rates on textiles and apparel items saying it will adversely impact 85 % of the sector. Read more.
Digital Services Tax Agreement - Part 2
Last month, we shared that the United States would withdraw its threat of additional tariffs on imports from Austria, France, Italy, Spain, and the United Kingdom after reaching an agreement on their treatment of digital services taxes (DST). Since then, the Office of the U.S. Trade Representative has announced it will also remove the threat of tariffs on imports from India and Turkey after reaching similar agreements with both countries.
Upcoming Policy News
We typically report on legislation and policy initiatives once they are concrete and the next steps are known. However, there are currently a few initiatives that we want to highlight for our readers as they take their first steps.
A group of U.S. lawmakers is hoping to push a supply chain bill through Congress before the end of the year which would establish a national database aimed at streamlining the U.S. supply chain and giving manufacturers crucial information to help them meet the need for products such as defense supplies or medical devices. Read more.
Legislation has been introduced in both chambers of the U.S. Congress to extend the Haitian Hemispheric Opportunity through Partnership Encouragement (HOPE) Act and the Haitian Economic Lift Program (HELP) Act through 2035. These trade preference schemes provide duty-free access for Haitian exports to the United States. Read more.
While there is no policy text to report on just yet, we are keeping an eye on the European Union, and specifically The Netherlands, for the possible 2022 introduction of a new agreement to further human rights, international labor rights, the environment, and animal welfare in the apparel and textile sectors. Read more.
Trade Agreement Updates A few new maneuvers around the world:
The United States and Taiwan have announced plans to cooperate for a new Technology Trade and Investment Collaboration (TTIC) framework to develop commercial programs and explore ways to strengthen critical supply chains. The parties are also “identifying steps to support semiconductors and other critical supply chains." Read more.
Chile and Paraguay have signed a free trade agreement to deepen trade ties and strengthen their bilateral agenda. Read more.
The Lao People’s Democratic Republic (Laos) has become a new participant of the World Trade Organization’s Information Technology Agreement, making it the first least developed country to do so. The country will eliminate tariffs on IT-related imports. Read more.
Uzbekistan is the first country to be officially admitted to the United Kingdom’s Enhanced Framework Generalised Scheme of Preferences (EF GSP). According to the UK government’s announcement, the move “sends a hugely positive signal of intent from both countries to turbo boost the UK-Uzbekistan trading relationship, particularly now that there will be zero import duty on more than 7,800 products made in Uzbekistan.” Read more.
Canada and ASEAN have agreed to proceed with negotiations toward a comprehensive Free Trade Agreement to help diversify supply chains; increase trade and investment; and reinforce Canada and ASEAN’s shared commitment to open markets and rules-based trade. Read more.
The Cambodia-China Free Trade Agreement (CCFTA) will enter into force January 2022, along with a renewed pledge by both parties to boost their annual bilateral trade figure to $10 billion. Read more.
U.S. Secretary of State Antony Blinken, speaking in Indonesia December 14th, outlined the core elements of a “free and open Indo-Pacific.” The United States previously announced plans for an inclusive and flexible Indo-Pacific economic framework that will “not be structured like a typical free trade deal.” Read more here or here.
Trucker Hours of Service Exemption for PPE
Finally, not a trade or tariff update, but something for the U.S. supply chain folks. The U.S. Federal Motor Carrier Safety Administration (FMCSA) has extended an exemption from hours of service rules for drivers hauling pandemic-related freight (including personal protective equipment), citing the need to provide capacity during a potential rise in Covid-19 infections. This most recent extension (there have been several before this) runs through February 28, 2021.