Below is a collection of stories related to trade and government policy that may impact the sewn products industry around the world. In addition, this issue of Behind the Seams includes an explanation of China's new Anti-Sanctions Law.
EU & U.S. Resolve Aircraft Dispute As of today, the United States and the European Union have finally resolved a long-running trade dispute over government subsidies for rival aircraft manufacturers Boeing and Airbus. The two sides agreed to suspend tariffs imposed as part of the trade battle for a period of five years. According to CNN, they will also each release statements spelling out "acceptable support" for aircraft manufacturers moving forward. Read more here or here.
Senate Passes U.S. Innovation and Competition Act
The U.S. Senate passed the U.S. Innovation and Competition Act (USICA) June 8th, a whopping 2,376-page bill aimed at boosting U.S. competitiveness. Among other things, the legislation will establish a new Directorate for Technology and Innovation in the National Science Foundation, establish a critical supply chain resiliency program, and invest billions of dollars in scientific and technological research and innovations — including artificial intelligence and robotics. The legislation became a vehicle for several different initiatives related to U.S. competitiveness, including the Make PPE in America Act, which will require federal agencies to issue long-term contracts for American-made PPE. While the legislation received bipartisan support in the Senate and a preliminary thumbs-up from President Biden, it still has to go through the U.S. House of Representatives before it can become law. Read more.
HHS Request for Information - Surgical Gowns Manufactured in United States The U.S. Department of Health and Human Services (HHS) has issued a request for information (RFI) regarding current/future production of disposable medical gowns in the United States and Canada. As stated in the RFI, the government is interested in obtaining product specifications and literature, location of manufacturing, and companies’ current and projected inventory and manufacturing capabilities over the next 18 months. Complete details can be found at the link above.
The RFI was originally only open for responses for four business days, closing on Monday, June 14th, but an extension was granted until June 17th. If anyone has information they would like to submit, we encourage you to reach out to email@example.com asap because, even with the extension, this is nowhere near enough time to gather information for a manufacturing endeavor of this magnitude. We expect a request for proposals to be issued in the near future that will give manufacturers a longer opportunity to submit information and bid proposals.
German Due Diligence Legislation
The German Parliament (Bundestag) passed supply chain legislation June 11th meant to better protect human rights and the environment in the global economy. The legislation will enter into force in 2023 and will initially cover companies with 3,000 or more employees. Companies with 1,000 or more employees will be required to comply starting in 2024. These companies must establish due diligence procedures to identify risks of human rights violations — including child and forced labor — and environmental destruction within their global supply chains and take action if they find violations at their foreign suppliers. Violations could result in a fine of EUR8m or 2% of a company’s average annual turnover.
UK Starts Talks to Join CPTPP
On June 2nd, the member nations of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) agreed to open accession talks with the United Kingdom, which officially announced its interest in joining the trade pact earlier this year. CPTPP was established in 2018 by member nations Japan, Canada, Australia, Vietnam, New Zealand, Singapore, Mexico, Peru, Brunei, Chile, and Malaysia after the U.S. pulled out of negotiations for the Trans-Pacific Partnership. The UK’s interest in the agreement revolves around cutting tariffs on vital UK industries including the food and automotive sectors; creating new opportunities in areas like digital, data, and across services; and deepening access to fast-growing markets, including Mexico, Malaysia, and Vietnam. While there is still a long way to go before the UK officially joins the trade pact, this is a significant advancement for the UK’s post-Brexit international strategy.
Many political pundits have noted that this step toward expanding the agreement opens the door for other interested economies, such as South Korea, Taiwan, Thailand, and, in particular, China, which sees the agreement as a potential avenue to broaden its sphere of economic influence. Read more.
U.S. Rules on Polyester Yarn Dumping
On May 27th, the U.S. Department of Commerce announced that imports of polyester textured yarn from Indonesia, Malaysia, Thailand, and Vietnam are being unfairly sold below their fair value (or “dumped”) in the United States, thus harming domestic producers. U.S. Customs and Border Protection will now begin collecting antidumping duties (AD) in the amount equal to the dumping cash deposits rates for imports from each country. Importers will be required to post duty deposits at these AD rates, which will be collected until the Commerce Department and the U.S. International Trade Commission conclude their investigations later this year. At that time, the duties could change. The investigation was initially requested by two major U.S. synthetic yarn producers — Unifi Manufacturing, Inc. and Nan Ya Plastics Corporation, America — in October 2020. Read more.
USTR Sets and Suspends Tariffs in Section 301 DST Investigations In one fell swoop on June 2nd, U.S. Trade Representative Katherine Tai announced and immediately suspended tariffs related to the Section 301 investigations into Digital Service Taxes (DSTs) adopted by Austria, India, Italy, Spain, Turkey, and the United Kingdom. The Office of the United States Trade Representative (USTR) determined that the aforementioned DSTs discriminated against U.S. digital companies, are inconsistent with principles of international taxation, and burden U.S. companies. As a result, USTR will impose additional 25 percent tariffs on previously specified goods from each country. However, the tariffs are suspended for 180 days, meaning they won’t go into effect until late November, with the hope that a multilateral agreement on international taxation can be concluded before then. Such negotiations are ongoing within the Organization for Economic Cooperation and Development (OECD) and the G20.
G7 Agrees on Global Corporate Tax
One of the biggest news items to come out of the recent G7 meeting (besides some entertaining photos), was an announcement that the parties will publicly endorse a global minimum corporate tax of at least 15%. The plan is meant to put an end to multinational corporations favoring low-rate nations to avoid pricey tax bills. The G7 also reached historic agreement on a plan to replace the patchwork of Digital Services Taxes that some countries (see above) have imposed on tech companies.
Tanzania Waives Duties on Leather Machinery The Tanzanian Minister of Industry and Trade, Kitila Mkumbo, announced a waiver on import duties for machines and materials used for leather processing during a parliamentary session last month. The waiver is aimed at encouraging local processing of leather products in the country which is deemed to offer considerable potential for development. The move is part of a broader initiative to develop the country's textile and apparel industries. Read more.
Pakistan and Argentina Explore Bilateral Trade
Two countries that don’t make our newsletter too often, Pakistan and Argentina have decided to form joint working groups in various industrial sectors including textiles to boost bilateral trade and economic cooperation. Read more.
Pakistan also announced a plan this month to cut taxes on imports of some raw materials to spur manufacturing and overall economic growth. Read more.
Mercosur Trade Debate Meanwhile, Argentina is gearing up for a fight within the Mercosur trade bloc (which also includes Brazil, Uruguay, and Paraguay) over the bloc’s trade rules and common external tariff (CET). Brazil and Uruguay want to make Mercosur more flexible and allow members to broker one-on-one deals with other countries or blocs. Argentina insists on negotiating together as previously agreed. In addition, Brazil is seeking a 20% reduction in the CET. At present, Mercosur’s tariffs are 35% for textiles and apparel. Argentina is reportedly willing to reduce or eliminate tariffs, but only on a limited number of products. Representatives from each of the Mercosur member nations are meeting this month to discuss both issues. Read more.
At the end of May, The State Department announced visa restrictions for Ethiopian and Eritrean government officials and members of security forces over human rights atrocities and the ongoing conflict in Ethiopia’s Tigray region. The conflict has not had a huge impact on the sewn products industry so far, but we will continue to monitor the situation. Read more.
Israel-Korea FTA Also in May, Israel signed a free trade agreement with South Korea, its first with an Asian country. The agreement will eliminate tariffs on around 95% of products between the two countries and is expected to increase their overall trade to more than $3 billion. Tariffs on South Korean textile products will be eliminated immediately when the agreement goes into effect, most likely later this year. Read more.
And, finally, a bonus read for the month: This Sourcing Journal article discusses what to expect if your imported products are detained by U.S. Customs and Border Protection for suspected forced labor.