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February 25 2013 Issue

Monday, February 25, 2013
Sandler, Travis & Rosenberg Trade Report

Report Shows Significant U.S. Value Added in Garments Made Overseas

[Editor’s note: The following article originally appeared in the Feb. 21, 2013, issue of the Advisor, a weekly publication of ST&R’s STR-TAP service, and is reprinted here with permission.]

The TPP Apparel Coalition commissioned a study to examine the share of U.S. value added in garments made abroad. The final report, entitled “Analyzing the Value Chain for Apparel Designed in the United States and Manufactured Overseas,” was released Feb. 13 and points out the significant contribution that millions of American workers make to apparel manufactured overseas. The author, Susan Hester, maintains that a substantial amount of U.S. jobs are included in the global value chains (GVCs) that design, develop, produce, import, distribute and sell apparel in the U.S. “American consumers and policymakers tend to look at the finished apparel product and put it into one of two categories: imported or made in the United States. But the reality is that GVCs have made the simplistic judgment … inaccurate,” said Hester.

The report finds that, on average, 70.3 percent of the final retail price of studied apparel is created by workers in the United States. Most of the lowest skilled jobs are done abroad, leaving the more highly skilled professional employment at home. These jobs are spread throughout the stages of U.S. value added, beginning with fashion designers and fabric and apparel patternmakers and continuing with transportation, storage and distribution managers, compliance officers, software developers and sales managers. Moreover, there are high-quality blue-collar jobs throughout the chain, such as cargo and freight agents, production, planning and expediting clerks, industrial machinery mechanics, railroad employees and longshore workers.

Finally, the report argues that tariffs applied to apparel imports increase the price paid by consumers. By removing these tariffs under a trade agreement, prices would decrease, demand would rise, and jobs along the apparel global value chain would also grow.

The findings of the report have been broadly welcomed by the U.S. apparel sector. For instance, Sandy Kennedy, president of the Retail Industry Leaders Association, claims that the report “demonstrates what American retailers have long known to be true — apparel imports are responsible for millions of quality white-collar and blue-collar U.S. jobs across the economic spectrum. The isolationist perspective that is the underpinning of U.S. apparel trade policy is outdated and counterproductive. To be successful, U.S. trade policy should bolster, not inhibit, global value chains and the American jobs they create.” 

DOC Highlights Achievements of National Export Initiative

The Department of Commerce issued last week a fact sheet detailing the achievements to date of the National Export Initiative, which aims to double U.S. exports by the end of 2014 and thereby increase domestic employment. The fact sheet claims “historic progress” toward this goal, noting that annual exports rose to a record $2.2 trillion in 2012 and that success stories have included the growth of exports to free trade agreement partners, record exports for the motor vehicle industry and agricultural products, and a robust travel and tourism sector. It also acknowledges the “economic headwinds” from Europe and elsewhere that have slowed export growth.

Highlights from the fact sheet include the following.

Export Growth. In 2012 growth in exports of goods and services outpaced the growth of imports of goods and services in both dollar and percentage terms for the first time since 2007. Exports as a share of U.S. GDP were 13.9% in 2012, tying the record set in 2011, and there were record levels of merchandise exports to more than 70 countries.

Manufacturing. Manufactured goods exports increased 47% between 2009-2012, reaching a record $1.35 trillion for 2012. The manufacturing sector has added roughly 500,000 jobs in that time, the most for any such period since 1996. U.S. exports of motor vehicles and parts totaled $132.7 billion in 2012, an increase of nearly 80% from 2009.

Services. In 2012, U.S. services exports totaled $632.3 billion, up 4.4% from 2011. Services imports grew only 2.2%, allowing the trade surplus in services to grow by $16.8 billion. Travel and tourism accounted for 8% of all U.S. exports and 27% of all service exports in 2012.

Agriculture. Agricultural exports rose 38% to a record $145.4 billion in 2012, despite “the worst drought in decades,” and the agricultural trade surplus reached a record $38.1 billion. China became the largest market for U.S. agricultural exports at $26 billion, a 38% gain backed by strong sales of soybeans, cotton and corn. Agricultural exports to Canada and Mexico reached a record $39.5 billion and comprised 28% percent of the U.S. total.

Countries. China has accounted for about 10% of the United States’ total export increase and in 2012 took in over $100 billion in U.S. exports for the second year in a row. U.S. goods exports to Russia reached record levels, with growth sectors including aircraft, motor vehicles and parts, and bovine animals. U.S. trade to and from sub-Saharan Africa has tripled over the past decade and further growth is the objective of the Doing Business in Africa campaign launched in November 2012. Exports to the 20 countries with which the U.S. has free trade agreements represented nearly half of all U.S. goods exports in 2012 and grew nearly twice as fast as exports to the rest of the world.

Small Businesses. The Export-Import Bank helped more than 3,300 small businesses expand their export sales in 2012, including 650 that used its services for the first time, and authorized a record $6.5 billion in export financing for small businesses. From 2009 through 2012 the Small Business Administration backed more than 2,400 loans to 3,500 small businesses, supporting a combined $3.4 billion in small business sales.

Export Counseling and Advocacy. In 2012, 2,718 U.S. companies working with the U.S. and Foreign Commercial Service were able to export for the first time or increase their exports by selling to new markets. From 2010 through 2012 the Commerce Department’s Advocacy Center coordinated an interagency group that helped hundreds of businesses win foreign government contracts totaling approximately $112 billion in U.S export content. The Advocacy Center has nearly doubled the number of active cases during that time, from 326 to 657.

Export Financing. For fiscal year 2012 the Ex-Im Bank reported a fourth-straight record-breaking year with $35.7 billion in authorizations and more than $50 billion in sales supported. The SBA has provided financing to more than 3,500 small business exporters.

Infrastructure. The Department of Transportation has invested $953 million in U.S. freight transportation infrastructure through its Transportation Investments Generating Economic Recovery grant program. More than a third of that funding went to 25 U.S. port projects, with the remainder going to projects on significant rail and highway freight corridors. 

Court Rules on Classification of Glass Vases Packaged with Flowers and Sold to Retailers

The Court of International Trade ruled Feb. 20 in Dependable Packaging Solutions Inc. v. U.S. that two styles of glass vases are properly classified as other glassware of a kind used for indoor decoration or similar purposes under HTSUS 7013.99.40 and 7013.99.50. These vases have “an inexpensive look and visible seams” and are imported empty from China, whereupon they are sold to mass-market flower packing houses that fill them with flowers, water and sometimes an additional nutrient solution from the grower. The packing houses then ship the flower-filled vases to retailers, which display and sell the flowers and vases as a unit.

The plaintiff argued that the vases should be classified under HTSUS 7010, which covers glass bottles, jars, etc. of a kind used for the conveyance or packing of goods, because they are made of glass and their principal use is as a packing container for the wet transportation of flowers. However, the CIT states that there can be no genuine factual dispute that the articles are vases, which are specifically identified in the Explanatory Notes to HTSUS 7013 as exemplary of glass items used for indoor decoration that fall under that heading. The CIT also points out that the vases are capable of being reused and that the plaintiff offered no support for its contention that the vases are typically discarded after being used to transport flowers to their ultimate destination. 

AD/CV Notices: Laminated Sacks, Plywood, Steel Threaded Rod, Line Pipe

Agency: International Trade Administration.
Commodity: Laminated woven sacks.
Country: China.
Nature of Notice: Final determination that sacks produced with two ink colors printed in register and a screening process are not circumventing these antidumping and countervailing duty orders.
Details: The ITA states that the screening-process sacks are not later-developed merchandise because they were commercially available at the time the original AD investigation was initiated.

Agency: International Trade Administration.
Commodity: Hardwood and decorative plywood.
Country: China.
Nature of Notice: Postponement until April 29 of preliminary AD duty determination.

Agency: International Trade Administration.
Commodity: Steel threaded rod.
Country: China.
Nature of Notice: Final determination that steel threaded rod containing greater than 1.25% chromium, by weight, produced by Gem-Year Industrial Co. Ltd. and otherwise meeting the description of in-scope merchandise is subject to this AD duty order.
Details: The ITA will instruct U.S. Customs and Border Protection to continue to suspend liquidation of, and require AD cash deposits for, subject merchandise entered or withdrawn from warehouse on or after Jan. 5, 2012, the date of initiation of this inquiry.

Agency: International Trade Commission.
Commodity: Welded large diameter line pipe.
Country: Japan.
Nature of Notice: Scheduling of full sunset review of antidumping duty order.
Details: The prehearing staff report will be placed in the non-public record on July 15 and a public version will be issued thereafter. A hearing will be held Aug. 1 and requests to appear at this hearing are due by July 25. Pre-hearing briefs are due by July 24 and post-hearing briefs are due by Aug. 12. Final comments are due by Sept. 9. 

President’s Export Council to Hold Open Meeting March 12

The President’s Export Council will hold an open meeting March 12 to deliberate on recommendations related to promoting the expansion of U.S. exports. Topics may include the Doing Business in Africa campaign, the need for nominations to the U.S. Export-Import Bank board of directors, a rapid response mechanism for sanitary and phytosanitary issues in the Trans-Pacific Partnership Agreement, an international services agreement, bilateral investment treaties, U.S.–Canada trade facilitation, the UNIDROIT Cape Town Convention on International Interests in Mobile Equipment, and workforce readiness. This meeting will be broadcast via live webcast here.

Import Restrictions Still Possible in IPR Probe of Wireless Communication Devices

The International Trade Commission has determined to review in part a remand initial determination finding that the importation, sale for importation and sale within the U.S. after importation of certain wireless communication devices, portable music and data processing devices, computer and components thereof are not violating patents owned by Motorola Mobility Inc. In connection with this review the ITC is requesting briefing from the parties to this investigation no later than March 8 on specific questions.

In connection with the final disposition of this investigation the ITC may issue an order that could result in the exclusion of the subject articles from entry into the United States and/or an order that could result in the respondent being required to cease and desist from engaging in unfair acts in the importation and sale of such articles. The ITC will consider issues related to such remedy, the effect it may have on the public interest, and the amount of the bond under which infringing articles could enter the U.S. during the 60-day period the president would have to review any ITC-ordered remedy based on filings previously submitted; i.e., no new request for such comments is being made at this time. 

Foreign-Trade Zones in New Jersey, Virginia Expanded

The Foreign-Trade Zones Board has approved the expansion of FTZ 49 to include the Raritan Center Business Park in the Newark/Elizabeth, N.J., area, within the New York/Newark U.S. Customs and Border Protection port of entry. This authority will terminate on Feb. 28, 2018, if no activity has occurred under FTZ procedures before that date.

The FTZ Board has also approved the reorganization of FTZ 204 under the alternative site framework to include a service area of Sullivan, Hawkins, Greene, Washington, Unicoi, Carter, Hamblen and Johnson counties in Tennessee and Buchanan, Dickenson, Wise, Lee, Russell, Scott and Washington counties in Virginia as well as the cities of Norton and Bristol, Va., within and adjacent to the Tri-Cities CBP port of entry. Authority for sites 2 through 9 will terminate if not activated by Jan. 31, 2018. 

USDA Trims Forecast for Agricultural Exports and Imports

The Department of Agriculture announced Feb. 21 that it has lowered its forecast for U.S. agricultural exports for fiscal year 2013 but still anticipates record shipments. The revised forecast is $142 billion, down $3 billion from the previous forecast in November but $6.2 billion above the FY 2012 total.

USDA states that grain and feed exports are forecast down $4.3 billion, mostly on reduced corn prospects associated with intense competition from Brazil, Argentina and others. Oilseed exports are up $1.0 billion due to strong soybean meal and oil shipments resulting from strong demand from China and slower shipments from Brazil. Cotton exports are forecast up $400 million, primarily due to greater import demand from China. The forecast for livestock, poultry and dairy is up $300 million, with greater beef and poultry exports outweighing lower pork shipments. Horticultural exports are unchanged at a record $32 billion, with fresh fruit and vegetable exports to Canada, Europe and Japan expected to continue rising. Sugar and tropical products are forecast down $300 million on lower exports to Canada and Mexico.

Agricultural imports are also expected to reach a new record at $112.5 billion, $9.1 billion higher than FY 2012 but down $2.5 billion from previous projections. The reduced forecast is largely due to lower anticipated imports of sweeteners, coffee and rubber. 

Advance Notice Requirement Proposed for Imports of 37 Chemical Substances

The Environmental Protection Agency has issued a proposed rule that would establish import restrictions on 37 chemical substances that were the subject of premanufacture notices. These substances are used in goods such as agricultural chemicals, electrodes, binders for silicone coatings, compressor lubricants, hardeners, flame retardants, adhesives, and cleaners and detergents.

Under this rule, persons who intend to import, manufacture or process any of these substances for an activity that is designated as a significant new use by this rule would have to notify EPA at least 90 days before commencing that activity. This notification would provide EPA with the opportunity to evaluate the intended use and, if necessary, to prohibit or limit that activity before it occurs.

Comments on this proposed rule are due no later than April 26. 

Foreign Regulatory Changes Could Affect Exports of Shoes, Apparel, Carpets, Lamps

According to the National Institute of Standards and Technology, the World Trade Organization has been notified of regulatory changes that may affect exports of specific products to the following countries. For information on how these restrictions may affect your business, contact ST&R.

Egypt – rules for clearance of shipments of shoes, leather bags, apparel and ready-made garments, home textiles, carpets and floor coverings

Kenya – mandatory standards for electric lamps, three-phase cage induction motors and animal feeds 

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