International Affiliates Newsletter: September 2011www.usaita.com 1

A PUBLICATION OF THE UNITED STATES ASSOCIATION OF IMPORTERS OF TEXTILES & APPAREL

September 2011

In This Issue:

International Affiliates

U S A - I T A , establ ished in 1989, is the U.S. trade association fo r impor t e r s a n d re t a i l e r s o f tex t i le and apparel products. Headquartered in Washington, DC, USA-ITA is the voice for the industry before Congress, the Administration, the business community and the public, as well as industry groups and governments around the world.

Between the changes to the short-supply list to the launch of the DR-CAFTA online directory, the Central America Free Trade Agreement (CAFTA) has

been making headlines all summer. Below, you’ll find three headlines you won’t want to miss if you’re a CAFTA producer or customer.

USTR Requests Arbitration Panel in CAFTA Labor Dispute with Guatemala

On August 9, U.S. Trade Rep. Ambassador Ron Kirk requested a Central America Free Trade Agreement (CAFTA) arbitration panel to weigh USTR’s claims that Guatemala has violated CAFTA by failing to enforce its labor laws. It marks the first time that USTR has formally pursued a labor case under the terms of a free trade agreement.

In a statement, Ambassador Kirk said, “With this case, we are sending a strong message that the Obama Administration will act firmly to ensure effective enforcement of labor laws by our trading partners. While Guatemala has taken some positive steps, its overall actions and proposals to date

have been insufficient to address the apparent systemic failures. We need to see concrete actions to protect the rights of workers as agreed under our trade agreement, and we are prepared to act to obtain enforcement of those rights when and where necessary.”

The case against Guatemala stems from a 2008 petition by the AFL-CIO and six Guatemalan labor organizations, alleging lax labor enforcement by the Guatemalan authorities. In July 2010, USTR announced that it had requested consultations with Guatemala to improve labor enforcement. Today, USTR announced that these consultations had failed and that USTR had therefore decided to seek an arbitration panel to adjudicate the dispute. Under the terms of CAFTA, the panel has the authority to levy a fine against Guatemala if the panel finds that Guatemala has failed to enforce its domestic labor laws. If Guatemala refuses to pay the fine, the United States would have the authority to modestly raise tariffs on Guatemalan exports until tariffs collected equal the value of the fine.

Commerce Removes Certain Ring-Spun Yarn from CAFTA Short Supply List

The the U.S. Department of Commerce is making an important supply-chain change that could impact businesses

COVER PAGE:Everyone’s Talking about CAFTA

PAGE TWO:CAFTA ctd.

U.S. Brands File Suit Challenging Gender-Based Tariffs

PAGE THREE:USA-ITA Joins the Obama Administration at MAGIC in Las Vegas

PAGE FOUR:USA-ITA Joins Businesses in Outlining Supply-Chain Priorities for TPP

The Scoop from Fashion Snoops for Spring 2012

Everyone’s Talking about CAFTABy David Spooner, USA-ITA Washington CounselSquire Sanders & Dempsey

International Affiliates Newsletter: September 2011www.usaita.com 2

that manufacture or source in CAFTA countries.

In a Federal Register notice published on August 22, the U.S. Department of Commerce decided to remove certain ring-spun yarns from the CAFTA short supply list. The decision marks the first time that Commerce has agreed to a petition to remove a fabric or yarn from CAFTA’s short supply list, requiring apparel makers to source the subject yarns from the United States or Central America. In October 2005, before CAFTA went into effect, Commerce approved a Galey & Lord request to add certain ring spun cotton yarns to the Caribbean Basin trade preference program’s short supply list, permitting duty free apparel from the Caribbean Basin to contain such ring spun yarns from third countries. When CAFTA went into effect, the CAFTA agreement grandfathered in the short supply designations of the Caribbean Basin trade preference program, including, of course, Galey & Lord’s ring-spun cotton yarns. This past July, Parkdale Mills and Buhler Quality Yarns filed a petition, asking Commerce to invoke the CAFTA provisions that permit Commerce to remove textile products from the short supply list and to remove the ring-spun yarns from CAFTA’s short supply list. Parkdale and Buhler claimed that they produce yarns that are substitutable for the yarns that were the subject of Galey & Lord’s 2005 petition. Commerce, today, announced that it had approved Parkdale and Buhler’s petition and that the ring spun yarns will be removed from CAFTA’s short supply list effective February 20, 2012. It is important to note that not a single retailer or apparel brand filed comments in opposition to Parkdale and Buhler’s request. The yarns that will be removed from the CAFTA short supply list are “[c]ompacted, plied, ring spun cotton yarns, with yarn counts in the range from 42 to 102 metric, classified in subheadings 5205.42.0020,5205.43.0020, 5205.44.0020, 5205.46.0020, and 5205.47.0020 of the Harmonized Tariff Schedule of the United States (HTSUS).” IDB Launches Supply Chain Directory for Textiles and Apparel in DR-CAFTA

During MAGIC in Las Vegas—the largest apparel and footwear trade show in the United States—the Inter-American Development Bank (IDB) launched the Supply Chain Directory for Textiles and Apparel in DR-CAFTA. This online directory is intended to facilitate business contacts between companies that trade under the benefits of the DR-CAFTA agreement. This is the most detailed directory of textiles and apparel producers in the region,

and it is free to companies based in the region thanks to financing from the Aid for Trade Fund of the IDB. If you’re a company in the region, you’ll want to log on to www.DRCAFTASOURCING.com to create your free profile, which will be available for U.S. companies to view. If you have any questions about the database, please feel free to contact us at info@usaita.com and we can help you get started.

Will we soon say goodbye to gender-based tariffs? It’s possible.

On August 16, 2011, PacSun, Tommy Hilfiger, and three other apparel importers filed almost identical lawsuits at the Court of International Trade, alleging that gender-

based tariffs are unconstitutional.

The lawsuits, filed on behalf of each company by the law firm of Grunfeld Desiderio, allege that apparel tariffs violate the Constitution’s equal protection and due process guarantees. According to the lawsuits, the federal government has no rational basis for applying different tariff rates for men’s and women’s apparel, making the tariffs simply discriminatory and unconstitutional under both the 5th and 14th Amendments to the Constitution.

The cases are the latest in a string of lawsuits, dating back to 2007, that have thus far failed to succeed in reversing gender-based duties. Last fall, the Supreme Court refused to hear an appeal of Totes-Isotoner v. The United States, after the Court of Appeals ruled against Totes-Isotoner. The Court of Appeals had ruled that Congress could have had a non-discriminatory basis (could have enunciated a rational basis) for establishing separate tariff rates for men’s and women’s apparel.

U.S. Brands File Suit Challenging Gender-Based TariffsBy David Spooner, USA-ITA Washington CounselSquire Sanders & Dempsey

International Affiliates Newsletter: September 2011www.usaita.com 3

USA-ITA Joins the Obama Administration at MAGIC in Las Vegas

From August 21-24, 2011, USA-ITA was in Las Vegas for the biannual MAGIC, the largest apparel, footwear, and acces-sories trade show in the United States. From August 21-24, USA-ITA hosted seminars and a booth during SOURCING at MAGIC, North America’s largest sourcing event highlighting the entire apparel, accessories, and footwear supply chain and sourcing knowledge and opportunities across the globe. SOURCING at MAGIC highlighted producers across the globe, from the United States to China to Central America to Bangladesh.

This year, the focus of the sourcing exhibition was the Americas Pavilion, featuring over 70 exhibitors from the Western Hemisphere, including Mexico, Canada, CAFTA, Peru, Haiti, and Colombia. Francisco Sánchez, Under Secretary for International Trade at the U.S. Department of Commerce Office of International Trade, spoke at a number of seminars throughout the week along with rep-resentatives from the Office of the U.S. Trade Representa-tive and USA-ITA members. The Americas Pavilion was made possible by the hard work of the U.S. Department of Commerce’s Office of Textiles and Apparel (OTEXA) and a number of textile and apparel associations throughout the Western Hemisphere, including USA-ITA.

LEFT: Under Secretary Sánchez opens SOURCING at MAGIC.

On Monday, August 22, USA-ITA President Julie Hughes moderated an open discussion for all MAGIC attendees featuring Under Secretary Sánchez, who started the discussion by emphasizing the benefits to sourcing in the Western Hemisphere, including the boost to the U.S. economy and the faster speed-to-market. He was followed by regional brands and manu-facturers spoke on their experiences, including USA-ITA Board of Directors member Gary Ross, Vice President at Avon Products Inc., who gave a lively presentation about Avon’s experience with sourcing in the Americas. The other speakers included Jim Hopkins, Vice President at Hamrick Mills in South Carolina; Randy Price, Vice President at VF Corporation; and Marty Moran, CEO of RadiciSpandex Corporation.

After the panel discussion, Under Secretary Sánchez joined Ju-lie Hughes, MAGIC International President Chris DeMoulin, and Unifi President Roger Berrier Jr. for a media roundtable with reporters from the Los Angeles Times and California Ap-parel News. During the press conference, he emphasized the President’s National Export Initiative goal to double exports by the end of 2014. According to a U.S. Department of Com-merce press release, “The Western Hemisphere is the largest market for U.S. textile and apparel producers. More than 64 percent of U.S. textiles and apparel exports are to the Western Hemisphere. In 2010, the U.S. exported nearly $13 billion of textile and apparel goods to the region, an increase of nearly 20 percent from 2009. The United States is the world’s 4th largest exporter of textiles and apparel.” ABOVE: USA-ITA President Julie Hughes moderates a discussion on the

National Export Initiative and sourcing in the Americas.

International Affiliates Newsletter: September 2011www.usaita.com 4

Aside from the pending Free Trade Agreements (FTAs), the Trans-Pacific Partnership (TPP) negotiations are getting the most buzz in the trade policy world, and USA-ITA and our member companies are working hard to ensure an outcome that is beneficial to both U.S. companies and the interna-tional manufacturers that would fall under the agreement.

On August 25, a coalition of industry groups, led by the Emergency Committee for American Trade, sent a letter to U.S. Trade Representative Ambassador Ron Kirk outlin-ing supply chain priorities for the Trans-Pacific Partnership (TPP) negotiations. USA-ITA joined a number of associa-tions and companies—including American Eagle Outfitters, Levi Strauss, Nike, and Wal-Mart, to name a few—in sign-ing the letter.

The coalition states that the following four provisions must be included in TPP:

1. A comprehensive, inter-disciplinary approach. As mentioned above, this key principle is a positive recog-nition of the responsibility of multiple authorities including transport, border administration, and “behind-the-border” regulatory agencies in supporting supply chains.

2. A mechanism for trouble-shooting and addressing problems. Obstacles can appear unexpectedly across global supply chains resulting from transport gateway restrictions, hold-ups at the border, or regulatory approvals. Such chokepoints result in additional costs for traders and goods by prolong-ing time-to-market.

3. An action-oriented work program including clear targets. A continuing, targeted work program will demonstrate strong commitment to progress in all relevant areas.

4. Future-Oriented Provisions. Twenty-first century supply chains are nimble, responsive to demand, involve collaborative decision making, and re-quire maximum flexibility.

The next round of TPP negotiations will take place in Chi-cago from September 8-12, 2011. USA-ITA and a number of our member companies will be attending, and we will keep all of our subscribers informed about the status of TPP and the outcome of the negotiations.

At MAGIC in Las Vegas, Fashion Snoops presented a series of seminars forecasting the fashion trends for the Spring 2012 and Fall 2012 seasons.

This information was geared toward buyers, who attended MAGIC to choose fabrics, apparel, and accessories for the upcoming fashion cycles, but it’s important information to know if you are a producer becauses you can then better understand what types of products your customers will be looking for.

For Spring 2012, you can expect the following top three trends:

1. Rainbow Brights. Your customers will want every color of the rainbow for Spring 2012, and the brigter, the better. Fashion Snoops says the most popular colors for Spring 2012 will be bright hues like poppy, geranium, orangeade, and grassy green, as well as vibrant neutrals like ink blue, honey brown, and sandstone. If you create apparel in vibrant color palettes, make sure your customs know!

2. Stick to the 70s. The 70s are back for Fall 2011—and they are sticking around for spring, too. For the next few fashion seasons, buyers will be looking for paisley and ethnic prints, filmy gauzes, crochets, and hippie accessories.

3. Perfectly Preppy. The counterpart to the 70s bohemian spirit is the “snooty prep” style that will be popular for spring, as well. Your customers will be asking you for polo shirts, rugby stripes, and colorblocking for both men and women next season.

USA-ITA Joins Businesses in Outlining Supply-Chain Priorities for TPP

The Scoop from Fashion Snoops for Spring 2012