NCTO Annual Meeting Talks China, De minimis and Exports

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Members of the National Council of Textiles Organizations (NCTO) at its 19^th annual meeting last week got a mix of post-pandemic good news about increases in trade, rule changes and more on-shoring and nearshoring. Countering that were stern warnings from a banking official about how to plan ahead in the face of seismic worldwide demographic changes under way.

According to outgoing NCTO chairman David Poston, the positive trends reported in 2022 included increased government procurement of US textile-based products, more pressure to crack down on abuse of the de minimis waiver system, safeguarding our free trade agreements  and maintaining a strong position on China trade enforcement. Maintaining the integrity of the yarn forward rule of origin was also cited.

Poston, president of the South Carolina-based Palmetto Synthetics, noted payoffs on efforts by several government agencies that resulted in $2 billion in new textile and apparel investments in the US and Central American region.  More pending legislation to boost US output is the Homeland Procurement Reform Act (HOPR), which would further allow the Department of Homeland Security to purchase high-quality American-made PPE for front-line personnel.

Former US Senator Heidi Heitkamp, now chair of the Ex-Im Bank Advisory Board of Directors, exhorted NCTO members to plan ahead, not just regarding PPE supplies but for vast population shifts that manufacturers are not poised to take advantage of.

As a country of 330 million people, she said, “we’re not growing.” The crisis of aging and zero-population growth has hit Japan and Europe and is coming to the US, according to the former elected official. Manufacturers have to begin to look at developing exports to Indochina because that is where the customers for US goods will be. In 20 years, some 70 percent of the world’s population will be in Indochina. “We will not be successful as a country if we’re not exporting,” she said.

The US also has to maintain relationships with its traditional trading partners in Europe.

Emerging and green technologies have to be kept in perspective, the Senator said.  She elaborated: you can’t always refuse to buy a product because it doesn’t meet US standards and you must be able to stand by claims you make on your own so-called green products.

According to Heitkamp, the message has to be one of openness and robust collaboration. We cannot go back to where we were pre-pandemic, she said. We have to be able to generate enough steel in this country to run our industries, make sure we have enough manufacturing to put clothes on our backs and sheets on our beds without being beholden to another nation.

“We’re now doing what it takes to jumpstart American manufacturing,” Sen. Heitkamp said. “But getting American manufacturing up and moving again won’t be sustainable if we don’t access international markets.”

Also speaking at the event were USTR Katherine Tai, who appeared via video, and Livia Shmavonian, Made in America Director at the US Office of Management and Budget.

Marisa Lago, Undersecretary of  Commerce for International Trade, concurs that our biggest and most unwieldy trading partner, China, has to be held accountable and forced to comply with all trade regulations. Lago refers to Secretary of State Blinken in his summation of working with China: invest, align, compete.

That means the US invests in trade, works with our allies, but at the end of the day still competes with China on many levels. The US is never going to sacrifice our intellectual property protections in order to compete with China, or compromise on our support of human rights, Lago said.

“But one thing I have to emphasize even as we are engaging in promoting US exports, we are never going to lose sight of the primary importance of protecting our national security and living up to our values,” the Undersecretary said.

Diversity issues are one area Lago feels have not reached the goal she set for any of the administrations she has served or any of the multiple positions she has held in government. “We need to do more in the areas (you) mentioned: women, minorities, the disadvantaged, veterans, rural and historically disadvantaged communities,” she noted.

The textile industry is well placed to make inroads in these areas. It has many jobs that don’t require a college degree and recognizes the importance of technical trade training. She points to North Carolina as a mecca for this approach and commends the state for its focus on fair labor practices.

US exports of fibers, textile and apparel were up last year, to $34 billion from $28.4 billion in 2021, according to David Poston. Capital expenditures also remain strong, with investments in yarn, fabric, apparel and some production, hitting  $2.27 billion in 2021, compared with $1.85 billion in 2020. There is $39.8 billion annually in two-way trade with the Western Hemisphere, up 18.4 percent in the past five years. This supports two million jobs in the supply chain, Poston said.

Poston left his position as chairman of the NCTO at last week’s meeting and handed the gavel to the newly elected Norman Chapman, CEO of South Carolina-based Inman Mills. The newly elected vice chairman is Charles Heilig, president of Parkdale Mills, located in North Carolina.

De minimis issues remain paramount in enforcing trade regulations, which fall under the aegis of Customs and Border Protection. There was an important change however, in that the legal value of any item to be taxed upon crossing the border, which was raised to $800, up from $200. Despite that 400 percent jump, there are still almost 1 billion de minimis shipments crossing the border a year, up from 150 million in 2016 when the requirement was changed, according to John Leonard, Deputy Executive Assistant Commissioner, Office of Trade, U.S. Customs and Border Protection.

The CBP enforces more than 500 US trade regulations, 14 trade agreements and seven priority trade issue in collaboration with 49 partner government agencies.

It is working to improve data collection with programs called 321 Data Pilot that gets data from the Amazons and Alibabas of the world, and Type 86 which generates a Harmonized Tariff number. To give an idea of volume, the 321 Data Pilot recorded 161 million entries in FY22;  Type 86 recorded almost 350 million transactions. Leonard said it was so effective the system ran out of numbers and had to be reconfigured.

CBP is also developing more effective tracing technology which can identify the origin of a fiber, often using DNA, to determine if it came from a region known for forced labor and therefore  considered contraband. It has an on-line reporting system, e-Allegations, where complaints of infractions are triaged and investigated.  It works closely with Congress and has added staff. Still, the number of confiscations grows with no end in sight, according to Leonard. Those confiscations don’t solve the bigger issue. “We can’t seize our way out of this problem,” he said.