If Section 421 Cases Filed on Apparel From China, New Duties Could Take Effect in Five Months

If other interested parties, such as those in the textiles and apparel sector, decide to follow suit, Section 421 duties on such products could be imposed with the same speed.

(The International Trade Commission received the petition to impose duties under Section 421¹ of the 1974 Trade Act on tires for passenger cars and light trucks from China on April 20, 2009. Just five months later, the ITC had concluded its investigation, recommended its remedy, and the President made his determination to impose 35-25% additional duties on such tires over a three year period, beginning September 26, 2009.)

As First Section 421 Import Relief Was Implemented, Might Encourage Others

As the China tire case was the first Section 421 import relief to actually be implemented, it might encourage more cases.

Under President Bush, four Section 421 investigations on Chinese products occurred (pedestal actuators, steel wire garment hangers, steel pipe fittings, and circular welded non-alloy steel pipe), and recommendations were made for remedy; however, President Bush decided to take no action.

Tire Case Was Brought by Union, Other Unions May Follow Suit

In addition, the tire case was brought by the United Steelworkers union, rather than domestic industry, which may encourage other unions to file, even if the domestic industry is not interested in seeking relief.

Apparel from China That Competes with Other Imported Apparel Using U.S. Inputs Could be Targeted

If textile and apparel unions and/or sectors of the domestic industry were to seek Section 421 relief, their targets could include apparel from China that competes with like apparel from countries with (1) declining U.S. trade, (2) that have trade preference programs or free trade agreements that encourage or require the use of U.S. fabric or U.S. yarn.

Products fitting the above scenario include:

Cotton trousers, breeches, shorts. According to the Office of Textiles and Apparel (OTEXA), imports of men's and boys cotton trousers, breeches, and shorts from China increased 104.44% from June 2008 to July 2009.

In contrast, imports of men's and boys cotton trousers, breeches, and shorts from Honduras, Dominican Republic, and Guatemala, which have U.S. fabric and yarn requirements through DR-CAFTA decreased 14.66%, 35.60% and 44.23%, respectively.

In addition, U.S. exports of cotton broadwoven fabrics and yarns likely used in the fabrication of men's and boys cotton trousers, breeches, and shorts in those three countries all declined. From June 2008 - July 2009, U.S. exports of cotton woven broadcloth declined 52.57% to Honduras, 34.70% to Dominican Republic, and 64.88% to Guatemala. In addition, U.S. exports of yarn fell 12.23% to Honduras and 28.53% to Guatemala during that period.

(The same trend is apparent for women's and girls cotton trousers, slacks, and shorts in which imports increased 96.06% from China but decreased 32.56% for Honduras, 29.36% for the Dominican Republic, and 20.30% for Guatemala.)

Cotton knit shirts/blouses. Likewise, the OTEXA statistics show a 50.58% increase in men's and boys knit cotton shirts from China from June 2008 to July 2009. However, imports of these products from certain FTA/preference countries using U.S. fabric and yarn decreased as follows: 12.55% for Mexico, 17.24% for Honduras, and 47.33% for Dominican Republic.

Correspondingly, U.S. exports during that same period of knit and knit pile fabrics to Mexico, Honduras, and Dominican Republic that could be used to manufacture such cotton knit shirts and blouses fell by 33.31%, 49.52%, and 36.45%, respectively.

(The same trend is true for women and girl's knit cotton shirts and blouses, for which imports increased 80.55% from China, but decreased 17.91% from Mexico, 20.64% from Honduras, and 13.86% from Dominican Republic.)

MMF knit shirts. OTEXA also reports that from June 2008 to July 2009, imports of men's and boys man-made fiber (MMF) knit shirts from China increased 18.97% but decreased 31.25% from Mexico, 30.72% from Honduras and 44.56% from Dominican Republic.

U.S. exports of MMF broadwoven fabrics that could be used to manufacture men's and boys MMF knit shirts in these countries also decreased during that period: 18.63% drop in exports to Mexico, 33.14% to Honduras, and 44.03% to Dominican Republic.

(Similarly, imports of women's and girls MMF knit shirts and blouses from China increased 34.67%, but decreased 10.37% from Mexico, 12.34% from Honduras and 10.62% from the Dominican Republic.)

Cotton and MMF underwear. The OTEXA statistics further show that imports of cotton underwear from China increased 49.95% from June 2008 to July 2009 but decreased 16.81% from Honduras, 30.12% from El Salvador, and 14.73% from Mexico. The same is true for MMF underwear which increased 54.74% from China, but decreased 13.55% from El Salvador and 59.74% from Mexico.

¹Section 421 investigations are a transitional safeguard tool to address import surges of Chinese products that cause or threaten market disruption. The procedure was negotiated as part of China's accession to the WTO, and is in effect until December 11, 2013. Section 421 safeguards can be used to provide relief against any type of import from China, including textiles and apparel.

(See ITT's Online Archives or 10/02/09, 09/17/09, and 09/14/09 news, 09100205, 09091705, 09091710, and 09091410, for BP summaries of USTR's request for comments on China's request for WTO consultations with the U.S. on the Section 421 tire duties; Presidential Proclamation 8414 which imposed the Section 421 duties; China's response to the imposition of Section 421 duties; and President Obama's decision to impose Section 421 duties on tires from China, respectively.)

OTEXA major shipper's report by category available at http://otexa.ita.doc.gov/MSRcat.htm

OTEXA export data by group available at http://otexa.ita.doc.gov/explist.htm