Our 23rd Annual Textile & Apparel Importer Trade & Transportation Conference was held on November 8, 2011, at Bridgewaters South Street Seaport in New York City. Below, you’ll find a recap of the presentations, including links to PowerPoint presentations and photos.
- Recap: 23rd Annual Textile & Apparel Importer Trade & Transportation Conference
- The Political Landscape for 2012
- Moving Along to Transportation...
- Positive News from Cotton Incorporated
- The Future of Customs Partnership
- A Fresh Look at New Sourcing Opportunities
- The Scoop on Trade Policy
- Conference Attendee Survey
- Conference Sponsors
On Tuesday, November 8th, USA-ITA and the American Import Shippers Association (AISA) welcomed over 200 professionals in the textile and apparel importing community to Bridgewaters South Street Seaport for our 23rd annual conference. It was day packed with presentations on topics including customs, supply-chain logistics, transportation, sourcing, politics, and other key issues, and a big success for both associations. Check out our Flickr page for photos, or keep reading for a recap of the topics covered.
The day kicked off with the transportation and sourcing keynote presentations from Ronald Widdows, Chairman of the World Shipping Council and Senior Advisor and Retired Group President/CEO of Neptune Orient Lines, and Soo-Ah Landa, Vice President of Global Merchandise Sourcing & Technical Design for Disney Theme Parks and Resorts. Though they discussed the numerous problems facing the industry right now, they also provided some ways for shippers and importers to manage these problems.
Widdows’s transportation keynote focused on the state of volatility in shipping. While the state of shipping seemed to be improving this time last year, the industry has now “returned to the dark side with vigor,” he said. These problems include:
- Growing Asset Bubble. The growing asset bubble in ships—meaning more ships than shippers can use—has led to a decrease in shipping rates. The problem is that, as shipping rates continue to decrease, fuel rates remain high, so shippers are facing huge financial losses.
- Lack of Infrastructure and Stability. Importers are increasingly looking to find other sourcing opportunities outside of China. But, how do you get these goods out of countries like Bangladesh? The unfortunate truth is that many countries simply do not yet have the infrastructure or stability found in China.
- Challenges to U.S. Competitiveness. The U.S. likewise needs to complete infrastructure projects, but doesn’t have the money. Widdows warned that Washington is unlikely to have a coherent transportation policy any time soon, and the industry should not expect any quick change from the status quo.
- Piracy. You don’t hear too much about piracy, but it exists, and it can only be solved by government action. However, governments are telling private industry to deal with it.
- Labor Tension. Widdows says that labor unions in the East Coast ports are getting more aggressive as the completion of the Panama Canal expansion looms. There hasn’t been this kind of tension in years.
Widdows wasn’t all dour. There are a few things that could change these shipping problems: surprise bounce in demand, dramatic improvement in the U.S. economy, a sharp drop in fuel prices, or parking a large number of ships quickly. However, for now, the industry should not expect the situation to improve.
In her sourcing keynote, Landa discussed the supply chain issues that importers face right now, such as volatility, political instability, natural disasters, environmental concerns, and fuel prices. In addition, importers—including Disney—are no longer simply concerned about the lowest price, but also look at speed to market, product quality, factory capacity, design and delivery process, and environmental and labor compliance, to name a few. Disney, however, is finding some innovative ways to deal with these problems, and other importers should take note:
- Anticipate. You must try to anticipate the trends as well as the economic, political, and environmental developments that may affect sourcing. Disney has people who speak the language on the ground in countries from which they source, and also looks at strategies for hybrid sourcing from a variety of suppliers.
- Mitigate. Disney has looked for ways to not only decrease its supplier base, but to also help its existing suppliers improve. Disney developed a supplier score card to measure risk, social compliance, environmental responsibility, and other issues to help drive improvement. (TigerTrade summarized the environmental issues in particular.)
- Evolve. You not only have to set goals, but achieve them and continue to evolve. Disney tries to get ahead of these goals using the scorecard. It’s not about strict compliance—different suppliers face different problems depending on where they’re located—but about consistent progress.
Whether you’re red or blue or somewhere in between, the panel on the Political Landscape for 2012 was fascinating and provided a quick primer on the nation’s political situation. Moderated by USA-ITA’s Washington counsel David Spooner, the panel featured speakers from the U.S. Senate Finance Committee, the U.S.-China Business Council, the Democratic Congressional Campaign Committee (DCCC), and the National Republican Congressional Committee (NRCC). We didn’t learn who will be the Republican Presidential nominee, but we did find out some interesting tidbits on what to expect in policy and politics in the upcoming year.
Photo L to R: Paul DeLaney, Erin Ennis, Travis Lowe, Brock McCleary, and David Spooner at the podium.
The first two panelists talked policy. Paul DeLaney, International Trade Counsel for the U.S. Senate Finance Committee, discussed the recently passed Free Trade Agreements (FTAs) with Colombia, Panama, and Korea, as well as the future of congressional trade policy. He pointed out that trade policy has moved along at an unprecedented pace—just a year ago, it looked like the U.S-Korea FTA would not pass, but now, it’s passed and signed into law, along with a number of other pieces of trade legislation.
DeLaney also briefed attendees on a number of other trade agenda items, including:
- The Trans-Pacific Partnership (TPP), which DeLaney said could drift away from its original purpose in the upcoming election year.
- Russia’s accession to the World Trade Organization (WTO), which will only happen if WTO announced a deal in mid-November, according to DeLaney.
- Customs Reauthorization, which remains under consideration.
- Trade Promotion Authority, which President Obama has not asked for but needs, according to DeLaney. He said that Senator Orrin Hatch (R-UT) is pushing for it.
- Africa Growth and Opportunity Act (AGOA) Third-Country Fabric, which Congress is negotiating to extend beyond the September 30, 2012, expiration date.
- The CAFTA fixes, which must still be enacted into law but have not yet been introduced into Congress.
Following DeLaney, we heard from Erin Ennis, Vice President of International Trade at the U.S.-China Business Council. Ennis’s discussion focused on the contentious Currency Exchange Rate Oversight Reform Act of 2011, which recently passed the U.S. Senate. According to Ennis, even if the bill passes the U.S. House, it will have a small impact—only about $150 million in tariffs—and would send a message but would not give the United States the leverage it desires over China. Ennis says passage depends entirely on the political situation in the election year. Currently, Speaker of the House John Boehner (R-OH) can avoid bringing it up for a vote. However, if Mitt Romney—who has spoken out strongly in favor of the bill—wins the Republican nomination, Boehner could face political pressure to bring it up. Nonetheless, if it comes up for a vote, Ennis predicts it will pass.
The next two speakers talked politics. Travis Lowe, Campaign Director for the Democratic Congressional Campaign Committee (DCCC), discussed the DCCC’s “Drive to 25” plan to get the 25 seats needed to regain the House. They are targeting 19 Republican seats in districts won by John Kerry in 2004 along with 42 Republican seats in districts won by Barack Obama in 2008. Given the current fundraising situation, Lowe believes the Democrats can get there. Brock McCleary, Deputy Political Director for the National Republican Congressional Committee (NRCC), said that he thinks Democrats will have a tough time retaking the House. Due to redistricting alone, the NRCC believes Democrats will lose at least 14 seats and would need a wave to overtake the largest House Republican majority since 1949. Regardless, it’s a long road to November 6th, 2012!
Hubert Wiesenmaier, Executive Director of AISA, organized an informative panel of transportation industry insiders, featuring USA-ITA Associate Member OOCL (USA) Inc., the Port Authority of New York & New Jersey, and AISA’s General Counsel Marty Lewin.
Erxin Yao, President of OOCL (USA) Inc., echoed the challenges outlined by Ronald Widdows. He explained a number of challenges for shippers right now, including:
- The 25-year low for shipping rates combined with high fixed costs for shippers;
- The increasing size of ships, which require more fuel than older ships;
- The different regulations in different ports;
- Chassis, which is only required in the United States but costs the industry $1 billion per year;
- The imbalance in supply and demand for boxes;
- The expansion of the Panama Canal, which causes logistical issues; and,
- Piracy, which remains a problem. In 2010, there were 250 successful attacks and 200 unsuccessful attacks, and most attacks still end in pirates being paid a ransom.
Next, Dennis Lombardi, Deputy Director of Port Commerce Department for the Port Authority of New York and New Jersey, discussed the port authority’s preparations for the larger ships that will be traveling from the Panama Canal in 2014 and beyond. The port’s modernization plans are outlined in Lombardi’s PowerPoint presentation here.
Finally, AISA’s General Counsel Marty Lewin wrapped up the discussion by noting the three words to describe the industry right now: volatility, uncertainty, and instability. He described some of the actions the Federal Maritime Commission has taken to help bring stability back to the industry. You can read Lewin’s presentation here.
We were very grateful to Cotton Incorporated for two reasons. First, they sponsored the wonderful luncheon, which featured delicious food and lively speakers from Mexico about the benefits of sourcing from our southern neighbor. Two, Mark Messura, Executive Vice President of Cotton Incorporated, provided some good news for the industry.
Messura reported that the price of cotton is down from the recent peaks in February and March of 2011. The most recent cotton price at the time of the presentation was $1.0655/pound, and though the numbers constantly change, the prices seem to be stabilizing. The recent high prices led to additional plantings, so we can expect to see greater supply and decreasing costs. However, China can cause the price to shift, as it is the largest producer AND the largest consumer of cotton. During the recent price peaks, China released some of its cotton reserves, which likely caused prices to drop. Now, China is rebuilding its supply, so prices could potentially rise depending on the outcome.
To learn more about cotton prices, including comparative fiber prices and a case study on UnderArmour’s utilization of the cotton price spike, download Mark Messura’s PowerPoint presentation here.
U.S. Customs & Border Protection: can’t live with ‘em, can’t live without ‘em in this industry! As we learned at the conference, however, CBP is finding ways to work better with importers and service providers. Moderated by USA-ITA’s customs counsel John Pellegrini, the panel featured Customs’’ Senior Advisor for Trade Maria Luisa O’Connell and Director of Textile Enforcement John Leonard, along with USA-ITA Associate Member Mary Jo Muoio from OHL Global Freight Management & Logistics.
Maria Luisa O’Connell, Senior Advisor for Trade to the Commissioner at U.S. Customs & Border Protection, discussed CBP’s engagement with the private sector. In FY2010, CBP facilitated $2 trillion in trade, so it’s important to get partnerships right. O’Connell explained that CBP has four major strategies for engagement: harmonized approach to trade facilitation, robust trade enforcement, private sector engagement, and automation and efficiency. CBP has already made some changes; O’Connell mentioned that they discovered they were stopping shipments from highly trusted companies for simple clerical errors, and they’ve been able to halt this practice. You can download O’Connell’s PowerPoint presentation here.
John Leonard, the new Director of Textile Enforcement, told us that textiles is the only industry-specific Priority Trade Issue for the agency. Although textiles and apparel account for only 5 percent of U.S. imports, they account for 43 percent of duties collected. Since the end of the apparel quotas in 2008, the biggest textile issue for Customs has been preference trade, including verification and simplified entry rules. Importantly, Leonard said that he hopes to expand the Centers of Excellence and Expertise to include a center for textiles, in an effort to simplify and standardize the entry of preference claims. You can download Leonard’s PowerPoint presentation, which includes the status of preference programs and FTAs in the U.S., here.
Finally, Mary Jo Muoio, Senior Vice President at OHL Global Freight Management and Logistics, discussed the collaboration between CBP and the industry from the broker’s perspective. She said that CBP plans to announce via Federal Register notice a pilot program for simplified entry, which would allow importers to file a streamlined version of their entry data earlier in the process. Furthermore, she explained, Customs partnerships have been moving uncharacteristically quickly over the past year. In addition to the pilot program, CBP has introduced a task force on the role of the broker and is working onother projects. You can read Muoio’s recent OFF THE CUFF article on entry simplification here.
Our conference attendees took a trip around the world in one hour during the panel on new sourcing opportunities. Moderated by Gary Ross, USA-ITA Board Member and Vice President of Global Fashion & Home Supply Chain for Avon, the panel featured speakers representing the CAFTA-DR region, Mexico, and Southeast Asia.
Daniel Vazquez, Senior International Trade Consultant at the Inter-American Development Bank (IDB), kicked off the discussion by giving an overview of the new CAFTA-DR sourcing database, DRCAFTASourcing.com. This database is in the beta version, but it will eventually be a resource for importers looking to source specific products in the CAFTA-DR region. For more information, visit the database or download his PowerPoint presentation here.
Next, Carlos Arias, President of American Denimatrix, spoke on behalf of the Central American-Dominican Republic Apparel and Textile Council (CECATEC-RD). If you attended MAGIC in Las Vegas, you may remember meeting the Denimatrix team at the Sourcing in the Americas Pavilion. Arias encouraged attendees to take a second look at the CAFTA-DR region as an alternative to China because Central American countries are no longer competing, but working together to create integrated regional production. China may offer a competitive price, but Central America offers speed to market due to proximity to the United States, quality, collaboration, and service, in addition to competitive price. If you’ve left the region, you’re encouraged to contact CECATEC-RD to let them know what they can do better.
We then heard from another important sourcing opportunity in the Western Hemisphere: Mexico. Echoing his colleagues who spoke during lunch, Luis de la Calle, President of Mexico Fits, said that the Mexican industry is back on track and importers should take a fresh look at the country. After all, Mexico has stability, no debt, and no deficit. The country is also working to open trade, most recently eliminating anti-dumping duties on shipments from China. He also emphasized that while Mexican denim remains the top export, you can find “more than jeans” in the country, including knit shirts, hosiery, and cotton-woven and wool-woven apparel, to name a few. For more information, you can download his PowerPoint presentation here.
Finally, we learned more about opportunities in Southeast Asia and the Source ASEAN Full-Service Alliance (SAFSA) from Jeff Streader, Operating Partner at Marlin Equity Partners and Advisor to SAFSA. Streader said that China is losing its speed-to-market advantage as factories move inland, and Southeast Asia provides a viable alternative. Vietnam and Indonesia in particular drive apparel production for the U.S. market, and SAFSA is building “virtual vertical factories” within the region to create better products, faster. With trade agreements like TPP in the works, duty-free access could soon be another advantage of the region. For more information, you can download his PowerPoint presentation here.
The last two speakers of the day provided the scoop on trade policy from insiders’ perspectives. Kim Glas, Deputy Assistant Secretary for Textiles & Apparel at the U.S. Department of Commerce, provided an overview of the Obama Administration’s trade agenda, and Jon Fee, Partner at Alston & Bird LLP and USA-ITA Associate Member, gave his entertaining perspective on the FTAs and more.
Continuing the conversations at the Sourcing in the Americas Summit at MAGIC, Glas emphasized that the Administration is putting a lot of focus on the Western Hemisphere.The Administration is promoting exports with the National Export Initiative, particularly in the Western Hemisphere. In addition, the Administration is working to negotiate the CAFTA fixes, particularly the problem of elastomeric yarn in short supply fabrics, and Commerce is working to promote the CAFTA-DR Sourcing Directory discussed by Daniel Vazquez in the previous panel.
Glas also discussed a number of other agenda items, ranging from the development of regulations for the recently passed FTAs, to the extension of the AGOA Third Country Fabric provision. The Administration is also working on TPP, and in particular, ensuring strong labor and environmental provisions in the agreement as well as maintaining benefits for all members. Finally, Glas touched on the Turkey safeguards. After a September 2011 report found that imports in Turkey would be subject to double-digit tariff increases, the U.S. convinced Turkey to lower the tariffs by 10 percent.
Last, but certainly not least, we heard from the always entertaining Jon Fee, who discussed trade policy during the current “bizarre political climate.” Given the circumstances, he was shocked to see the FTAs with Colombia, Panama, and Korea passed. Still, Fee is not optimistic about the implementation timeline given the laws that must be passed and the opposition in some of the partner countries. Fee noted that all three agreements have a yarn-forward rule of origin, but numerous differences.
Fee also discussed other recent trade developments, including the Merchandise Processing Fee, included in the FTAs to defray the cost of processing U.S. imports and lost tariff revenue, as well as the status of trade nominees including Customs Commissioner Alan Bersin, who faces bipartisan opposition. Regarding TPP, he explained that the textile provisions have not been determined and he believes that U.S. will probably stick to a yarn-forward rule of origin despite opposition from industry.
Finally, Fee closed his discussion with a humorous explanation of the current Republican presidential candidates—and led the audience to cocktails in the exhibit hall. You can download Fee’s PowerPoint presentation here.
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This conference could not have taken place without the generous support of our sponsors.