Trans-Pacific pact jeopardizes China’s position as top US apparel source

A pending free trade agreement involving the U.S. and 11 other Pacific Rim countries could jeopardize mainland China’s dominance in producing apparel for U.S. consumers.

Vietnam is the country best poised to gain apparel market share in the U.S. if the Trans-Pacific Partnership is completed, according to a Reuters analysis. The agreement, which excludes China, would make U.S. apparel imports from Vietnam duty-free, lending added momentum to the country’s growing competitiveness as a producer nation, driven partly by rising Chinese labor costs.

Vietnam has an established infrastructure for apparel production, and its supply chain efficiency is improving, said Economist Mario Moreno.

Negotiators working on the TPP agreement are in Hanoi, Vietnam, this week in an effort to complete the proposed pact by the end of this year. Participating countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S. and Vietnam. The participating countries make up about a third of global trade and 40 percent of global GDP.

Apparel exports from mainland China accounted for 32.5 percent of U.S. imports in the first half of 2014 compared to the same period a year ago, according to PIERS, the data division of JOC Group. China’s share of total U.S. apparel imports inched up 0.4 percent within the same period.

Vietnam, the second-largest source of U.S. apparel imports via ocean container, saw its share rise 1 percent to a 12 percent share in the first six months of this year compared to the same period in 2013. Bangladesh is the third-largest source of U.S. apparel imports, followed by Indonesia, Hong Kong, Cambodia and Honduras. Hong Kong’s figures contain many shipments originating in mainland China.

Garment makers are also looking to source more from Myanmar, with the most recent entrant being San Francisco-based Gap. Following the repeal of some U.S. sanctions in 2012, Myanmar has attracted the attention of third-party logistics companies, including Kuehne + Nagle and Yusen Logistics, many of which are serving apparel shippers.

U.S. containerized apparel imports were down 17.2 percent year-over-year in the first half of 2014, according to PIERS statistics. On a year-over-year basis, imports were down 17.9 percent in the second quarter and 16.5 percent in first three months of the year.

“A major driver of apparel imports is disposable income mainly because ordinary clothes aren’t luxury goods,” Moreno said. “Since 2006, growth in real disposable personal income has flattened, and despite the recent decline in unemployment rate, wage growth has been disappointing.”

The third-quarter statistics on U.S. apparel importers will be revealing, as they could show how confident retailers are that shoppers will buy for the back-to-school and winter holiday seasons. There are indications that the majority of holiday good have already made their way through the ports and are in transit to distribution centers, and eventually, store shelves. If that is the case, then the lack of a new U.S. West Coast longshore contract is less of a threat to retailers’ seasonal inventory buildup.

Contact Mark Szakonyi at and follow him on Twitter:@szakonyi_joc.

Foreign Policy-Based Export Controls Subject of Annual BIS Review

Thursday, September 04, 2014

Sandler, Travis & Rosenberg Trade Report

The Bureau of Industry and Security is seeking comments by Oct. 6 for its annual review of whether the foreign policy-based export controls in the Export Administration Regulations should be modified, rescinded or extended from January 2015 to January 2016.

Coverage of Controls. Foreign-policy based export controls apply to a range of countries, items, activities and persons, including the following.

– entities acting contrary to U.S. national security or foreign policy interests

– certain general purpose microprocessors for military end-uses and military end-users

– hot section technology for the development, production or overhaul of commercial aircraft engines, components and systems

– encryption items

– crime control and detection items

– specially designed implements of torture

– certain firearms and related items

– regional stability items

– equipment and related technical data used in the design, development, production or use of certain rocket systems and unmanned air vehicles

– chemical precursors and biological agents, associated equipment, technical data, and software

– various chemicals included on the list of those controlled pursuant to the Chemical Weapons Convention

– communication intercepting devices, software and technology

– nuclear propulsion

– exports and reexports to certain persons designated as proliferators of weapons of mass destruction

– certain cameras to be used by military end-users or incorporated into a military commodity

– countries designated as supporters of acts of international terrorism

– certain entities in Russia

– individual terrorists and terrorist organizations

– certain persons designated by Executive Order 13315 (“Blocking Property of the Former Iraqi Regime, Its Senior Officials and Their Family Members”)

– certain sanctioned entities

– embargoed countries

– U.S. and UN arms embargoes

In addition, the EAR impose foreign policy-based export controls on certain nuclear-related commodities, technology, end-uses and end-users.


Criteria for Determining Whether to Continue Controls. Among the criteria considered in determining whether to extend U.S. foreign policy-based export controls are the following.

– the likelihood that such controls will achieve their intended foreign policy purposes in light of other factors, including the availability from other countries of the goods, software or technology proposed for such controls

– whether the foreign policy objective of such controls can be achieved through negotiations or other alternative means

– the compatibility of the controls with U.S. foreign policy objectives and overall U.S. policy toward the country subject to the controls

– whether the reaction of other countries to the extension of such controls is not likely to render the controls ineffective in achieving the intended foreign policy objective or be counterproductive to U.S. foreign policy interests

– the comparative benefits to U.S. foreign policy objectives versus the effect of the controls on U.S. export performance, the competitive position of the U.S. in the international economy and the international reputation of the U.S. as a supplier of goods and technology

– the ability of the U.S. to effectively enforce the controls

– the economic impact of proliferation controls

Industry Information Sought. BIS is interested in industry information relating to the following.

– the effect of foreign policy-based export controls on sales of U.S. products to third countries (i.e., those not targeted by sanctions), including the views of foreign purchasers or prospective customers regarding these controls

– controls maintained by U.S. trade partners (e.g., the extent to which they have similar controls on goods and technology on a worldwide basis or to specific destinations)

– licensing policies or practices by U.S foreign trade partners that are similar to U.S. foreign policy-based export controls, including license review criteria, use of conditions and requirements for pre- and post-shipment verifications (preferably supported by examples of approvals, denials and foreign regulations)

– revisions to foreign policy-based export controls that would bring them more into line with multilateral practice

– actions that would make multilateral controls more effective

– the effect of foreign policy-based export controls on trade or acquisitions by the intended targets of the controls

– the effect of foreign policy-based export controls on overall trade at the level of individual industrial sectors

– how to measure the effect of foreign policy-based export controls on trade

– the use of foreign policy-based export controls on targeted countries, entities or individuals

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Shenyang Customs to implement FTZ regulations

Shenyang Customs said on Sunday that five regulations already in force at China (Shanghai) Pilot Free Trade Zone (FTZ) will be launched in Shenyang Comprehensive Bonded Zone.

According to Shenyang Customs, the zone will introduce all 14 innovative regulations of Shanghai FTZ in three phases.

In the first phase, they will implement five regulations, including “centralized tax collection”, “separate delivery, concentrated declaration”, “self-handled transportation”, “simplifiedpaperless customs clearance” and “simplified arrival-departure record list”.

Another five regulations will be implemented in the next phase.

Shenyang Comprehensive Bonded Zone was established in October 2009. It is divided into two sections serving logistics, processing and manufacturing, research and development, testing and maintenance. Its annual trade volume is estimated to hit $70 billion next year.

Pact ‘should be done by 2015’

Negotiators say success will depend on quality of free trade agreement


Negotiators from China, Japan and South Korea called for the conclusion of a comprehensive trilateral free trade agreement by the end of 2015, officials said on Monday.


“The three sides all agreed to accelerate the China-Japan-South Korea FTA negotiations, and we expect to conclude sooner than the RCEP (Regional Comprehensive Economic Partnership),” Assistant Minister of Commerce Wang Shouwen said on the sidelines of the fifth round of China-Japan-South Korea FTA negotiations, which started on Monday.


This round of talks in Beijing is scheduled to wrap up on Friday.


Ministers from 16 Asia-Pacific economies have agreed to finish the RCEP talks by 2015.


“But negotiations are hard to predict. We all have very good intentions to speed up, but we must reach a high-level and comprehensive pact. We will not sacrifice quality for speed, because quality is very important,” said Wang, who is also head of the Chinese delegation.


The three countries launched trilateral FTA negotiations in November 2012. The pact is intended to cover trade in goods and services as well as investment and other issues such as intellectual property rights protection.


The pact will forge a common market of 1.5 billion people with a combined GDP of $15 trillion.


Woo Tae-hee, assistant minister for trade at the Ministry of Trade, Industry and Energy of the Republic of Korea, said: “The three countries share a common understanding that the FTA should proceed faster than the RCEP. … I hope we can make some sensible progress in market access, in liberalization of services and investment. We should look at the bigger picture instead of speaking to small details.


“I also say that we should have a forward-looking attitude toward scope and coverage,” Woo said.


Yasumasa Nagamine, vice minister for international affairs at the Ministry of Foreign Affairs of Japan, said the trilateral FTA will provide a legal framework to promote ties among the three largest economic powers in Asia.


“In Japan, the promotion of the FTA is an important element of the third arrow of so-called Abenomics, the policy package to vitalize the Japanese economy. The trilateral FTA will be an inescapable part of the current economic policy. That is why we are very pragmatic about these negotiations,” he said.


Abenomics refers to a set of economic policies initiated by Prime Minister Shinzo Abe.


“We really desire to conclude these FTA negotiations sooner than the RCEP negotiations,”Nagamine said.


“At the same time, we should continue to strive for a comprehensive and high-level FTA. Let us be strategic in narrowing the gaps among our stances,” he added.


Wang Haifeng, a researcher with the Institute for International Economic Research at the National Development and Reform Commission, said that the key task of the trilateral FTA talks lies in the trade of goods and services, as a separate three-way investment pact took effect on May 17.


“Technically, there is no problem in speeding up the trilateral FTA talks. But the progress is mainly being affected by political factors in Japan,” he said.


“The trilateral FTA will bring greater benefits to Japan than its other FTAs while boosting the country’s domestic economic restructuring, and it is thus of great significance,” Wang said.