Industry Leaders Testify on America’s Supply Chain Resilience
Kate Nishimura
7 min read
The U.S. Trade Representative (USTR) kicked off a two-day hearing on fostering domestic supply chain resilience on Thursday, inviting industry experts to weigh in on how American businesses can divest from China and ensure self-sufficiency and growth.
After soliciting the industry’s feedback in March, trade groups and representatives from the country’s textile sector convened at the International Trade Commission in Washington, D.C. to speak to the trade programs and domestic incentives they believe can help shore up the textile and apparel sector.
National Council of Textile Organizations (NCTO) President and CEO Kim Glas testified that the U.S. government must be more deliberate in implementing trade and investment policies that benefit domestic industry. It’s a matter of urgency, she stressed—at least 14 U.S. textile factories have been closed in recent months, eliminating an estimated 100,000 jobs across the Western hemisphere.
While the domestic textile sector has supported the country’s public health organizations and its military, its commercial growth has been stymied by the predatory trade practices of other sourcing leaders, the NCTO lead said. Paired with a lack of effective customs enforcement, the issue is “threatening the future of domestic textile manufacturing, as well as the textile and apparel coproduction chain between U.S. and our Western Hemisphere free trade agreement (FTA) partners responsible for $40 billion in annual two-way trade.”
Along with other trade groups, NCTO has long been a proponent of de minimis reform, advocating that the trade “loophole” be closed to players like China, which have made hay by deluging the American market in small, low-value shipments that easily evade customs enforcement and Section 301 duties.
“This loophole in U.S. trade law allows four million packages a day to enter the U.S. duty free and largely uninspected,” Glas said, citing Customs and Border Protection (CBP) data showing that textile and apparel products make up about half of all de minimis entries. Not surprisingly, “China is the largest beneficiary.”
Glas, who also spoke to the need to reinstate the Miscellaneous Tariff Bill (MTB) and protect yarn-forward rules of origin, praised the Department of Homeland Security’s (DHS) recently released textile and apparel enforcement plan, calling it “an important first step to combatting fraud and circumvention of free trade agreement rules and trade laws.” Glas said U.S. enforcement strategy “must be continuous and aggressive with penalties to help deter fraud and illegal trade activities.”
Nate Herman, senior vice president for policy at the American Apparel and Footwear Association (AAFA) argued that while “signals from Washington certainly made clear that it’s time to diversify away from China,” the U.S. government isn’t walking the walk, so to speak.
“We want to limit risk, increase proximity to markets and suppliers, avoid supply chain disruptions, drive sustainability, foster responsible supply chains and more,” he said. “Resilient supply chains rely on certainty, clarity, and flexibility—but at the same time, we have witnessed inaction by the administration in Congress to negotiate new free trade agreements.”
Nor has the administration or Congress made moves to renew expired or expiring trade programs, from MTB to the Generalized System of Preferences (GSP), lapsed three years ago, the Africa Growth and Opportunity Act (AGOA) and Haiti HOPE-HELP, which will expire in 2025.
“Successful agreements and reliable programs are fundamental building blocks for resilient supply chains—supply chains, not depending on China,” Herman said.
The AAFA policy lead took an opposing stance to NCTO’s Glas when it came to rules of origin laws, saying restrictions “intended to close the back door to China” are actually creating hurdles and administrative headaches for companies bent on nearshoring and onshoring.
“For apparel, the yarn forward rule requires everything from the yarn forward to be made in the U.S. or [free trade agreement] partners. It is with few exceptions—an all or nothing rule,” he explained. “If 95 percent of the garment is originating, but 5 percent is not, you fail.”
Companies must pay full duty rates on products made with minimal inputs sourced from outside of FTA countries, he argued. A yarn-forward rule of origin “can, and has, worked for certain companies and for certain supply chains, but the rigidity of yarn-forward also limits apparel investments, which limits apparel demand, which limits textile investment.”
“With this vicious cycle, and with no flexibility, the size of the pie never grows and supply chains don’t get more resilient,” Herman said.
National Retail Federation (NRF) vice president for supply chain and customs policy Jonathan Gould said the trade group’s members are also in favor of liberalizing certain trade provisions, like rules of origin laws.
“As we evaluate trade policy and supply chain resiliency, we need to make sure that those policies are based on an accurate assessment of the costs and benefits of trade, and modeled to address challenges and opportunities for 21st century supply chain,” he said. “This means more modern Rules of Origin and systems to provide more opportunities for supply chain diversification, not less.”
According to Gould, retailers that survived the pandemic were able to do so because their supply chains offered them a backup plan—or two or three—if one supplier or even a whole country was out of commission. “Resiliency we saw during the pandemic was made possible because retailers and others had redundancies built into the supply chains were able to shift sourcing and key products” to other producers and production locales.
“Tariffs, managed trade and protectionism will not help improve supply chain resiliency,” he added. “The benefits of global integration include lower inflation greater variety of goods and services, more innovation, higher productivity, good jobs for American workers, and exporting sectors foreign direct investment in us industries, and a higher likelihood of achieving our climate goals.”
Timothy Voit, vice president of strategic and international sales at Thomaston Mills, a George and South Carolina-based fabric and bedsheet manufacturer, said he has witnessed “tremendous job losses in our sector and an increasing dependence on China and other Asian sources for a wide range of finished products and inputs by the U.S. private sector and federal government.”
In spite of the opportunities provided by programs like the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) and the U.S. Mexico Canada Agreement (USMCA), “much of the productive capacity of the United States to make soft goods for national defense, as well as for the consumer market, has been eliminated,” he said.
“Production has been instead concentrated and often adversarial, high-carbon-intensity countries with flimsy environmental and labor standards, Voit added. “Factory and job losses in our domestic manufacturing center have intensified and vulnerabilities to critical supply chains are multiplying in the current environment.”
Voit told the committee that the glory days the U.S. textile industry briefly enjoyed when it was called upon during the Covid-19 crisis to produce PPE and other essential products have faded from memory for many enterprises, and “old bad habits from before the pandemic have only become worse.”
He advocated for Congress to adopt changes that force federal government agencies to procure textile products from U.S. makers. The Berry Amendment, which compels the Department of Defense (DOD) to purchase certain items that are 100-percent domestically produced, has been circumvented for years, with military bases buying bedsheets and other textile products from offshore manufacturers. The law should be modernized and more effective enforcement measures should be put in place to ensure compliance, he said.
Voit also recommended that Congress pass the MTB, excluding finished products made in China from the legislation, and extend duty relief retroactively to 2020, when the program lapsed.
“Time is of the essence. Our industry proved its value during the Covid era,” he added. “The reversion and amplification of the trends and aggressive trade practices against this our workers and our environmentally sustainable practices has been disheartening.”
