Home    Resource Store    Past Issues    Buyers' Guide    Career Center    Subscriptions    Advertising    E-Newsletter    Contact

Textile World Photo Galleries
November/December 2015 November/December 2015

View Issue  |

Subscribe Now  |


Vietnam Fashion, Fabric & Garment Machinery Expo
11/25/2015 - 11/27/2015

From Farm To Fabric: The Many Faces Of Cotton - The 74th Plenary Meeting of the International Cotton Advisory Committee (ICAC)
12/06/2015 - 12/11/2015

Capstone Course On Nonwoven Product Development
12/07/2015 - 12/11/2015

- more events -

- submit your event -

Printer Friendly
Full Site
Knitting / Apparel

Add Value Or Else

A Caribbean Basin Initiative strategy for U.S. mills

 Add Value Or Else A Caribbean Basin Initiative strategy for U.S. mills Despite all the high hopes and hoopla surrounding the passage last year of the Caribbean Basin trade legislation, the results, thus far, have been disappointing for most U.S. mills producing apparel fabrics or yarns. There is little doubt that imports of apparel products from the region will grow over the next few years. The real question is whether the Caribbean Basin Initiative (CBI) region can compete in the long term with other apparel-producing regions especially after the quotas are removed on apparel imports from other countries in 2005.For producers of apparel fabrics and yarns, this situation is particularly critical. Like it or not, U.S. apparel production will continue to decline, and imports of finished garments will continue to increase. Even the most competitive U.S. producer of apparel fabrics or yarns will find it hard, if not impossible, to prosper without a competitive downstream customer.The other cold reality is that retailers and wholesalers of apparel products will always be forced to chase the cheap needle. And even though labor costs today are considerably lower in the CBI region than in the United States they are still considerably higher than in other less-developed countries in Southeast Asia, the Indian Subcontinent and Africa. 

 Elimination Of Quotas Will Reduce CBI AdvantageBy far, the biggest and most important advantage for the CBI region is in the zero-duty rate on qualifying garments, i.e. those made from U.S. fabrics and yarns. Currently, that advantage is significant in many key product classifications when compared to the duty rates on imports from Asia and other regions.Figure 1 shows the top imports from the CBI region in 2000 and the duty rates that would apply to the same garments imported from China, India or most other countries.Unfortunately for the CBI region (and Mexico), the elimination of import quotas (not duties) on other countries in 2005 will cut deeply into that competitive advantage.For most imports still covered by U.S. quota restrictions and that includes most apparel products there is frequently a cost associated with acquiring the export visa in the supplier country. The quota cost if there is one is usually reflected in the f.o.b. cost of the garment from the foreign manufacturer. The cost of quota can vary significantly from country to country, depending on U.S. market demand for the product, the capabilities of manufacturers in a particular country, and the quantity of quota available in that country for that quota year. Quota costs also rise and fall during the quota year.In some countries such as Hong Kong and China the quota charge can be significant.Figure 2 illustrates the before and after impact of the elimination of import quotas on one important product classification mens cotton polo shirts.Its clear from this example that factories producing polo-style shirts in the CBI region could easily find themselves after 2005 at a competitive disadvantage with producers in lower-cost countries such as Pakistan and for moderate- to better-quality polo shirts from countries such as Hong Kong, China and India. The same, of course, applies to other products as well.  
CBI Region Lacks Packaging Infrastructure Or FacilitatorsAnother challenge facing the CBI region is the growing demand for full-package garment production from U.S. wholesalers and retailers. Unfortunately, few independent garment factories in the region have the capability to offer full-package services due to financing limitations, lack of knowledge about U.S. fabric and trim sources, inadequate pattern-making or fabric-cutting capabilities, and other critical elements of full-package production. Likewise, few independent factories in the region can offer the type of product development support or quick turnarounds on samples or pricing as can their Asian competitors.While there are some U.S. companies such as Perry Ellis International, VF Corp., Kellwood, Tropical Sportswear and others that can effectively facilitate or manage full-package production in the region, theres room for more. Although the Asians are well-represented with factories in the region, most of the fabric and trim purchasing and other coordination/facilitation is done through their Asian offices which puts U.S. mills at a disadvantage.The situation begs for more facilitators or aggregators to step in and fill this role. The recent formation of the Amerisource Group is a step in the right direction. Hopefully, for U.S. mills, others will follow. 
Long-Term Strategy: Add ValueFor the short term, U.S. producers of apparel fabrics and yarns have little choice but to focus on those product groups in which North American producers are currently the most competitive bottom-weight cotton fabrics and basic cotton knits for T-shirts, sweatshirts and underwear. However, for the longer term, U.S. mills are going to need a different approach in order to prosper.1.Focus on higher-value fabrics.With CBI labor costs already high in relation to other lower-cost countries such as Pakistan, India and Bangladesh, its critically important for the long term to reduce the labor-cost component in garments produced in the region without lowering the value of the product. The best way to do that is to increase the value of the fabric in the garment.Finding ways to increase the use of better-quality wool and synthetic fabrics in mens and womens dress slacks would be one example of a strategy that could work for the region.2.Forge alliances with best-of-class knitters and finishers.The lack of knitting capacity in the CBI region is proving to be a real obstacle for U.S. yarn spinners. Yarn spinners should be forging alliances with top-quality U.S. knitters to do full-package production of better-quality knit garments in the CBI region, or else looking for an Asian partner that is willing to build a knitting plant in the region. Likewise, U.S. greige weavers need to partner with best-of-class U.S. finishers to produce better-quality bottom-weight or shirting fabrics.3.Upgrade the capabilities of CBI factories.Using the best fabrics alone will not be enough if the CBI region cannot meet the quality standards or price points of U.S. retailers and wholesalers. Just looking at the list of top imports from the region, one sees the current focus on basic, relatively low-labor-content products like T-shirts, jeans and underwear. Unless factories can upgrade their sewing skills and productivity over time, they will be displaced by new low-cost suppliers in other regions.U.S. mills need to be identifying and partnering with factories in the region that have the will and the resources to upgrade their capabilities. In many cases, these will be Asian-owned plants with headquarters in Asia. Calling on those factory owners should be a top priority. Making the economic case for the use of U.S. fabrics in CBI production will also be required.4.Find the aggregators.Likewise, U.S. mills need to be forging alliances with U.S. and Asian aggregators doing production in the CBI region. These companies can bring the essential sourcing network, logistical and financing capabilities, product development support, and most importantly the customers to the table.5. Develop product sourcing infrastructure and outsourcing capability.Last but not least, U.S. yarn spinners, knitters and weavers should not put all of their eggs in the CBI basket. While the CBI region and Mexico can provide economical alternatives to U.S. apparel production, the strict rules of origin requiring the use of U.S. fabrics and yarns can be both a blessing and a curse. In order to reduce costs, move up the value chain and meet the future needs of U.S. retailers and wholesalers, U.S. mills are, in some cases, going to have to supplement their use of local yarns and fabrics with imported products.Using imported yarns, however, does not necessarily rule out the possibility of lower-cost apparel production in North America. Under NAFTA rules, sewn product assembled in Mexico can still qualify for full NAFTA benefits zero duties and no quotas as long as the fabric is formed and cut in the U.S. This rule creates opportunities to use imported yarns to upgrade a knit or woven fabric and still meet the pricing requirements of a U.S. wholesaler or retailer.  Editors Note: Jim Langlois is executive director of Hahn International Ltd., Stamford, Conn, a company that helps its industry clients develop and execute strategies to stimulate growth and profitability in the North American market.Hahns team of senior professionals and strategic alliances with other industry specialists bring strategic planning, market research methodologies and access to top executives throughout the fiber, textile, apparel and retail supply chains. The company has extensive hands-on experience in production, marketing, importing and exporting of textile-related products. For more information visitwww.hahninternational.com. October 2001