Textile Industry Seeks Customs Reform

The president of the National Council of Textile Organizations (NCTO) has made an urgent appeal for
Congress to enact legislation combating fraud and other forms of illegal trade that he claims are
costing “tens of thousands of U.S. jobs.”

In testimony before the House Ways and Means Committee’s Trade Subcommittee, NCTO President
Cass Johnson outlined a litany of fraudulent practices that he says are running rampant as a result
of lack of enforcement of free trade and preferential trade agreements.

“There is no more important issue for the domestic textile industry than the integrity and
enforcement of our trade agreements and obligations,” Johnson said.

He told the subcommittee that “years have passed” since enactment of the Central
America-Dominican Republic Free Trade Agreement, the North America Free Trade Agreement and the
Andean Free Trade Agreement, and “we still are wondering when the promised tough enforcement is
going to appear.” Johnson said the textile industry has seen rapid increases in illegal fraud
coming from the free trade and preferential trade agreement countries “as unscrupulous importers
and producers have progressively discovered there is little they can’t get away with.”

He said this situation has left his association’s member companies “shaken and angry” and
that “many companies have lost faith in the government’s commitment to defend them from illegal

Claiming that preferential trade agreements have become the “lifeblood of the U.S. textile
industry,” Johnson said textile and apparel trade within the Western Hemisphere countries now
amounts to $20 billion a year. In addition, he said, the U.S. Treasury may be losing as much as $1
billion a year in revenue because importers are undervaluing apparel products from China or
improperly claiming free trade preferences.

Johnson appended to his testimony the case history of R.L. Stowe Mills, a 103-year-old
company that ceased operations in 2009 and is going through a liquidation process due in large
measure, according to Harding Stowe, its CEO, to the lack of enforcement of fraudulent practices in
textile trade.

Johnson said his association has developed six key areas in which problems need to be

  • Customs verification systems regarding textiles and apparel are burdensome to importers and
    provide Customs with little actionable information.
  • Customs can do a better job of making import specialist assignments to high-trade ports.
  • Importers that do not reside in the United States and therefore are outside of the nation’s
    legal authority have become difficult to manage and have become a major source of fraudulent
  • Customs needs additional resources to focus on and combat undervalued goods, particularly from
  • Customs does not have sufficient resources to partner with foreign-country customs services,
    particularly in the free and preferential trade areas.
  • The Justice Department currently discourages commercial fraud cases.

Johnson said he expects the leadership of the Congressional Textile Caucus to introduce
legislation that, for the first time, will be “textile specific” and address what the industry
hopes will be solutions to some of its fraudulent trade problems.

May 25, 2010