The 2006 Department of Defense (DOD)
Authorization bill, passed by Congress at the end of 2005, includes a provision introduced by Rep.
Robin Hayes (R-N.C.) that strengthens domestic sourcing requirements for DOD procurement of
textiles and apparel.

A “Buy American” provision for textiles included in the 1941 Berry Amendment allows waivers
to be issued when certain products are not available from domestic makers. Under the new rule, the
DOD must notify Congress and the US textile and apparel industry within seven days of plans to
purchase textile and apparel items from foreign sources, and all components of textiles and apparel
for DOD use must be sourced domestically.

January/February 2006

In its year-end textile trade and
economic review, the National Council of Textile Organizations (NCTO) cited the removal of quotas
on January 1st and the conclusion of a China textile bilateral agreement on November 8th as two of
the most important events affecting the United States textile industry in 2005. Other important
factors were the sharp rise in oil prices and passage of the DR-CAFTA agreement.

2006 – A Look Ahead

As we noted, the threat from China to textile and apparel sectors around the world became
terribly apparent in 2005. Chinese exports to the United States and the EU increased by $9 billion
last year, while exports from other developed countries fell by $5 billion. Chinese import market
share in U.S. apparel categories not covered by quotas in the US-China bilateral rose from 12.5% to
41% in just nine months and is projected to hit 75% by January 1, 2007.

With respect to the Berry Amendment, special thanks go to the successful efforts of Rep.
Robin Hayes to have the waiver process for Berry strengthened and more accountability inserted into
the system. NCTO will begin working with Rep. Hayes and other members of Congress to expand Berry
to other departments, like the Transportation Security Administration, with a national security
focus.



Review of 2005 Textile Industry Economic and Trade Statistics

NCTO noted that following numerous plant closings and sharp job losses early in the year, US
textile production and employment began to stabilize shortly after safeguards were imposed on China
in May 2005. Five of the last six months have shown small production gains in the textile sector
with total textile shipments in the United States at $75.1 billion, only two percent off of 2004
figures. Moreover, textile profits rebounded, reaching $1.3 billion during the first three quarters
of 2005, an increase of 78% over similar 2004 figures. Final year end textile job losses slowed,
declining by 11,300 in 2005, compared to a loss of 25,000 jobs in 2004.

However, domestic shipments from textile yarn and fabric mills, which produce mostly for the
apparel trade, were off 6 percent for the year while textile plant closings increased to 31,
compared to 24 in 2004. This reflected production lost to China early in the year and the intensely
competitive global trade system since quotas were removed.



Press Release Courtesy of NCTO

Vancouver-based Hemptown Clothing Inc. has contracted the Alberta Research Council (ARC) to help
commercialize its Crailar textile fiber technology, which was developed jointly with the National
Research Council of Canada. Additionally, the company is supplying alternative textiles to apparel
brands Serum Versus Venom (SVSV), New York City, and Triple Five Soul, Los Angeles, for their
newest fashion lines.

ARC will conduct pilot tests on samples of the enzyme process that changes industrial hemp
into soft, white fiber, called Crailar, as part of the effort to develop large-scale commercial
textile applications in apparel, home wares, flooring and other uses. The enzyme will be applied to
full pilot plant samples to make 100-kilogram bundles of refined hemp fiber.

The process and end product is considered eco-friendly as hemp may be grown organically and
without the fresh water irrigation required by cotton, according to Hemptown.

“This is a key time in the development of Crailar. We look forward to seeing the results of
ARC’s tests and appreciate their help in assessing Crailar as a viable biotech tool in the
processing of hemp,” said Jerry Kroll, CEO, Hemptown.

In other company news, SVSV and Triple Five Soul will use Hemptown’s bamboo and soy fabrics
in their street-inspired apparel.

“Our partnership with SVSV will promote alternative organic fabric to a mainstream customer,”
said Jason Finnis, president, Hemptown. “[T]his alternative fabric line will go a long way to
promote organic textiles as a fashion item.”

January 1, 2006