United States To Impose Tariffs On Honduran Sock Imports

Responding to a near doubling of cotton sock imports from Honduras in 2007, the Committee for the
Implementation of Textile Agreements (CITA) has notified Honduras it is planning to invoke a
safeguard mechanism that could result in new tariffs for the remainder of this year. The US
Association of Importers of Textiles and Apparel (USAITA) immediately attacked the action, saying
it is a “serious mistake” that undermines all of the US free trade agreements (FTAs).

In taking the action, under the US/Central America-Dominican Republic Free Trade Agreement
(CAFTA-DR), CITA said use of the safeguard mechanism is warranted based on “substantial growth” in
imports from Honduras of 27.3 million dozen pairs of socks in 2007, an increase of 99 percent over
the previous year. CITA said, however, it has not made a determination at this time to apply a
safeguard mechanism to wool and man-made fiber socks.

US Deputy Assistant Secretary of Commerce Matt Priest said the Bush administration takes its
trade agreements very seriously and “remains committed to upholding its responsibilities under the
DR-CAFTA agreement.”

Noting this is the first time the United States has used a safeguard mechanism in connection
with a FTA, Laura E. Jones, executive director of USAITA, said: “Ironically the extreme measure
being taken here threatens what has been most successful about DR-CAFTA — the opportunities and
actual sales created by US yarn producers. CITA is sacrificing a key segment of the US industry,
one that is successful and responding positively and enthusiastically to the opportunities created
by this agreement with allies in this hemisphere, for some US sock makers who clearly won’t reap
any benefits from a safeguard measure.” Jones warned that Honduras would seek “compensation” that
could reduce US exports to that country. She added that US agriculture interests could be
particularly concerned.

Under the safeguard procedures, the United States and Honduras will enter into discussions
within 60 days, and then the United States will have 30 days to determine whether it will levy new
tariffs on Honduran socks. The amount of the proposed tariffs has not been announced. They could
take effect by April and would last only through the remainder of 2008.

January 22, 2008