US hosiery sector wants flexible rule of origin in TPP

22 Sep '12

7 min read

This one supplier would be insufficient to supply all of the industry's needs, meaning U.S. hosiery producers would have to rely on other sources and therefore not be eligible for TPP benefits, according to the THA paper.

Because it would allow yarns from outside the region, a knit-to-shape rule for socks and hosiery is similar to a cut-and-sew rule for apparel. But unlike most apparel, which requires yarn to be woven into fabric that is then cut and sewn into a final product, socks and hosiery are produced directly from yarn with no major intermediate steps, according to an industry source. This is why a cut-and-sew rule does not work for socks and hosiery.

Another reason THA rejects the U.S. yarn-forward proposal is because it does not consider the temporary short supply provision floated by USTR as part of its proposal to be a "viable solution." USTR has proposed identifying a short-supply list of specific textile inputs that are not made in the region. During a limited period -- perhaps three to five years after the TPP deal takes effect -- these inputs could be used to make apparel items that would still receive TPP tariff benefits (Inside U.S. Trade, May 25).

The goal of this provision is to give TPP countries such as Vietnam and Malaysia enough time to build up their own textile industries in order to be able to produce textile inputs that are in demand by TPP apparel makers but not currently made in the region.

But in its position paper, THA argued against this temporary short-supply approach for two reasons, the first being that it is predicated on the idea that the TPP region eventually would have the ability to supply all of the components needed by the industry. THA said this approach would limit the ability of U.S. sock and hosiery makers "to source the best product at the most competitive price, the two major reasons U.S. products are currently competitive on the world market."

Secondly, THA argued that the short-supply provision fails to address the innovative nature of market, given that socks and hosiery are becoming more technologically advanced as new types of yarns are invented. A temporary short supply list would only cover yarns that currently exist but not future ones, which would be required to originate in the TPP region.

"By its nature, a short supply provision cannot address future materials," THA said in the paper. "Subsequently, U.S. products would either not be able to use these new materials, or they would be disqualified from TPP preferential treatment." To illustrate the sheer scope of yarns used by U.S. sock and hosiery makers, an industry source said one U.S. company had responded to a USTR request to propose items for the TPP short supply list by providing roughly 5,000 specific types of yarn.

With respect to U.S. suppliers of elastomeric yarn, THA noted that U.S. producer Radici closed its doors in October 2011, and that another producer, Asahi Kasei/Dorlastan, is slated to follow suit next month. The group argued that a TPP yarn-forward rule that applies to elastomeric yarn would restrict U.S. sock and hosiery makers to sourcing from essentially one provider.

"Neither U.S. producers and importers, nor Congress, nor the administration would want to see that kind of monopolistic control of the industry," THA said. "Indeed, with the closing of these two U.S. elastomeric yarn producers, a rule requiring origination of elastomeric yarn becomes a potential 'earmark' for one U.S. company."

The Hosiery Association (THA)

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