US denim makers mull relocation to Mexico as EU hikes tax

Last Month, European Commission announced that tariff on women’s denim trousers will increase from 12 percent to 38 percent, which will be effective from May 1, 2013.

Besides the high-end premium denim manufactures of the US, the imposed tariff will also affect the extensive network of contractors that work for and supply to those companies, from jeans factories and wash houses to textile and trimming businesses.

In a statement to fibre2fashion, president of California Fashion Association, Ms. Ilse Metechek said, “The steep tariff would prompt the US denim companies to manufacture in countries where the tariff would not apply, causing local manufacturing factories to cut jobs.”

“Our brands will stay in business very well and they will just do it in Mexico. But the job base, the cluster of factories, warehouses and suppliers here, will not stick around," she says.

Marc Crossman, chief executive of Joe’s Jeans Inc., said, “Whether it is a market with long-standing business or a new market, this is not good news. We cannot afford to raise the price of our jeans, so we will primarily sell product made in Mexico into the European market.”

According to Thimio Sotos, chief financial officer at high-end denim company J Brand Jeans, it is an extraordinarily high tax and if it ultimately causes a change in demand in Europe, it will impact supply, which will in turn impact jobs here in Los Angeles.

The increase in import duty came just as the US denim industry was expected to begin recovering sales in Europe, where the ongoing recession has been a drag on business. The US denim exports in the first two months of 2013 rose nearly 20 percent year-on-year to US$ 7.4 million.

Fibre2fashion News Desk - India