China reaches export quota cap on apparel

7 weeks after U.S. sets import limits, clothing items reach restrictions

Chinese exporters reached a cap the U.S. imposed on imports of knit shirts and underwear and neared the limit on trousers just seven weeks after the Commerce Department put restrictions on the import of those products.

Importers will not be able to bring in any more of those items from China until January, according to U.S. Customs & Border Protection, which released the data Friday.

"Shipments accelerated as people rushed to beat the quota," said Brenda Jacobs, a lawyer for the U.S. Association of Importers of Textiles and Apparel, which represents companies such as Liz Claiborne Inc. and J.C. Penney Co. "People couldn''t afford not to have the goods."

Through the first four months of this year, U.S. imports of apparel from China were up 79 percent over the same period a year ago, led by increases in cotton clothing. Imports of those three products increased more than tenfold in the first six months of the year, U.S. textile groups say.

In part to address that surge, the Commerce Department imposed caps May 23 on those three categories -- knit shirts, cotton trousers and underwear -- and limited growth in their import from China to 7.5 percent for a year.

"China was ready to ambush the U.S. industry in 2005 but timely action by the Bush administration has kept damage to a minimum," said Cass Johnson, president of the National Council of Textile Organizations.

In seven weeks, imports exceeded what they had for more than seven months a year ago. The quotas for knit shirts and underwear were reached Friday. Importers filled 98 percent of the quota on trousers, making it likely that quota would be met later Friday.

Total imports from China of those three products last year were $1.2 billion, the department said.

A 40-year global textile quota system that shielded U.S. and European producers from low-cost imports expired on Jan. 1 under World Trade Organization rules. The expiration left their markets open to a flood of goods from China, the world''s biggest garment-making nation and one of the cheapest.

Within weeks, importers also may face caps on imports of boys'' shirts, man-made trousers, man-made knit shirts, and new caps on wool pants, sweaters and other goods, Jacobs said. Companies such as VF Corp. and Liz Claiborne say they have begun to shift operations to less efficient production sites such as Hong Kong and the Philippines to avoid the quotas.

The quotas have induced China to try to seek an overall agreement with the U.S. on how to limit trade in textiles and apparel and avoid the uncertainty of the quotas. James Leonard, the top Commerce Department official for textiles, was in Beijing Friday for talks with officials.

Bloomberg News