- The Washington Times - Sunday, August 1, 2004

When U.S. customs officials delved into details of the U.S.-Australia Free Trade Agreement, they noticed something odd.

Australian numbers showed that the country wasn’t selling Americans nearly as many sweaters as U.S. importers claimed.

“When you see a $200 million discrepancy in trade data, that is significant. That’s just from one country,” said Janet Labuda, director of the textile enforcement and operations division at the Bureau of Customs and Border Protection.

The likely problem: China.

So customs started a three-month program targeting and often seizing products from seven nations through which “knit-to-shape” products — sweaters — might be shipped illegally. The illegal trans-shipment avoids quotas and tariffs that would apply to products made in China.

The program targeting sweaters is the second of its kind this year. Socks were held up at ports earlier in the year.

Both are efforts to overcome textile and apparel smuggling, a multimillion-dollar problem — there are no exact figures — that breaks U.S. law, diverts income from the U.S. Treasury, and increases pressure on domestic manufacturers.

“To us, jeepers creepers, we’re not talking one or two dollars. It’s a significant amount of product,” Miss Labuda said.

U.S. importers say the program isn’t targeted enough. They say it is delaying sweater shipments by weeks or months as they are forced to produce documents that prove country of origin, including employment records, timecards and transportation documents.

“Our members are really feeling the pain. They are expressing a lot of concern,” said Julia Hughes, vice president of international trade for the U.S. Association of Importers of Textiles and Apparel. The association’s members include companies such as the Gap, but firms did not want to discuss the knit-to-shape program.

The sweater seizures follow a sock program that importers called thinly veiled protectionism. Importers say it is also disruptive.

“The problem you have is, you might have retailers who cancel orders. And these are things in ads, things in catalogs. It’s tying up money,” said John Pellegrini, a customs lawyer who works with apparel importers.

Neither customs nor importers would offer specific dollar figures for the sweater program, which runs through the middle of August.

“Then we will see what the results are and determine if we need to continue, stop, shift our efforts,” said Miss Labuda.

Total textile and apparel imports last year were almost $80 billion. It is not clear how much product was labeled illegally.

Sweater manufacturing often involves several steps at factories in different countries. Although it is legal to complete some sewing in China and still label a product as, for example, made in Australia, it is illegal to complete all the work in China and label it as made elsewhere.

Some illegal shipments are expected to subside Jan. 1, when the quota system ends. But the incentive to mislabel products will continue as long as overseas companies seek to avoid tariffs. Clothing from Australia, for example, enters the United States duty-free under a new trade agreement, although many products from China do not.

“The fat lady hasn’t sung yet,” Miss Labuda said.

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