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NCTO’s Glas talks U.S.-made PPE, raises caution flag on other issues

Posted October 15, 2020

 

By Devin Steele (DSteele@eTextileCommunications.com)

 

While the National Council of Textile Organizations (NCTO) and its members these days have a full plate working to push Capitol Hill to mandate U.S.-made Personal Protective Equipment (PPE), the industry should keep careful watch on a couple of other issues that could have deleterious long-term effects on the U.S. textile sector.

 

Kim Glas, NCTO’s president & CEO, put those issues and others front and center when she keynoted the Southern Textile Association’s (STA’s) Joint Fall Meeting of the Northern & Southern Divisions on October 7. Working without a slide deck because “everything is happening so fast" (in Washington), she spent a good amount of her talk on the industry’s response to the PPE shortage and pending legislation around that issue, before raising a caution flag on those other concerns.

 

Those include the Generalized System of Preferences (GSP) and the Miscellaneous Tariff Bill (MTB), both of which will require Congress to take up – likely during a lame-duck session in December – before they expire at the end of the year.

 

The GSP, established in 1974, provides opportunities for many of the world’s poorest countries to use trade to grow their economies and climb out of poverty. The GSP includes 119 countries and allows those least-developed economies to have unilateral, duty-free market access to the U.S. market. From the beginning, Congress excluded certain “sensitive” products from eligibility, including clothing, textiles and footwear, sectors that are already “hyper-developed” in those countries, Glas said.

 

Now, with the extension deadline looming, textiles, clothing and footwear may now be on the table due to a heavy push by the retail lobby – and, if successful, such a move would “eviscerate our industry literally overnight if this effort is successful,” she said.

 

“With so much oxygen in Washington around the retail sector right now – is the retail sector going to survive COVID-19? And what's happening in the retail sector? And how many companies are still going to be in business? – it has caused lobbying on the Hill to be stepped up, to expand GSP to include textile and apparel products,” she said.

 

She noted that 32 percent of U.S. apparel imports come from GSP countries, and 36 percent of China's fiber, yarn and fabric exports go into GSP countries.

 

“And all you have to do in these GSP countries to get duty-free preference – if our products are included – is cut and sew an item,” Glas said. “So yarn forward (rule of origin), USMCA, the CAFTA-DR agreement, all the things we’ve worked hard on – you can kiss them goodbye,” she said. “This would mean billions of dollars that are lost in our industry literally overnight if this effort is successful.

 

“And when we're dealing with so many threats right now – whether it's COVID-19 or PPE supply chains – just taking the time to fight this threat on top of those other things is overwhelming,” she added.

 

With GSP expiration fast approaching, there is talk that it may be renewed for a short period of time so policymakers can work on “modernizing” it, Glas said. Modernization could mean including women’s rights for some of those GSP countries – or it could mean qualifying textiles and apparel, she pointed out.

 

“The argument the retailers are using on the Hill is, ‘yeah, we agree, we need to diversify sourcing out of China,” she said. “But we need to do it by giving everyone else a preference in Asia. So we're going to help meet President Trump's agenda on this, so this needs to move forward.’ ”

 

While retailers are “confusing the issue” in D.C., NCTO has been aggressive in its fight back, despite its relatively small size – and miniscule lobbying dollars compared to retail’s resources, she said.

 

“It’s really been a bootstrap effort to try to get everybody educated on the Hill related to this,” Glas said. “Our backs are against the wall on some of this stuff, and we need to make sure we don’t lose our focus on issues that could undermine our industry literally overnight.”

 

Miscellaneous Tariff Bill

 

Also lapsing December 31, the MTB temporarily reduces or suspends tariffs on certain imported products and makes technical corrections to U.S. tariff laws. The MTB duty suspensions and reductions are designed to boost the competitiveness of U.S. manufacturers by lowering the cost of imported inputs without harming domestic firms that produce competing products.

 

Some NCTO member companies benefit from MTB duty suspensions relating to certain products, Glas said.

 

“But over the years, the MTB has been kind of a sweet benefit for the retail sector because it gives essentially about 75 percent of the requests for duty relief now on finished products,” she said. “It was never the intention for the MTB to include all of these finished products. And because our industry doesn't represent a lot of finished apparel manufacturers or finished product manufacturers, we have no standing to object at all. So even if we sell the yarn that goes into the denim skirt, we don't have any standing to object unless we find a denim skirt manufacturer, for instance, here in the United States.”

 

She added: “We’ve already alerted Capitol Hill about some of the controversial items, at least the ones to our hemisphere and to our industry. We're hopeful that members of Congress will be able to get some of those things off the list, but that's definitely a fight we're going to have to engage in.”

 

Industry answers PPE call

 

As COVID-19 was beginning to spread and shut down much of the U.S. in March, the NCTO took a call from the White house and worked with its membership and other associations to rise to the occasion and form a coalition of companies to address the PPE shortage in rapid time, Glas said. And the industry’s efforts, which included many companies retooling operations to produce face masks, gowns and other PPE items, have not gone unnoticed in all levels of government, she said.

 

“Our industry has received clear recognition from President Trump, Peter Navarro (assistant to the president, director of Trade and Manufacturing Policy and the national Defense Production Act policy coordinator) and members of Congress,” she said. “I can’t even tell you how many calls I get from members of Congress who don't represent textiles but want to help our industry. It's because of the incredible leadership that has been demonstrated, obviously in this acute time for PPE production, that has really helped change the conversation in Washington about what it would take to onshore these industries.”

 

But with the pandemic still upon us, and after having been caught flat-footed once due to the heavy reliance on China for PPE items, the question NCTO and the industry is now facing is: How long will the love affair with U.S. textiles last?

 

“There is a significant fear that this has been a sugar rush, and that PPE production long term is not going to be here to stay, that we're going to get back to whatever normal is,” she said. “And, in fact, Chinese production has ramped up by five times since COVID-19, and our levels of imports of PPE have been astronomical. Have we done enough work right now in the midst of this crisis to ensure that we are onshoring these production chains? And what is necessary to making that happen?”

 

To ensure the U.S. has a reliable, regional or local supply chain for such products going forward, it will take a whole industry approach to getting the right policies and tools in place to never find itself in that scenario again, Glas pointed out.

 

NCTO has been working in a variety of ways to keep these issues on the front burner in Washington, she said. That includes working across industry associations that have equities on PPE and through its advocates to come up with a plan that addresses such questions as: What are the kinds of tax incentives the industry needs? What are the domestic procurement laws? How can the Berry Amendment be applied more broadly to all PPE purchased by the federal government?

 

“Without a strong demand signal to our industry, no one is really going to invest long term,” Glas said.

 

The council also has been working to ensure long-term contracts (three to five years), in order to justify investment decisions around PPE production, she added.

 

In addition, the NCTO and its members need to further engage the private marketplace, particularly hospitals and distributors that are under budgetary constraints and have heavily relied on cheaper, offshore options for PPE, she said.

 

“Are there incentives that we can give hospital systems? Can they get better Medicare reimbursement rates because they source PPE locally or close to home? These are the kinds of framework policies that we have come up with, and we have had many members of Congress reach out to us to start writing these bills.”

 

She cited several pieces of legislation that have been introduced, including the U.S. Made Act of 2020, written by Sen. Lindsey Graham (R-S.C.), which is modeled after the Berry Amendment and outlines PPE acquisition requirements for the Strategic National Stockpile. The act serves as the core of the China-related provisions of the latest stimulus package introduced in the Senate but has yet to be moved forward.

 

She also mentioned bipartisan legislation introduced by U.S. Senators Rob Portman (R-Ohio) and Gary Peters (D-Mich.) aimed at strengthening efforts to onshore production of PPE in the U.S. by requiring the Defense Logistics Agency (DLA) to issue long-term contracts for American-made PPE. That act has been replicated in the House in the Make PPE in America Act and is co-sponsored by a Republican (Ted Budd, North Carolina) and a Democrat (Jan Schakowsky, Illinois).

 

But what she calls the “Gold Star Bill” – American PPE Supply Chain Integrity Act – was introduced also in bipartisan fashion by Rep. Patrick McHenry (R-N.C.) and Bill Pascrell Jr. (D-N.J.). The legislation implements the Berry Amendment standard of “100 percent of a product that is grown, reprocessed, reused or produced in the United States” for the purchase of PPE by the Department of Defense, Department of Health and Human Services, Department of Homeland Security and the Department of Veterans Affairs. It also resets the contract level for the Berry Amendment from $250,000 to $150,000 to ensure more PPE is made in America.

 

“We are looking at two Senate co-sponsors,” Glas said. “That act is rapidly getting a lot of endorsements on the Hill, and we ask for your help to reach out to your members of Congress. We're trying gain momentum on this issue.”

 

With several legislative efforts taking place in Congress, the focus should be on getting these bills moved forward, she added.

 

“We really need to have a concerted effort as an industry to advocate for this, to show why it's critical and why it's timely,” she said.

 

She also touched on the U.S.-Mexico-Canada Agreement (USMCA), signed into law in January, and the recently renewed Caribbean Basin Trade Partnership Act (CBTPA) – to free trade agreements that greatly benefit the U.S. textile industry, she said.

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