US jeans makers slapped with triple duty

Tuesday, 30 April 2013
US jeans makers slapped with triple dutyJust as the US jeans industry was getting back to healthy profitability, it is being dealt a big blow by the EU: From tomorrow, May 1, the European Union will start collecting 26 percent more import duty on all women’s jeans made in the US. This means that the tariff on women’s denims will more than triple from currently 12 percent to 38 percent.

"Blue US jeans makers slapped with triple dutyjeans were created in California! Now, just as this traditionally American manufacturing sector is making its way back to home-grown profitability, the industry is facing a significant blow to an important and growing export market," said Tom Travis, managing partner of international trade law firm Sandler, Travis & Rosenberg, P.A.

And indeed, the move could mean that many European customers’ favourite jeans made in USA have become out of reach. For US jeans makers, the consequences could be far reaching too. “This will not only affect the brands that make jeans but all the wash houses and sources that support the industry. When you do the numbers, it is not just about dollars but about jobs,” warned Ilse Metchek, president of the California Fashion Association.

She is also worried that many US jeans brands could move their production to Mexico to avoid the additional duty. “They won’t be just shifting production of women’s jeans to Mexico but the entire collection,” she fears.

Jeans brands are trying to avoid the extra duty

California-based jeans company Hudson was planning to do just that, to at least move some of the company’s production to Mexico to avoid the additional duty. But a move like that will take a few months during which the company will have to comply and burden its European customers with the extra cost.

They are already worried that the jeans, currently priced between 189 and 245 US-dollars, will become too expensive and have asked the company to reduce their prices. According to senior vice president of operations at Hudson Daniel Barcenas, the company was expecting to send about 2.1 million dollars in blue jeans to Europe between the beginning of May and the end of July. With the new ruling, those numbers may need to be revised.

The hike in import duty for women’s jeans comes just weeks before the beginning of free trade agreement talks between the EU and the US that many see as historic. According to Sandler, Travis & Rosenberg, it is a “continuation of sanctions authorized by the World Trade Organization in retaliation for the U.S. failure to fully comply with a WTO ruling against the Continued Dumping and Subsidy Offset Act of 2000”.

The Byrd Amendment, as it is commonly known, allowed the US to distribute additional duties collected on imports of unfairly traded goods to US industries affected by such practices. The WTO sees this as a violation of its rules but couldn’t do anything to stop it. However, the organisation allows other countries to raise import duties for US goods.

"The immediate issue for U.S. jeans manufacturers affected by this action is to figure out how to preserve their EU export business through this crisis. We are working closely with both our EU and U.S. offices to formulate both short-term tactical and long-term strategic options," said Travis.

Images: Liz West / Maegan Tintari