In late June, the Department of Commerce placed quotas on apparel imports from China. Those quotas, which were quickly filled when larger vendors and retailers aggressively moved to secure deliveries, have now turned into an embargo and many retailers may not have their full product assortments on the floor this winter.

Based on the most recent rounds of meetings between the U.S. Commerce department and Chinese officials, and delays caused by the focus on the situation in the U.S Gulf region caused by Hurricane Katrina, attempts to rectify the situation in time to free up quota for fall deliveries look to be threatened.

The National Retail Federation had stated that an agreement needs to allow for double-digit increases in imports and should not restrict items not made in the U.S. NRF joined the American Apparel and Footwear Association and the U.S. Association of Importers of Textiles and Apparel in writing to U.S. Trade Representative Rob Portman and Commerce Secretary Carlos Gutierrez to express concerns about the bilateral agreement. Together the groups specifically asked for several key concessions, including, not restricting goods for which there has been no disruption to U.S. manufacturers of similar products and that no new safeguards limits should be imposed. The letter also stated that the recent quotas “have created immense uncertainty throughout the entire supply chain.”

The issue began in January when existing trade quotas were removed from all apparel coming out of China, a change that was ten years in the making as part of China’s entry into the WTO. In the following months, many apparel vendors — from across all industries — placed an unprecedented number of orders with third-party Chinese manufacturing companies. According to the National Textile Association, in the first five months of the year, all U.S. textile and apparel imports from China increased by 64%. According to Chinese Customs data, as of May 2005, China's textile and apparel exports to the U.S. were up 85%. Others have cited data that suggests that the import of certain classifications jumped more than 500% in the first 30 days of the change.

After heavy lobbying efforts by trade groups, the U.S. government responded on May 13, with the Committee for the Implementation of Textile Agreements (CITA) imposing the “safeguard provision” of China’s World Trade Organization ascension agreement. This established quotas covering many cotton items as well as man-made fiber (MMF) underwear, shirts, non-knit (woven) shirts, and MMF trousers. These quotas allowed import volume to grow only 7.5% over last year’s volume. When these quotas were filled in July and August, the U.S. Department of Customs embargoed imports in these categories. These safeguards are set to expire in 2008.

The quota on MMF pants is of particular concern to the sporting goods industry because it covers everything from basketball warm-up pants to soft-shell ski pants.

Normally, quotas established for a specific country would not be a problem as vendors spread their production across a number of countries to ensure deliveries, but most manufacturers had already placed orders with Chinese manufacturers and were simply awaiting delivery of their fall goods. Large retailers and vendors began to air freight goods into the U.S. in order to beat their competitors to market and ensure deliveries of fall product.

The manufacturers who did not — or could not — react in time, may now be left without product this fall/winter season. Much of that product is now tied up in customs as the Commerce Dept. works on a solution to the impasse.

Several industry organizations are working diligently behind the scenes on both sides of the issue. The final outcome still remains unclear, but many vendors are stuck with a large portion of their apparel for winter shipments in customs.