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Issue 10, 2003 (29 May)
 Feature Article

CITA Issues Final China Textile Safeguard Rules, Few Changes from Original Draft

On 21 May 2003 the Committee for the Implementation of Textile Agreements (CITA) published the final rules for employing the textile-specific safeguard provision contained in China's World Trade Organisation (WTO) accession protocol. China's accession protocol allows the US and other WTO member countries, which believe that imports of Chinese textile and apparel products are disrupting the market, to request consultations with China, and if necessary to impose quotas. The final rules differ only slightly from the draft that was circulated in April 2003.

The rules for imposing the textile-specific safeguards envisage the following timeline: After receiving a petition, CITA has 15 days to decide whether the request meets minimum requirements. The receipt of a petition will not be made public. A petition must contain a full product description, extensive import data for the last five full calendar years and quarterly data for the most recent year. For a petition to be accepted by CITA, these data should demonstrate that imports of Chinese-origin textile and apparel products are increasing rapidly in absolute terms. The petition also needs to contain data on the US domestic production of like or directly competitive products, including annual data for the last five full calendar years and quarterly data for the most recent year.

CITA will protect any information in the petition that is marked "business confidential" from disclosure to the full extent permitted by law. However, if confidential information is provided as part of the safeguard request, a non-confidential version must also be provided by the petitioner. In this version the confidential information is summarised or, if necessary, deleted. This non-confidential version will be made available to the public.

Should CITA accept the petition, it will publish a Federal Register notice to that effect, and request public comment. CITA may also initiate a safeguard action on its own, but this would also be announced in the Federal Register with a request for public comments. Comments would have to be received within 30 calendar days after the publication of the Federal Register notice, more than the 15-day period proposed in the original draft. This extension was added primarily because major US apparel importers and retailers felt that the 15-day comment period would have been insufficient to counter the arguments advanced by the petitioners.

Subsequently, CITA has up to 60 calendar days to decide whether to request consultations with China. Should CITA decide to request consultations, it will announce this decision in the Federal Register. The new quota will come into force on the publication date of this Federal Register notice. Consultations with China will be held within 30 days of receipt of the request for consultations and could be extended to 90 days of receipt of the request for consultations. China immediately would have to hold its shipments in the categories at issue to a level of 7.5% above the imports entered over the past twelve-month period ending two months before the consultation request was made. In the case of wool products, the quota is 6% above that recent import level.

Should the US and China fail to resolve the issue in these consultations, the quota would become "permanent". However, in the context of the textile-specific safeguard, the term "permanent" itself is a relative concept. After all, no quota under the safeguard provision may stay in force longer than until the end of the calendar year or beyond a twelve-month period from its imposition, at least not without reapplication, or unless it has been agreed upon by the individual WTO member and China. Moreover, CITA's notice explains that a reapplication of the quota would take place only if CITA makes a new affirmative market disruption determination.

As far as the interpretation of the rules is concerned, it is not entirely clear how the concept of "market disruption impeding the orderly development of trade" is defined. The closest thing to a formal US definition occurred in 1983, and the unlikely purveyor was a White House spokesman who defined "market disruption or threat thereof" in the context of textile and apparel trade as constituting total growth in imports of a specific category of 30% or more in the most recent year, or imports reaching 20% of domestic production. Alternatively, a market disruption could also occur if imports from an individual Chinese supplier reach 1% of the total US production in a category. It remains to be seen whether CITA chooses to clarify this potentially confusing issue.

To the dismay of importers, the final safeguard rules also do not limit petitioners to producers of like or directly competitive products. Domestic producers, trade associations and labour unions would all be eligible to file safeguard petitions. In other words, the American Textile Manufacturers Institute (ATMI) and its members, ie, the US textile industry that makes the fabric and yarns, may bring a case against apparel products. This provision destroys the argument that ATMI does not have the standing to request the sort of safeguard petition it filed last year.

ATMI has indicated that it intends to resubmit its safeguard petition originally submitted in September 2002. At that time ATMI requested that the US impose safeguard quotas on knit fabric (Category 222), brassieres (Category 349/649), gloves (Category 331/631), nightwear (Category 350/650) and textile luggage (Category 670). If ATMI were to resubmit its petition immediately and CITA would accept it, a request for public comment could be published in the Federal Register as early as 10 June 2003, with those comments being due 30 days later.