US Import Measures on Textile and Clothing Products

Purpose

This paper updates Members on developments regarding the imposition by the US of additional import measures on certain garments from Hong Kong.

The US Additional Import Measures

2. On 17 June 1996, the US Customs unilaterally imposed additional import measures on 10 categories of apparels from Hong Kong. The affected products are skirts (wool/cotton/man-made fibre (mmf)), suits (wool/mmf), nightwear (cotton), underwear (cotton/mmf), and dresses (cotton/mmf). The additional measures are :

    additional documentation requirements. These are requirements for a new importer’s certificate on the origin of the shipment and, in respect of existing textile declarations, for original signatures of all factories involved in the production of the shipment;
    a requirement for single-entry bond as opposed to the usual option of continuous entry bond; and
    other requirements including a provision for consignments to be detained if a US ‘textiles production verification team’ is in Hong Kong until the team verifies that production has actually taken place in Hong Kong.

3. We find these measures objectionable because they are discriminatory, and have been imposed unilaterally without reasonable notice. Besides, the proposed ‘production verification’ is not consistent with our domestic law and, if acceded to, would undermine the separateness and integrity of our customs jurisdiction.

4. In addition, the US Customs announced on 29 August 1996 that with effect from 1 September four other categories : cotton gloves, cotton knitted shirts, women’s cotton pants, and cotton dressing gowns would be put on a ‘watch-list’ and monitored for 30 days. Should the monitoring indicate the possibility of transhipment, similar additional import measures would be imposed.

Actions Taken by the Government

5. There have been correspondence and meetings between senior officials of the two sides, including the Governor’s letter of 16 July to President Clinton and the Financial Secretary’s meeting with the Acting US Trade Representative on 1 October. We understand that LegCo Members have also written to President Clinton in July.

6. On the operational level, two rounds of bilateral consultations were held in June and July in order to convince the US side that these measures were unnecessary and should be lifted since a good system to detect and combat illegal transhipment was already in place in Hong Kong. The US insisted on carrying out joint production verification in Hong Kong and the consultations failed to reach agreement.

7. As a result of a series of informal exchanges, Hong Kong Customs invited US Customs officers to visit and observe Hong Kong’s control and enforcement systems at work in September, for a period of 30 days. Under the September visit programme, joint teams of Hong Kong and US Customs officers visited 139 factories that were involved in the production of the ten categories of products subject to additional import measures, and that had given consent to be visited. In line with our laws, the joint teams did not undertake any enforcement activities. Any necessary enforcement operations, including the inspection of factory books and records, were undertaken by Hong Kong Customs officers on their own, and separate from the joint visits.

Latest Development

8. After a third round of consultations held in late October, the US announced that it was maintaining the additional measures except that two categories would have one of the additional measures (single entry bond) removed. The four categories on watch-list would also continue to be subject to monitoring The two sides further announced that US Customs officers would visit Hong Kong within the year to exchange data relevant to the products in question, and that the joint factory visit programme in September would continue. The outcome of the consultations was summarised in the press statement at Annex issued by the Hong Kong Government at that time.

9. Preparation is in hand for the further visits by the US Customs. Meanwhile, we are continuing our on-going efforts to enhance our textiles control systems. It is hoped that through the agreed further exchanges, the US would be persuaded to terminate the additional import measures.

Impact on Trade

10. In 1995, Hong Kong’s exports in the ten categories subject to additional import measures and the four categories on US watch-list were about 28% or $10.2 billion of our total exports of textiles and clothing to the US. It is difficult to assess how much of that trade has been affected by the US initiatives. It is noted that eight of the ten categories subject to the additional measures have registered a decrease in exports, ranging between 5% to 54% in July -October 1996, as compared with the same period in 1995. Similarly, 2 of the 4 categories placed on the watch-list have also registered a decrease in exports of 14% and 16% respectively, in July - October 1996, as compared with the same period in 1995. Based on the feedback from our trade, there is no doubt that the measures have led to substantial trade diversion although it is difficult to establish a direct causal link between the decrease in trade volume and the imposition of the additional import measure because of the existence of other variables (e.g. changes in consumer demand in the US market).

Referring the Dispute to the WTO

11. So far we have not taken the case to the WTO, partly because the WTO process would take time and therefore would not bring immediate relief to our trade. It is also our preference that the matter should be resolved bilaterally in a way that meets both sides’ concern over illegal transhipment, that minimises disruption to the trade, and that is consistent with each side’s own laws and regulations. Escalating the case to the WTO for dispute settlement remains an option, and we will not hesitate to activate it if a bilateral settlement proves unattainable.

Trade and Industry Branch
December 1996
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Last Updated on 21 August 1998