Apparel Groups Say AGOA Expiration Will Shift Suppliers Back to Asia

Speaking to International Trade Today after a hearing at the Office of the U.S. Trade Representative, Julia Hughes, president of the U.S. Fashion Industry Association, said that the consequences of not renewing AGOA "might very well be the opposite of what the [Trump] administration or the Congress would want, of pushing companies back to traditional suppliers, even with a high tariff rate."

Hughes said that while "it is a dire prediction for what happens with sourcing from Africa," if African countries "suddenly have, not only the MFN tariffs, which for apparel could be as high as 32%, and ... a reciprocal tariff on top of that," that will spell the end of sourcing from Africa. "That's just going to make it economically not viable for the sourcing from the region."

Beth Hughes, vice president, trade and customs policy, of the American Apparel and Footwear Association, said in her testimony that AAFA members may be forced to shelve African projects and shift to Asia if the act is not renewed. While she is hopeful that Congress will renew it, she said that long-term sourcing options may become untenable without AGOA: "I do think many [companies] will remain. They're committed to their suppliers and vendors. However, it will become increasingly difficult with the duties that we pay for imports of apparel in the United States that are already high, plus stacking any IEEPA tariffs, it will become very difficult."

Julia Hughes said in the post-panel hearing that the looming expiration is already causing FIA members to reduce sourcing from Africa. She said that results from a soon-to-be-published poll of FIA members found that 30% were already reducing sourcing in the region and that 60% said renewal was necessary for new investments in Africa. Fashion brands and retailers want to diversify their portfolios and find new reliable sourcing partners in Africa, she said, adding that 80% of FIA members support renewing AGOA for another 10 years.

Wayne Milano, the senior vice president of sourcing and product development at Catalyst Brands, parent company of Aeropostale, Brooks Brothers, Eddie Bauer, Lucky Brand Jeans and Nautica, said that he expects his company's sourcing decisions will "shift over time" if AGOA expires. In an interview after the panel, he said that his company's deciding factor will be "whatever comes of August 1 and beyond."

All three on the panel testified that the current rules of origin for AGOA countries should remain unchanged.

In post-panel interviews, they expressed concern about the Trump administration's flexible definition of transshipment and whether that would mean African apparel factories wouldn't be able to import Chinese fabric to sew into garments, which is allowed under the third-country fabric provision. Julia Hughes said that "it's a real area of concern" for FIA and that its board is consulting legal experts to parse what the administration could mean in its recent letters mentioning a new rate for transshipment (see 2507080028).

If the Trump administration establishes a regional value content policy for Chinese goods, Julia Hughes said, FIA members "have some experience in dealing with [regional value content]. But it's complicated." But if the administration chooses to create new rules of origin that supersede those for textiles and apparel, which "are written in statute," she said, that would be "mind-blowing."

When asked how hopeful she is for the renewal of AGOA, Beth Hughes said that her organization is "very hopeful." Despite recent skepticism from USTR Jamieson Greer about the program (see 2507090054), Hughes said that there is congressional support for it. She said that Rep. Jason Smith, R-Mo., is a "big champion of AGOA" as well as Sen. Mike Crapo, R-Idaho. "So I do think that there's a chance, a good chance," she said, "that we will see [AGOA] renewed before September 30."