01-26780. Notice of Solicitation of Comments on Modification of Worsted Wool Fabric Tariff Rate Quotas

AGENCY:

Department of Commerce, International Trade Administration.

ACTION:

Notice of solicitation of comments on requests for modification of tariff rate quota limitations on the import of certain worsted wool fabrics.

DATES:

To be considered, comments must be received or postmarked by 5 p.m. November 13, 2001.

ADDRESSES:

Comments must be submitted to: Deputy Assistant Secretary for Textiles, Apparel and Consumer Goods Industries, Room 3001, United States Department of Commerce. Washington, D.C. 20230. Six copies of comments should be submitted.

FOR FURTHER INFORMATION CONTACT:

Sergio Botero, Office of Textiles and Apparel, U.S. Department of Commerce, [phone].

SUPPLEMENTARY INFORMATION:

The Department of Commerce (Department) hereby solicits comments on requests for an increase in the limitations on the quantity of imports of certain worsted wool fabric under the 2002 tariff rate quotas established by the Trade and Development Act of 2000. To be considered, comments must be received or postmarked by 5:00 p.m. November 13, 2001 and must comply with the requirements of 15 CFR 340 (66 FR 6459, published January 22, 2001). Thirty days after the end of the comment period, the Department will determine whether the limitations should be modified.

1. Background

Title V of the Trade and Development Act of 2000 (the Act) creates two tariff rate quotas, providing for temporary reductions in the import duties on two categories of worsted wool fabrics suitable for use in making suits, suit-type jackets, or trousers. For worsted wool fabric with average fiber diameters greater than 18.5 microns (Harmonized Tariff Schedule of the United States (HTS) heading 9902.51.11), the reduction in duty is limited to 2,500,000 square meters per year. For worsted wool fabric with average fiber diameters of 18.5 microns or less (HTS heading 9902.51.12), the reduction is limited to 1,500,000 square meters per year. Both these limitations may be modified by the President, not to exceed 1,000,000 square meters per year for each tariff rate quota.

The Act requires the annual consideration of requests by U.S. manufacturers of men's or boys' worsted wool suits, suit-type jackets and trousers for modification of the limitations on the quantity of fabric that may be imported under the tariff rate quotas, and grants the President the authority to proclaim modifications to the limitations. In determining whether to modify the limitations, specified U.S. market conditions with respect to worsted wool fabric and worsted wool apparel must be considered. On January 22, 2001, the Department published regulations establishing procedures for considering requests for modification of the limitations. 66 FR 6459, 15 CFR 340.

On September 14, 2001, the Department published a notice in the Federal Register soliciting requests for modification of the 2002 tariff rate quota limitations. The Department received four such requests from the following: Hartmarx Corporation (on its own behalf, on behalf of its wholly-owned subsidiaries including Hickey-Freeman, and on behalf of the Tailored Clothing Association); Hartz & Company, Inc.; Hugo Boss; and Tom James Company. These requests were for the maximum increase (1,000,000 square meters) in each of the two tariff rate quota limitations (HTS 9902.51.11 and HTS 9902.51.12). A summary of these requests is provided below. The full text of the request and exhibits, with the exception of business confidential information, is available for inspection between 9:00 a.m. and 4:30 p.m. in Room 2233, United States Department of Commerce, 1401 Constitution Avenue, Washington D.C. 20230.

Comments may be submitted by any interested person, including U.S. manufacturers of worsted wool fabric, wool yarn, wool top and wool fiber. Comments must comply with the requirements of 15 CFR 340. If the person submitting comments is a domestic producer of worsted wool fabric, comments should include, to the extent available, the following information for each limitation with respect to which comments are being made: 1) A list of domestic manufacturers of worsted wool suits, suit-type jackets, or trousers for whom orders were filled during the period July 1, 2000 to June 30, 2001, the date of such orders, the total quantity ordered and supplied in square meters of domestically produced worsted wool fabric and of imported worsted wool fabric, and the average price received per square meter of domestically produced worsted wool fabric and of imported worsted wool fabric for such orders; 2) A list of all requests to purchase worsted wool fabric during the period July 1, 2000 to June 30, 2001 that were rejected by the person submitting the comments, indicating the dates of the requests, the quantity requested, the price quoted, and the reasons why the request was rejected; 3) Data indicating the increase and/or decrease in production and sales for the period January 1, 2001 to June 30, 2001 and the comparable six month period in the previous year of domestically-produced worsted wool fabrics used in the production of worsted wool suits, suit-type jackets and trousers; 4) Evidence of lost sales due to the temporary duty reductions on certain worsted wool fabric under the tariff rate quotas; and 5) Other evidence of the ability of domestic producers of worsted wool fabric to meet the needs of the manufacturers of worsted wool suits, suit-type jackets and trousers in terms of quantity, variety, and other relevant factors.

Comments must be accompanied by a statement by the person submitting the request (if a natural person), or an employee, officer or agent of the legal entity submitting the request, with personal knowledge of the matters set forth therein, certifying that the information is complete and accurate, signed and sworn before a Notary Public, and acknowledging that false representations to a federal agency may result in criminal penalties under federal law. Any business confidential information provided that is marked business confidential will be kept confidential and protected from disclosure to the full extent permitted by law. To the extent business confidential information is provided, a non-confidential submission should also be provided, in which business confidential information is summarized or, if necessary, deleted.

II. Summary of Request

All four requests, from Hartmarx Corporation (on its own behalf, on behalf of its wholly-owned subsidiaries including Hickey-Freeman, and on behalf of the Tailored Clothing Association), Hartz & Company, Inc., Hugo Boss, and Tom James Company, request the maximum possible increase (1 million square meters) in each of the two tariff rate quotas (HTS 9902.51.11 and HTS 9902.51.12).

The Hartmarx request claims that current government statistics demonstrate only a small percentage of imported worsted wool fabrics is being entered under the tariff rate quotas and that worsted wool fabric import data for the first six months of 2001, when annualized, demonstrate that in neither HTS category is there a large percentage of worsted wool fabric imports subject to duties that are covered by the tariff rate quota. Of the more than four million square meters of the finer worsted wool fabric imports (annualized), only 37 percent is subject to tariff rate quota duty-rates. Of the more than 10.5 million square meters of coarser worsted wool fabric imports (annualized), only 24 percent is subject to tariff rate quota duty-rates.

The Hartmarx request also addresses the six market factors that the Act requires be considered in determining whether to modify the tariff rate quota limitations. The request cites certain findings of the U.S. International Trade Commission in its report titled “Certain Wool Articles: First Annual Report on U.S. Market Conditions” (Investigation No. 332-427, USITC Publication 3454, September 2001) to support its claims that 1) there has been a decrease in the sale and production of domestically-produced worsted wool fabrics during 2000, with additional and significant production cutbacks during 2001; 2) there has been no decrease in the consumption of overall tailored worsted wool apparel on a square meter equivalent basis; 3) there is a growing inability of domestic producers of worsted wool fabrics to meet the needs of the domestic apparel manufacturers, and an increased need to rely on imported fabrics; 4) there is no evidence of reduced sales by domestic worsted wool fabric manufacturers because of any factor other than their decisions to reduce production; 5) there is evidence of lost sales by domestic apparel manufacturers because of an inability to access fabrics on a price competitive basis; and 6) the domestic textile industry is not losing sales because of imports of lower priced fabrics.

The Hartmarx request claims the current market conditions for each relevant factor favor granting the maximum increase permitted under the Act and argues that such an increase would not harm the domestic textile industry because it would not displace current domestic fabric orders nor cover a sizeable percentage of imports. The request claims that U.S. textile mills are not producing sufficient fabrics to satisfy the needs of the U.S. tailored clothing industry, arguing that the domestic textile industry has made business decisions that have eroded its capacity to supply tailored clothing companies. The request states that the tailored clothing industry has experienced significant economic injury as a result of tariff rate quota limitations that are too small, while the textile industry has demonstrated no harm as a result of the tariff rate quotas. The tailored clothing industry claims it has demonstrated that, given current import levels, the increase being sought does not cover a majority of the worsted wool fabrics that the industry has been importing. Therefore, the request states that the U.S. textile industry remains fully protected by existing duty rates on a majority of the fabric that the tailored clothing industry will continue to import, and by the significant duty rates charged on fabric even under the tariff rate quota.

The Hartmarx request states that under the North American Free Trade Agreement (NAFTA), Canada and Mexico can export to the United States more than 6.5 million square meter equivalents of duty-free tailored clothing manufactured with non-NAFTA fabrics. In addition, these 6.5 million square meters of fabric imported into Canada and Mexico are subject to effective duty rates far lower than the reduced rates U.S. tailored clothing companies pay on the four million square meters of tariff rate quota-subject fabric. The request claims that most of these 6.5 million square meter equivalents of tailored clothing represent lost sales for domestic apparel producers. The request claims that the textile industry has experienced significant financial benefit from the Act, specifically unlimited duty-free access to yarns, top, and fiber. In addition, the sheep industry received significant funding from the Act. The request claims that the tailored clothing industry has received little benefit to date.

Hartz & Company, Inc., Hugo Boss, and Tom James Company associate themselves with the reasons and supporting material included in the petition submitted on behalf of the Tailored Clothing Association. In addition, these requesters argue the following reasons why the tariff rate quota limitations should be increased: 1) domestic fabric mills have significantly reduced their commitment to act as suppliers to domestic producers of men’s and boys’ worsted wool tailored clothing. Domestic producers of worsted wool fabric do not produce the fabric that the tailored clothing industry customers demand with respect to styling, variety, types, quality, and prices; 2) Canadian and Mexican manufacturers export duty-free to the United States more than 6.5 million square meter equivalents of worsted wool apparel items (suits, suit-type jackets, and trousers) containing fabrics imported from outside NAFTA countries. These fabric imports are subject to lower duty rates than those paid by U.S. importers of worsted wool fabric for apparel, even for imports under the tariff rate quotas and the United States government should provide at least as much access to imported fabric as it has allowed to Canadian and Mexican competitors. Even if the full relief is granted, the domestic tailored clothing industry will be able to import only 6 million square meters of such fabric subject to comparable duty rates; and 3) the tariff rate quota allocations for calendar year 2001 when described as a percentage of fabric imports demonstrate the inadequacy of the tariff rate quota limitations.

Dated: October 18, 2001.

Linda M. Conlin,

Assistant Secretary for Trade Development, Department of Commerce.