Announcement of Request for Bilateral Textile Consultations with the Government of the People's Republic of China and the Establishment of an Import Limit for Cotton, Wool, and Man-Made Fiber Socks in Category 332/432 and 632 Part, Produced or Manufactured in the People's Republic of China

AGENCY:

Committee for the Implementation of Textile Agreements (Committee).

ACTION:

Notice

EFFECTIVE DATE:

October 29, 2004.

FOR FURTHER INFORMATION CONTACT:

Ross Arnold, International Trade Specialist, Office of Textiles and Apparel, U.S. Department of Commerce, (202) 482-4212. For information on the quota status of these limits, refer to the Bureau of Customs and Border Protection website (http://www.cbp.gov),, or call (202) 344-2650. For information on embargoes and quota re-openings, refer to the Office of Textiles and Apparel website at http://otexa.ita.doc.gov.

SUPPLEMENTARY INFORMATION:

Authority: Section 204 of the Agricultural Act of 1956, as amended (7 U.S.C. 1854); Executive Order 11651 of March 3, 1972, as amended.

On October 29, 2004, as provided for under paragraph 242 of the Report of the Working Party on the Accession of China to the World Trade Organization (Accession Agreement), the United States requested consultations with the Government of the People's Republic of China with respect to imports of Chinese origin cotton, wool, and man-made fiber socks in Category 332/432 and 632 part (“socks”). In accordance with paragraph 242 of the Accession Agreement and the procedures set forth by the Committee on May 21, 2003 (68 FR 27787), as clarified on August 18, 2003 (68 FR 49440), the United States is establishing a twelve-month limit on socks from China, beginning on October 29, 2004, and extending through October 28, 2005 at a level of 42,433,990 dozen pairs.

Paragraph 242 of the Accession Agreement allows World Trade Organization Members that believe imports of Chinese origin textile and apparel products are, due to market disruption, threatening to impede the orderly development of trade in these products to request consultations with the People's Republic of China with a view to easing or avoiding such market disruption. Upon receipt of the request, the People's Republic of China has agreed to hold its shipments to a level no greater than 7.5 percent (6 percent for wool product categories) above the amount entered during the first 12 months of the most recent 14 months preceding the request for consultations. The Member requesting consultations may implement such a limit. Consistent with paragraph 242, consultations with the People's Republic of China will be held within 30 days of receipt of the request for consultations, and every effort will be made to reach agreement on a mutually satisfactory solution within 90 days of receipt of the request for consultations. If agreement on a different limit is reached, the Committee will issue a Federal Register Notice containing a directive to the Bureau of Customs and Border Protection to implement the negotiated limit.

On June 28, 2004, the Committee received a request from the Domestic Manufacturers Committee of The Hosiery Association, the American Manufacturing Trade Action Coalition, the National Council of Textile Organizations, and the National Textile Association alleging that imports from the People's Republic of China of socks are, due to market disruption, threatening to impede the orderly development of trade in this product, and requesting that an Accession Agreement textile and apparel safeguard action be taken on imports of socks. The Committee determined that this request provided the information necessary for the Committee to consider the request, and, on July 22, 2004, the Committee solicited public comments on the request (69 FR 43807). This public comment period ended on August 23, 2004. The Committee determined that imports of Chinese origin socks are, due to market disruption and the threat of market disruption, threatening to impede the orderly development of trade in socks, and that imports of socks from China play a significant role in the existence of and threat of market disruption. A summary statement of the reasons and justifications for the U.S. request for consultations concerning imports of socks from the People's Republic of China follows this notice.

Paragraph 2.B. of the U.S.-China Textile Visa Arrangement provides that if additional categories become subject to import quotas, those categories shall be automatically included in the coverage of the Visa Arrangement. This Visa Arrangement was notified to the World Trade Organization Textiles Monitoring Body as an agreed administrative arrangement on May 21, 2002. Consequently, the United States will require that shipments of Chinese socks be accompanied by an export visa and Electronic Visa Information System (ELVIS) transmission issued by the Government of the People's Republic of China. The United States considers that implementation of the visa/ELVIS requirement is in the mutual interest of both countries. Goods in Category 332 shall remain subject to the Group II limit, and will continue to be subject to export visa and ELVIS requirements. If exported on or after January 1, 2005, goods in Category 332 shall be subject only to the limit established in the directive that accompanies this notice. In order to provide a period for adjustment, the United States will allow shipments of goods in Categories 432 and 632 part that are not accompanied by an export visa and an ELVIS transmission to enter the United States if exported prior to November 28, 2004. However, shipments exported from China on or after November 28, 2004 must be accompanied by an export visa and ELVIS transmission issued by the Government of the People's Republic of China, and shipments without an export visa and ELVIS transmission will be denied entry. Socks in Category 632 (632 part) are in HTS numbers 6115.93.6020, 6115.93.9020, 6115.99.1420 and 6115.99.1820. They may be visaed as “cat. 632” or “cat. 332/432/632.“, but not at “632pt.” Similarly, socks in Category 332 may be visaed as “cat. 332” or “cat. 332/432/632,” and socks in Category 432 may be visaed as “cat. 432” or “cat. 332/432/632.”

A description of the textile and apparel categories in terms of Harmonized Tariff Schedule of the United States numbers is available in the CORRELATION: Textile and Apparel Category with the Harmonized Tariff Schedule of the United States (see Federal Register notice 69 FR 4926, published on February 2, 2004). Also see 68 FR 65445, published on November 20, 2003.

Committee for the Implementation of Textile Agreements

October 28, 2004.

Commissioner,

Bureau of Customs and Border Protection, Washington, DC 20229.

Dear Commissioner: Pursuant to Section 204 of the Agricultural Act of 1956, as amended (7 U.S.C. 1854); and Executive Order 11651 of March 3, 1972, as amended, you are directed to prohibit, effective on October 29, 2004, entry into the United States for consumption and withdrawal from warehouse for consumption of cotton, wool, and man-made fiber socks in Category 332/432/632pt., produced or manufactured in the People's Republic of China and exported during the twelve-month period beginning on October 29, 2004, and extending through October 28, 2005, in excess of 42,433,990 dozen pairs.

Paragraph 2.B. of the U.S.-China Textile Visa Arrangement provides that if additional categories become subject to import quotas, those categories shall be automatically included in the coverage of the Visa Arrangement. Shipments of Chinese origin cotton, wool, and man-made fiber socks in Category 332/432/632pt. ¹ must be accompanied by an export visa and Electronic Visa Information System (ELVIS) transmission issued by the Government of the People's Republic of China. Goods in Category 332 shall remain subject to the Group II limit, and will continue to be subject to export visa and ELVIS requirements. If exported on or after January 1, 2005, goods in Category 332 shall be subject only to the limit established in this directive. In order to provide a period for adjustment, the United States will allow shipments of goods in Categories 432 and 632pt. that are not accompanied by an export visa and an ELVIS transmission to enter the United States if exported prior to November 28, 2004. However, shipments exported from China on and after November 28, 2004 must be accompanied by an export visa and ELVIS transmission issued by the Government of the People's Republic of China, and shipments without an export visa and ELVIS transmission will be denied entry. Socks in Category 632 (632pt.) are in HTS numbers 6115.93.6020, 6115.93.9020, 6115.99.1420 and 6115.99.1820. They may be visaed as “cat. 632” or “cat. 332/432/632.“, but not at “632pt.” Similarly, socks in Category 332 may be visaed as “cat. 332” or “cat. 332/432/632,” and socks in Category 432 may be visaed as “cat. 432” or “cat. 332/432/632.”

Products which have been exported to the United States prior to October 29, 2004, shall not be subject to the limit established in this directive.

In carrying out the above directions, the Commissioner should construe entry into the United States for consumption to include entry for consumption into the Commonwealth of Puerto Rico. The Committee for the Implementation of Textile Agreements has determined that this action falls within the foreign affairs exception of the rulemaking provisions of 5 U.S.C. 553(a)(1).

Sincerely,

D. Michael Hutchinson,

Acting Chairman, Committee for the Implementation of Textile Agreements.

¹ Category 632pt. only HTS numbers 6115.93.6020, 6115.93.9020, 6115.99.1420 and 6115.99.1820.

SUMMARY OF THE REASONS AND JUSTIFICATIONS FOR U.S. REQUEST FOR CONSULTATIONS WITH CHINA PURSUANT TO PARAGRAPH 242 OF THE REPORT OF THE WORKING PARTY ON THE ACCESSION OF CHINA TO THE WORLD TRADE ORGANIZATION

Cotton, Man-made Fiber, and Wool Socks

Merged Category 332/432 and 632 Part

The United States believes that imports of Chinese origin cotton, man-made fiber and wool socks (“socks”) are, due to market disruption, threatening to impede the orderly development of trade in socks, and that imports from China play a significant role in the existence of market disruption. Further, the United States believes that imports of Chinese origin socks are, due to the threat of market disruption, threatening to impede the orderly development of trade in socks, and that imports of socks from China play a significant role in the threat of market disruption. Either finding supports a request for consultations with the Government of the People's Republic of China under Paragraph 242 of the Report of the Working Party on the Accession of China to the World Trade Organization (“Paragraph 242”). The following facts, and others contained in this Statement, support these beliefs:

U.S. Imports from China Are Increasing Rapidly in Absolute Terms. U.S. imports of socks from China increased from 985,619 dozen pairs in 2001 to 21,877,024 dozen pairs in 2003 (an increase of over 2,100 percent), and to 42,491,164 dozen pairs in the twelve-month period ending August 2004 (an increase of over 4,200 percent from the 2001 level).

U.S. Imports from China Are Increasing Rapidly Relative to Other Imports. In 2001, China was the 12th largest exporter of socks to the United States. By the year ending August 2004 China became the largest supplier to the U.S. of socks.

Chinese Average Unit Values Are Well Below Values from Other Countries. In 2001, the average unit value of U.S. sock imports from China was US$11.54 per dozen pair, compared to a “rest of world” import average unit value of US$8.68 per dozen pair. By 2003, the average unit value of imports of socks from China fell to $5.11 per dozen pair, compared to $7.51 per dozen pair for the rest of the world. In the year ending August 2004, the average unit value of imports of socks from China fell further to US$4.92 per dozen pair, compared to US$7.71 per dozen pair for “rest of world” imports.

U.S. Imports from the World Are Increasing Rapidly in Absolute Terms. U.S. imports of socks from all sources into the United States, excluding socks containing U.S. components that were imported under outward processing programs, increased from 51,014,517 dozen pairs in 2001 to 98,976,106 dozen pairs in 2003, (an increase of 94 percent), and to 119,805,665 dozen pairs in the year ending August (an increase of 135 percent from the 2001 level.)

The U.S. Socks Industry is Vulnerable to Increasing Imports. U.S. production plus outward processing of socks fell 13.2 percent from 2001 to 2003 (from 246,464,000 dozen pairs to 214,020,000 dozen pairs), while the share of the market held by U.S. producers fell by 14.5 percentage points (from 82.9 percent to 68.4 percent) during this period. The number of employees and the number of establishments in the sock industry also fell significantly during this period.

U.S. Imports from China Are Likely to Increase Further in the Near Future. China's capacity to produce apparel, including socks, and the low prices of imports of these products from China pose an imminent threat to disrupt the U.S. market for socks. Due to the vulnerability of the U.S. industry today, continued increases in low-priced sock imports from China could have a considerable impact on the market in the near future.