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Yarn Market
James L. Lemons, Ph.D., Technical Editor

Universal Pause In Business

James L. Lemons, Ph.D., Technical Editor

T he good news is: the Federal Reserve cut interest rates by half a percentage point, and Chairman Alan Greenspan said the Fed would not hesitate to cut rates further if necessary. The bad news is: don’t count on lower interest rates to do much for yarn manufacturing, which is still struggling with building inventories and with overcapacity. As one spinner said, “The interest rate cut is a non-event as far as our business is concerned.” Consumer spending is rapidly declining, as the national unemployment rate has climbed to 5.7 percent. Skepticism is building now that congressional approval is in place for a US invasion of Iraq.

The impact on yarn manufacturing seems to be affecting all sectors to some extent. The president of a large spinning company said, “There seems to be a universal pause in business right now … we are going to batten down the hatches and try to ride out the storm until mid-2003.” Several firms are reporting stronger third-quarter earnings due to cost cutting, while indicating declining sales across most of their businesses. Air-jet yarns were holding their own for a while; however, even this sector is suffering now that the fleece season is over.

Spinners also are struggling with increases in raw material prices. The potential threat in Iraq has driven the price of crude oil to $25 a barrel. Fiber producers are trying to pass the increases in petrochemicals on to the spinners.

Cotton prices are up substantially. The US Department of Agriculture (USDA) reports storm losses in the Delta and Southeast may dramatically affect quality and yield. As one spinner pointed out, “Good-quality cotton is going to be harder to come by from this year’s crop.”

Tough Lady — Tough Job
$70 billion worth of textiles and apparel were imported legally into the US market last year. This begs the question, how much is smuggled or transshipped to circumvent quotas and tariffs? Customs officials estimate the amount to be in the billions of dollars. Yet, they seized only $16.5 million of illegally imported textiles and apparel in 2001, and this represents a substantial improvement from the prior administration
($7.7 million in 1999).

Ask Janet Labuda, director of the Textile Enforcement and Operations Division of the Customs Service, if she is satisfied with the results — the answer is a resounding NO! However, only one-third of the 1,200 import specialists assigned to Customs focus on textile and apparel issues. More than 16 million cargo containers enter US ports each year, and Customs can examine only 1 to 2 percent of these containers.

Under Labuda’s direction, the agency has developed an extensive database of importers it suspects may be involved in smuggling or transshipment schemes. This allows Customs to target the highest-risk shipments for closer scrutiny. Importers and retailers scream if anything impacts their supply chain, and constantly pressure Customs to expedite the cargo clearance process. Labuda fights on to get the most out of the limited resources at her disposal.

A new program called Customs-Trade Partnership Against Terrorism (C-TPAT) encourages larger importers and retailers to require tighter security from their international suppliers and shippers so that Customs can focus on specific problems. Some of the larger retailers have agreed to join the new program in order to expedite clearance for their imports. Many retailers, however, feel this program will only drive up the cost of imported goods.

US apparel import preference programs require that garments be manufactured from US fabrics or yarns. The problem for Customs often lies in definitively determining the actual origin of these fabrics or yarns.

Labuda feels the most intriguing idea to help her agency may be to introduce taggets/tracers in US-made yarns to help inspectors identify fraudulently imported garments. The difficulty lies in developing a tracer that will not change the properties of the fibers it is applied to, as well as being resistant to subsequent textile chemical treatments during dyeing and finishing. The US Department of Commerce is currently looking at a proposal from the USDA, as well as one from the Energy Department, to develop such a trace agent. The new technology to facilitate this process is in the final stages of development — stay tuned!

December 2002

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