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Top trade challenges and opportunities in 2021

Markets | August 1, 2021 | By:

The list of trade issues facing Washington policy makers in 2021 is long and complex. How these issues will be addressed affects a range of industries, and the textile industry is no exception. With member companies driving innovation in materials essential to health care, advanced technologies and national security, the industry is likely to feel this impact more than most. So, what can you and your company do to best position yourself in the months ahead?

Buy American initiatives

The U.S. government is one of the most important players in the U.S. economy, accounting for approximately $600 billion in spending each year. How that money is spent has an enormous effect on U.S. trade, competitiveness and national security. As part of an effort to promote U.S. manufacturing and investment in U.S. businesses, President Biden made the rules governing federal contracting a priority issue and has turned first to provisions of the Buy American Act, a law that dates back to 1933 that allows the U.S. government to give preference to U.S.-made goods in federal contracts. 

In January, President Biden signed an executive order that makes changes to how the Buy American Act is implemented. This includes:

  • Raising domestic content requirements for end products and construction materials.
  • Changing how domestic products can qualify for preferential treatment. 
  • Increasing price preferences for domestic end products and construction materials. The degree to which foreign products are subsidized or benefit from other unfair trade practices will also now be considered in assessing price differences.
  • Narrowing exemptions for foreign items that are triggered when a domestic alternative is not available or the foreign item is a commercial off-the-shelf (COTS) item.
  • Mandating that waivers of Buy American Act requirements must be approved by a new Made in America office.
  • Ordering federal agencies to use the Manufacturing Extension Partnership to seek out domestic suppliers, including small- and medium-sized companies, to produce goods and materials for federal procurement.

The federal body that administers U.S. procurement rules, the Federal Acquisition Regulatory (FAR) Council, was required to develop new regulations to implement the changes by July 24, 2021.  

The executive order represents just the tip of the iceberg concerning changes that are likely to affect U.S. procurement and trade flows. Advanced textiles companies that supply products to the federal government or that are looking to expand in that area should make sure they understand both the existing FAR rules and the new proposals coming out of Washington. Investing in advice from a government contracts specialist can mean the difference between sales lost or won, and it can help companies avoid the many traps for the unwary that government contracting rules can sometimes present. 

At the same time, companies should consider engaging with policy makers to make sure their views are heard. As they formulate the new rules of the road, policy makers will benefit from this feedback to help ensure that new rules achieve their intended objectives.

Supply chain security—and scrutiny

U.S. regulators are increasingly focused on enforcing trade rules that restrict imports due to human rights, national security and other concerns. New U.S. Department of Commerce rules on information and communications technologies and services went into effect March 22, potentially requiring new licenses to import technology, such as advanced wearable products from China, which are considered sensitive from a U.S. national security perspective. 

At this writing, new legislation was under consideration in Congress to further restrict new investments overseas that involve the transfer or sharing of sensitive technology. Given these developments, it has never been more important for companies to know not only direct suppliers, but their suppliers’ suppliers, investors and business partners. 

Export controls

This year is also unlikely to see any slowdown in new U.S. export control and enforcement. Many technologies used or produced by this industry—including advanced fibers, sophisticated production equipment, fabrics for extreme environments and military applications, and advanced composites, among others—have long been subject to export licensing requirements. 

Changes to U.S. export control laws that began last year have further restricted the export or transfer of these technologies, especially to customers in China, Hong Kong, Russia and Venezuela. In many cases, products that could once be exported freely to these countries now require a license, particularly to major companies in China and Russia that the U.S. has designated as “military end users” or has listed on the U.S. “Entity List.” 

Broad bipartisan support for these initiatives means there is unlikely to be any significant rollback or change of course this year. Companies in the advanced textile industry that export from the U.S., or that utilize U.S. technologies in their products and R&D, should closely monitor these changing requirements and invest in compliance—including close scrutiny of their customers and supply chains. 

Trade agreements

We are unlikely to see significant new trade agreements before the end of the year. Close to home, the U.S., Canada and Mexico continue the hard work of implementing the United States-Canada-Mexico Agreement (USMCA), the successor to the North American Free Trade Agreement (NAFTA). Among the issues that may affect the advanced textiles industry under USMCA are changes to rules of origin for duty preferences and new environmental and labor chapters.

At the beginning of March, the U.S., European Union (EU) and U.K. announced they were suspending tariffs imposed in response to the ongoing dispute over subsidies for civil aircraft production. This announcement may signal a renewed opportunity for further U.S.-EU-U.K. cooperation on trade issues, including, potentially, a new U.S.-U.K. trade agreement and reduction in U.S.-EU trade tensions.

Finally, while the prospects of an end to the U.S.-China trade dispute and a lifting of Section 301 tariffs on imports of Chinese products seem remote at present, the Biden administration has signaled that it intends to engage with China where possible and to review existing tariffs. 

Antidumping and countervailing duties

Laws generally known as the U.S. “trade remedy” laws allow companies with production facilities in the U.S. to petition the U.S. government to impose duties on imports of merchandise that are found to be unfairly subsidized or sold at less than fair value, causing injury to a U.S. industry. Such “antidumping and countervailing duty” or “AD/CVD” laws have been used with increased frequency in recent years. Recently, the advanced textiles industry has experienced several of these cases. 

For example, AD/CVD orders have been imposed on imports of advanced geogrid, amorphous silica fabric and polyester staple fiber. Those cases have already had a significant impact on U.S. manufacturers of those products, leading to a sharp reduction in imports from countries subject to the orders (notably China) and allowing impacted U.S. companies to recover or even expand their own production and sales. 

The bottom line is that 2021 will see many critical trade policy decisions and new trade laws that will shape the direction of the advanced textiles industry for years to come. Companies that engage with policy makers and closely monitor these developments will be well positioned to minimize any adverse impacts and take advantage of the new opportunities that our ever-evolving trade laws present. 

Nate Bolin is a partner with the law firm DLA Piper LLP, based in Washington, D.C., and is a noted authority on U.S. antidumping and countervailing duty laws, export controls and related areas of national security and international trade laws. 

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