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NCTO urges yarn fraud enforcement

August 1st, 2009 / By: / Industry News

In testimony before the Small Business Committee in June, National Council of Textile Organizations (NCTO) member companies, past U.S. Customs senior staff and government investigative agencies called on Congress and the Administration to overhaul the textile enforcement effort in the CAFTA and other trade preference areas, as textile fraud has soared to new levels.

Harding Stowe, chairman of RL Stowe Mills, Belmont, N.C., testified that his third-generation textile company, the oldest in the country, was forced to close in January after Customs failed to act when Pakistani and Chinese yarn supplies surged into the CAFTA region falsely labeled as yarns made in the United States. Stowe noted that his company supplied U.S. Customs officials with regular information about which companies were using the illegal yarns and where the yarns were coming from, but that no enforcement action was taken.

Dan Nation, president of Parkdale Mills, the largest yarn spinner in the United States, testified that his company has been forced to lay off hundreds of employees as yarn fraud has increased; he noted that his company regularly sees false affidavits of U.S. origin being used, and that CAFTA qualifying exports of a number of types of garments are far larger than the yarn actually produced in U.S. and CAFTA yarn mills. Nation cited NCTO figures that show that seven U.S. yarn plants have shut down in the last year due largely to CAFTA/NAFTA yarn fraud.

Dick Crichton, a retired senior Customs officer, testified that importers have been using increasingly sophisticated methods to get around trade preference rules, and outlined 12 steps that Customs should take to crack down on textile fraud. In response, Loren Yager of the General Accountability Office cited continuing resource restraints in the textile and apparel area that limit the ability of the government to enforce free trade agreement rules, and confirmed that the movement of Customs to the Department of Homeland Security has created a de-emphasis on trade enforcement.

In submitted testimony, Cass Johnson, NCTO president, noted that textile industry support for CAFTA was predicated on commitments from the government that enforcement in the region would be strong, but that the government has de-emphasized enforcement after the agreement passed. He cited figures that show importers filing trade preference claims stand only a one in one thousand chance of having their preference paperwork examined, and that total revenue charges by U.S. Customs for illegal preference claims were only $2.2 million out of nearly $12 billion in preference claims last year. Johnson also stated that NCTO has been meeting with U.S. Customs and other government agencies to look at ways to improve customs efforts, and described a two-part plan to refocus, restaff and retool textile enforcement capabilities.

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