Impacts of COVID-19 on US Textile & Clothing Industry

With US garment industry experts expressing concern that the industry won’t be able to survive for long if the coronavirus pandemic continues till July or August, the US government has started taking a number of aggressive steps to counter the situation.

US Cotton Supply Chain under Stress

The US cotton prices have been declining from March 2020 as almost every manufacturer has suspended the production lines and retailers have shut shops across the country due to worldwide COVID-19 pandemic.

The weak demand under the threat of COVID-19 has sharply impacted the US cotton prices which decreased to 50 cents/lb after more than a decade. According to the US Department of Agriculture (USDA), the US spot cotton prices averaged 52.58 cents/lb for the week ending March 19 from 56.15 cents/lb in the previous week, which was reported as the lowest weekly average since September 3, 2009. The weekly average of cotton price had reached to 70.28 cents a year earlier in the same period. The cotton prices ranged between 55.31 cents (on March 13) and 49.75 cents (on March 19).

The US stock of previous season that ended last fall is being used in the state now as the cotton plantation of this season hasn’t yet begun or is in the early planting stages. Also, the orders for apparel and fibre stand cancelled.

According to Cotton Inc, significant changes have occurred in macroeconomic conditions due to the outbreak of COVID-19. The Organization for Economic Cooperation and Development revised the forecast for global GDP growth in 2020 in early March with growth rate of 2.4 per cent which was below the 2.9 per cent growth rate in 2019. According to recent report from IHS Markit, recession would be there in the 2nd quarter and recovery through the 4th quarter.

USDA’s March 31 Prospective Plantings report says that the US cotton acres estimation has declined by 1 per cent to 13.7 million acres in 2020 as compared to 2019. Upland acres came to 13.5 million acres with Pima estimation of 228,000 acres. The small increase in cotton acres projections have been observed in the six states of the US including Florida, Kansas, Missouri, New Mexico, Oklahoma and Texas in 2020. To support the USDA’s context, the growers were surveyed by the National Agricultural Statistics Service (NASS) during the first two weeks of March. The market was probably expecting 12.5 million acres or less.

US Changes Tariff Policy

The US government has removed the tariffs for certain China-made products in the List 3 and List 4A, which was previously charged for the next few months. For products approved in the exclusion, duty breaks will be retrospective with effect September 24, 2018, when the $200 billion in List 3 tariffs first took effect through August 7, 2020. For apparel, women’s, girls’ and infants’ pants, skirts, and dresses made of polyurethane-coated leather, are not inflicted with tariffs in trade-war. Now the exempted accessories include backpacks, duffel bags and tote bags of man-made fibres.

For textiles, cashmere or camel hair yarn, polyester filament tow, woven polyester or cotton/poly blends coated with polyurethane, and circular single knitted fabric, will also see the duty break. According to the USTR (Office of the United States Trade Representative), more products from the textiles and clothing could be excluded further. USTR has opened a docket for members of the public, businesses, and government agencies to submit comments if they want further modifications to the 301 tariffs.

As per the USTR, the products including bags and clothing are among the latest exclusions from the Section 301 with additional 25 per cent tariff on List 3 goods from China. The major textile and clothing product of this latest exclusions are backpacks, bags, leather skirts and dresses, yarn and fabrics. These exclusions, which must be claimed using new HTSUS subheading 9903.88.43, will be retrospective from September 24, 2018, and remain in place until August 7, 2020.

Soaring Textile and Apparel Shipments to US in January

According to the Department of Commerce’s Office of Textiles and Apparel, import of cotton, wool, manmade fibre, silk blend, and non-cotton vegetable fibre textile and apparel products in January 2020, was equivalent to 5.69 billion square metres, up 10.3 per cent from December 2019 but down 9 per cent from January 2019.

The total textile import of the country was 3.38 billion SME, up 4 per cent for the month but down 7.50 per cent from the previous year. Apparel import was 2.31 billion SME, up 20.90 per cent from December but down 11.20 per cent from a year before.

In January 2020, textile imports were 69.3 billion SME, up 0.1 per cent from a year earlier, as textile imports increased 1.7 per cent to 41.8 billion SME and apparel imports fell 2.1 per cent to 27.5 billion SME.

Coronavirus Devours US Garment Business

Garment factories in the country have either shuttered or stalled with the spread of COVID-19 pandemic. US is strongly restricting the shipments of the textiles and clothing raw materials from China with zero orders from stores of brands and retailers.

Approximately more than 98 per cent of the clothing used by Americans is supplied by overseas producers. According to census data, some 67,600 makers of apparel, accessories and finished textile products are working in the garment districts of Los Angeles and New York City. At present, more than 15,000 people in New York City were found positive for COVID-19. Hence all the non-essential businesses in the New York City have been closed and garment manufacturing doesn’t count as an essential service. According to industry experts, if the virus continues till July or August as also reiterated by president Trump, then they won’t survive so long without income.

New York City’s Department of Small Business Services is working to start a zero-interest loan programme and an employee retention grant. Vogue and the Council of Fashion Designers of America announced A Common Thread, a fundraising initiative supporting those in the American fashion community who have been impacted by the COVID-19 pandemic.

Some factories are bustling to make masks and other protective gear which are in high demand. The situation has provided great opportunity to partner with local small businesses in challenging economic times to provide for a fast turn of inventory. Many textile, apparel, footwear, and fashion companies have quickly repurposed their domestic and overseas factories, their supply chains, and their warehouses to make and deliver crucial masks, gowns, gloves, and other items of personal protective equipment (PPE). Some companies are using their sourcing, customs, and shipping expertise to quickly deliver PPE to hospitals. Some companies have donated warehouse space to local hospitals to manage their suddenly expanding logistical requirements or need for extra space to house patients.

Strive Manufacturing, the first factory in the US to gain both Global Organic Textile Standard and Organic Content Standard certifications, is negotiating with the LA Mayor’s office to become an essential manufacturer of medical supplies. American Apparel’s Los Angeles Apparel venture can make 300,000 surgical masks and 50,000 gowns per week in its 150,000-square-foot factory in downtown LA. Automakers such as GM and Ford are quickly trying to convert to produce masks and ventilators for the billions of pieces of PPE needed to combat the pandemic.

According to data released by the Bureau of Economic Analysis (BEA), consumer spending on clothing and footwear moved down by 1 per cent to $407.71 billion in February compared to $403.67 billion spent in January. Economists and consumer analysts expected a strong cut in March spending, as apparel and footwear stores closed across the country.

Apparel industry of the country is heavily impacted due to the COVID-19 spread as approximately 40 per cent of the US’s apparel products come from China. Total 80 per cent of the US’s apparel products were supplied by oversees countries in 2019.

New COVID-19 Legislation for Cotton Growers

US president signed the newly passed $2 trillion Coronavirus Aid, Relief & Economic Security Act (CARES Act) on March 27. Several supplemental appropriations for US farmers were put in place followed by the National Cotton Council and other organisations with agricultural allies in Congress.

USDA got $49 billion in the funding package to fight against the COVID-19 disaster. The distribution is given as below.

• $9.5 billion to keep up agricultural producers (livestockand specialty crop producers).

• $14 billion for the Commodity Credit Corporation (CCC) andincrease the borrowing authority of USDA to aid agriculture in times of crisis.CCC has been providing the funds for Market Facilitation Program since last twoyears.

• The Secretary of Agriculture has been also given authoritythrough the end of September 2020 to extend the term of marketing assistanceloans to 12 months from the current nine months.

• The Treasury has been given authority to set criteria to allow farm credit institutions to be eligible lenders under the programme until the national COVID-19 emergency expires.

Farmers, agricultural and rural businesses are also eligible for small business interruption loans, with repayment forgiveness provided for funds used for payroll, rent or mortgage and utility bills. Based on National Cotton Council (NCC) evaluation of the programme, cotton farms are eligible with salary limited to $70,000 and growers must show need.

NCC with USDA and other federal agencies will provide relief on H-2A visa processing of guest workers supply in timely manner as spring planting season begins. The NCC is also working with agencies to regulate transportation.

US Textiles and PPE Demand and Supply Dynamics

The people across the US and factories usually producing hoodies and t-shirts are re-manufacturing masks to mitigate the shortages. In early March, the US removed the Chinese face masks and some other medical equipment from tariffs to avoid the situation of dire shortages. The US imported 130,000 N95 masks, 1.7 million surgical masks and other medical supplies from China recently in March and distributed majorly to the hardest-hit states including New York, New Jersey and Connecticut.

According to the US Health and Human Services (HHS), the country needs 300 million masks to tackle COVID-19, but there are only 30 million available in stocks. According to The New York Times, hospitals in some states were facing the difficulties in operating due to shortages of the mask. As reported by the Washington Post, the doctors were asked to reuse the masks.

In light of sharp increase in the spread of COVID-19, government called on the Defence Production Act to expand production of hospital masks and protective gear. This act was enacted in 1950, and it gives the federal government a wide range of powers to enlist private companies to help deal with the national crisis.

Tariffs on Chinese medical goods are hurting the US's coronavirus fight, hence the US imported less from China. According to the Peterson Institute for International Economics, imports of Chinese medical products fell by 16 per cent between 2017 and 2019. Mask production lines moving out of the US potentially caused short supply in the country. According to Medegen Medical Products, presently the global production of face masks is significantly limited to China and not practical or competitive for others. The recognised mask manufacturers in the world are Americans but their actual production is done outside the US.

For example, 3M and Honeywell have their production units in China. The actual mask production is not done in the country. Hence the US is facing massive shortages, especially after the tariffs on imported goods, including masks rose in September 2019. National Public Radio (NPR) reported that the problem had been sown 15 years ago. At that time, most mask factories moved abroad for the benefits of low production cost. Hence the surgical mask supply shifted from 90 per cent local production to 95 per cent imports in one year. The latest US Census Bureau data showed that 71 per cent of US customs import value in made-up textile articles, face masks included, was imported from the Chinese mainland in January 2020.

Trump’s 90-Day Tariff Deferral to Save the Industry

President Trump has reportedly prepared to announce a 90-day deferral on tariffs for certain imports. The USTR however was not available for comment, according to Bloomberg. Most-favoured nation or MFN tariffs are the highest rates countries agree to impose on other members of the World Trade Organization (WTO) for product groups like textiles, clothing and footwear.

According to the company experts, delaying duties would help them to preserve cash flow while there is little or no revenue for long periods and to save the jobs. Many retailers have already removed workers or furloughed them, and executives’ pay cuts have started. The 90-day pause on import duties is awaiting Trump’s approval.

Company officials have requested to suspend the collection of all tariffs over the next 90 days and to be prepared to extend it for an additional 90 days. The government has already postponed the income tax deadline until July 15 and many other dates and deadlines have been set back. Company personnel also requested for the refund of all the Section 301 tariffs it has collected in the past two years.

US Buyers to stop buying Vietnamese Textile and Apparel Products

Many US partners have rescinded the receipt of the textile and garment products for three to four weeks by sending notice to their Vietnamese partners. Approximately half of all textile exports from HCM City go to the US. According to chairman of Viet Thang Jean Pham Van Viet, the Chinese experience showed that it would take at least two months in the US to control the pandemic.

US Exploring Cotton’s Value in Face Covers

A study conducted by the US researchers from government laboratories and academia on the stability of the SARS-CoV-1 virus on different surfaces showed that copper and cardboard seem to be better as compared to plastic and stainless steel. No SARS-CoV-1 virus was measurable on copper and cardboard beyond eight hours. Also, this study inferred that viruses don’t persist longer on cellulosic materials. In addition, moisture regain of cellulosic materials will show advantage as humidity affects the persistence of virus on the material. The wide research on cotton showed that advanced applications of the cotton such as toxic chemical decontamination and oil absorbancy would be significant against the spread of COVID19.