Textile smuggling undercuts U.S. industry, Congress to be told

WASHINGTON -- U.S. trade data show that more cotton yarn was exported from the United States last year than was actually produced here -- a number that sounds awfully hinky to a Gastonia, N.C., mill executive.

Dan Nation, a division president of Parkdale Mills, will tell Congress on Thursday that he thinks foreign companies are lying about where they are making their yarn. The result, he says, are illegal, duty-free imports that undercut American-made textiles and cost jobs both domestically and in free-trade countries.

He's had to close plants in South Carolina, North Carolina and Alabama since late last year, laying off 450 workers.

"The cheaters are winning," Nation said in an interview. "I'm really getting tired of sitting down and looking at people in the eye and telling them they don't have a job anymore."

Nation and other industry officials say foreign companies sneak products through free-trade countries and slap on fake paperwork -- and that U.S. Customs and Border Protection isn't doing enough to stop textile smuggling.

"Inadequate enforcement allows fraud and corruption," Nation said in his prepared testimony, which was obtained by McClatchy.

A CBP spokeswoman said Wednesday that enforcement of textile import regulations has been designated a "priority trade issue" and that the agency maintains "a robust trade enforcement program."

Nation accuses a company called Yarns America of operating a shell company in New York that actually produces its yarns overseas, then apparently sends it into the United States using fraudulent paperwork.

A call to Yarns America's headquarters in Lawrence, N.Y., yielded an answering machine and went unreturned.

According to data put together by the National Council of Textile Organizations, more combed-cotton yarn was exported from the United States in 2008 then was produced and imported here.

"I mean, people are lying, or else there's some awful problem in the data collection somewhere," said David Trumbull, vice president for international affairs for the National Textile Association. "It was a real wake-up call to me."

He said new trade agreements with Central America, North America and sub-Saharan Africa bring new regulations that can overwhelm enforcement agents at the borders.

"We don't know what is going on, what's coming into the United States under these preference programs," Trumbull said.

Thursday's hearing, led by Rep. Heath Shuler, D-N.C., will look into how illegal textile imports affect small businesses. Shuler is chairman of the subcommittee on rural development, entrepreneurship and trade for the House Committee on Small Business.

"I intend to raise the profile of an issue that has cost the jobs of hardworking Americans, especially in the Southeast," Shuler said Wednesday in a prepared statement.

Although textiles make up a relatively small percentage of imports, they carry high duties, which can make them attractive for smugglers looking to exploit weaknesses in enforcement systems, said Loren Yager, director of International Affairs and Trade for the Government Accountability Office, who will testify at the hearing.

"With this industry, quite a lot of responsibility is with the (Customs and Border Patrol) agency and control of the border," Yager said in an interview.

"We don't make specific recommendations about number of personnel they need to have," he said. "We believe they need to do a better job of assessing the number of personnel they need and presenting that kind of a plan clearly to Congress."

Four years ago, President George W. Bush toured the R.L. Stowe textile plant in Belmont, N.C., to reassure workers that CAFTA would not hurt their jobs.

This past winter, the plant shut its doors.

Company president D. Harding Stowe said he'd been assured by the president that the White House would crack down on textile smuggling.

"Lack of effective customs enforcement was an important factor in our decision to close the business," Stowe said in his prepared testimony.

"It is my hope that by contributing to this hearing other American textile companies that still remain in business will have a future in our industry."