Friday, May 24

Where textile mills thrived, the remnants fight for survival

In his 40-year career, William Lucas has seen nearly every step of the erosion of the American garment industry. As general manager of Eagle Sportswear, a Middlesex, North Carolina, company that cuts, sews and assembles clothing, he hopes to keep what’s left of that industry intact.

Mr. Lucas, 59, has invested hundreds of thousands of dollars in training his employees to use more efficient techniques accompanied by financial bonuses to make employees work faster.

But he fears his investments could be undermined by a U.S. trade rule.

The rule, known as de minimis, allows foreign companies to ship goods worth less than $800 directly to U.S. customers while avoiding tariffs. Lucas and other textile manufacturers in the Carolinas, once a textile hub, argue that the provision – nearly a century old but booming – motivates retailers to rely even more on foreign manufacturers to keep prices low.

Defenders of the rule argue that the United States’ lack of competitiveness is not to blame. But domestic manufacturers say this mostly benefits China at the expense of American manufacturers and workers.

“It’s just hard to compete with that,” Lucas said. “Someone just needs to change the law. Someone just has to change the rules.”

During the pandemic, when e-commerce purchases soared, the use of de minimis also increased.

In fiscal 2016, 150 million packages entered the United States duty-free under the policy, but by 2023 that figure had risen to more than a billion, according to Customs and Border Protection. About half are textile and clothing products.

A June congressional report found that Shein and Temu, ultra-fast fashion retailers founded in China, accounted for nearly 30% of packages arriving under the de minimis rule. (Shein and Temu have said they are open to reworking the exemption.) But while U.S. manufacturers say the rule is one of their biggest challenges, it’s not the only one.

Clothing sales are coming off pandemic highs and have declined. That means fewer orders for the remaining operators in the Carolinas. Bryan Ashby, president of Carolina Cotton Works in Gaffney, S.C., said that a few years ago he purchased equipment to handle a larger capacity, but that he noticed in late summer that his buyers were backing out.

According to the National Council of Textile Organizations, an advocacy group, eight textile mills in the southern United States closed between August and December. In November, a spinning mill in North Carolina attributed part of its closure to the increased use of de minimis.

“When you have plants that have been open for so long that close, it’s like a canary in the coal mine as to how politics and economics are contributing to the economic damage facing the industry,” said Kim Glas, the board’s president.

For much of the 20th century mills in the region were plentiful. The situation began to change in the 1990s, after the signing of the North American Free Trade Agreement, which eliminated US tariffs on products from neighboring countries, and large multinationals began moving clothing production to Mexico. In 2001, when China joined the World Trade Organization, retailers headed to Asia in search of cheap labor to produce their products. Since 1994, employment in the apparel industry in the United States has declined by 65 percent, according to the Bureau of Labor Statistics.

The surviving companies are mostly family-owned and privately held, and they are constantly reinvesting money into their businesses to pay for expensive new equipment and automation to stay competitive. Many produce items for the US military, which requires some clothing to be American-made, or for companies whose stated mission is just that. According to the American Apparel and Footwear Association, in 2022, only 2.9% of apparel sold in the United States was produced domestically.

Halsey Cook, CEO of Milliken, a 159-year-old manufacturer in Spartanburg, S.C., that makes items such as military clothing, automotive floor coverings and goods for Patagonia and Carhartt, said that because of de minimis, the textile industry “feels the pain in a new way.

“That garment industry had largely already gone overseas,” he said. Surviving U.S. textile producers have adapted to the reality of free trade agreements, Cook said, but the huge growth in the use of de minimis “has completely opened up and undermined that system.”

In the cotton fields, ginneries, spinning mills, dye houses, and cutting and sewing shops of the Carolinas, conversations become lively when it comes to business law, which looms over the work being done.

Parkdale Mills, one of the country’s largest yarn producers, has a mill in Gaffney, S.C., that processes only cotton. Men transport bales of cotton on forklifts, and automated equipment cleans the cotton and turns it into yarn that can be made into fabric. Many Parkdale employees have worked there for decades, and Davis Warlick, the executive vice president, greets his workers on the floor with warm familiarity.

We’re trying to create more jobs,” Mr. Warlick said after a tour of the 400,000-square-foot facility. But he said he and his employees were left scared. “All of this is threatened every day by a bad and ill-informed decision on Capitol Hill. And all this goes away and they don’t understand it.”

The apparel industry is among the most price sensitive, and retailers will jump at opportunities to save as much money as possible.

“When you erode any aspect of the supply chain, you hurt everyone,” said Glas of the National Council of Textile Organizations. That includes U.S. farmers and those who work with them, he added.

Tatum Eason knows this well. He owns the Enfield Cotton Ginnery in eastern North Carolina, which cleans hundreds of bales of cotton for farmers in the surrounding community. He removes debris and other impurities from the cotton for free and earns money by selling the cotton seeds that escape during cleaning. (Those cotton seeds are later used for cottonseed oil and to feed livestock in the United States and tilapia fish in Saudi Arabia, he said.)

In 2023 it ginned half the cotton produced the year before. And with high interest rates making operational loans for farmers more expensive and the price of cotton futures falling, he senses the year ahead could also be challenging. His business is based on farmers’ optimism that the hostile environment could lead them to plant less cotton starting in April.

She had filled her office with a carousel of Miss Vickie’s potato chip bags and a gumball machine—sweet inducements to keep farmers coming back to her so she could encourage them that planting cotton was worth it.

“We’re thinking about what we can do in our business to know what we’re going to produce every year,” she said, sitting in her wood-paneled office. “It’s worrying.”

The pandemic-driven e-commerce boom wasn’t the only factor in the proliferation of de minimis shipping. In 2016, Congress increased the de minimis cap from $200 to $800 in an effort to reduce costs for importers, speed up delivery times for small and medium-sized businesses, and reduce customs and trade protection paperwork. borders.

The textile and clothing industry wants to limit enforcement of the provision, but has not agreed on a proposal to send to lawmakers. But there appears to be agreement that manufacturers in China and across Asia are getting a free pass to the U.S. consumer market.

There are bills in Congress that seek to prevent some countries, such as China and Russia, from using the provision, but no one is calling for its elimination.

Supporters of de minimis argue that its elimination could lead to increased costs for consumers and businesses that import goods. The competitive challenges felt by the textile industry are not caused by the provision, according to John Pickel, senior director of international supply chain policy at the National Foreign Trade Council, an advocacy group that supports de minimis.

“I think it’s a bit of a red herring to hang your hat on de minimis as some sort of bogeyman for why particular domestic industries are not competitive,” Pickel said.

While details and invoices are discussed in Washington, U.S. manufacturers continue to fill orders.

Inside a nondescript one-story building at Eagle Sportswear, a staff of 75 completes orders of hoodies, shorts and sweatpants for customers such as the U.S. Army and American Giant, a private retailer dedicated to selling clothing of national production.

Up to five workers stand next to each other and share the tasks needed to complete a garment. This is a departure from the traditional “batch sewing” approach, in which one person sits down and works on an individual task before moving a garment along the production line. By having multiple pairs of hands and eyes on a piece of material and tackling it immediately, the company aims to increase quality control and provide greater value to customers.

Pay starts at $11 an hour and can go up to $17, including bonuses for meeting production goals. It used to take an hour to complete a garment, Lucas said, but that time has been cut to 43 minutes.

Mr. Lucas says he has had to charge American Giant more over the past year to make some of his clothing, partly because of orders that require smaller batches. Bayard Winthrop, who founded American Giant in 2012 and assembled a national supply chain capable of making his company’s $138 cotton sweatshirts, says that’s fine.

Many retailers in his position have decided to reach abroad to produce more with less. It’s more important to him to keep manufacturing — and those jobs — in the United States, he said.

“The people out here should be celebrated as the heroes of this country, and we’ve lost our way for a long time,” he said, sitting in Mr. Lucas’ office at Eagle Sportswear. “I really don’t know why. I think it should be celebrated more, celebrated more from a political perspective.”