Testimony of United States Trade Representative Michael Froman Before the Senate Finance Committee on the African Growth and Opportunity Act (AGOA), July 30, 2014

Testimony of United States Trade Representative Michael Froman
Before the Senate Finance Committee on the African Growth and Opportunity Act (AGOA)

Washington D.C.
July 30, 2014

*As Delivered*

 

Thanks very much Chairman Wyden, Ranking Member Hatch, Members of the Committee, and thank you for inviting me here to today to testify about AGOA. 

AGOA, as you’ve noted, has been the cornerstone of America’s economic engagement with sub-Saharan Africa for the past fourteen years. And it has had some very important successes. U.S. imports from AGOA countries have grown from $8.2 billion in 2001 to $26.8 billion in 2013, a threefold increase. Non-oil AGOA trade has increased almost fourfold during the same period from $1.4 billion to almost $5 billion. 

U.S. direct foreign investment (FDI) stock in sub-Saharan Africa has also increased from approximately $9 billion to $35 billion. And according to the African Coalition on Trade, AGOA-related investment has resulted in the creation of some 300,000 jobs in sub-Saharan Africa and almost 120,000 jobs here in the United States. 

But there clearly is more work to be done. Utilization of AGOA is low and uneven. The bulk of U.S. imports under AGOA come from a handful of countries. And although we are beginning to see increasing diversification, exports under the program are still concentrated in a few sectors.  And finally, while the growth in exports has been impressive over the life of AGOA, in absolute terms the level of exports is quite low. We can and must do better.

And to that end, last August I launched a comprehensive review of AGOA to examine both its successes over the last 14 years, as well as areas where it might be improved. And as we undertook this exercise, we were mindful too that the Africa of 2000 is not the Africa of 2014. Six of the ten fastest growing economies in the world are in Africa. And African countries are increasingly moving away from unilateral preference programs and entering into reciprocal trading relationships, including with the European Union.  As we think about AGOA’s future, we need to consider how the U.S.-Africa trade relationship should evolve over time as well.

We draw three main conclusions from our review:

First, while tariff preferences are important, they are not sufficient. African countries face constraints to trade that range from inadequate and high cost infrastructure, particularly in the energy and transportation sectors; burdensome customs procedures and other border barriers impacting Africa’s regional and global trade; difficulties complying with agricultural, safety and marketing standards (including sanitary and phytosanitary requirements); limited skilled labor; and low productivity and competitiveness in non-oil, value-added products.  And, despite growing business interest in Africa, AGOA countries also continue to face difficulties finding partners in the United States.

For AGOA to reach its full potential, it must be situated at the core of a comprehensive trade and investment strategy, an AGOA compact that targets the full range of the supply-side constraints to trade in Africa that creates new markets for African products, harnesses growing private sector interest in trade and investment, and promotes regional integration and value-added production. Now this also includes moving forward with implementation of the WTO Trade Facilitation Agreement concluded in Bali last year, which, by OECD estimates, could lower trade costs for developing countries in trade by up to 15 percent if fully implemented.

Second, there are some areas in which the AGOA program itself can be updated and improved.  This, of course, is the province of Congress, but the findings of our review may be helpful as you consider these issues.  For example:

• The Length of Extension.  Our research suggests that it is important to extend the program for a sufficient period of time to encourage investment in critical industries in Africa. 
• Product coverage:  As you said Mr. Chairman, most AGOA beneficiaries enjoy duty-free treatment for virtually all of their products. (97.5 percent of the tariff lines are covered)  However, there are still 316 tariff lines that continue to lie outside the program, and we believe Congress should consider whether any new products can now be added to the program keeping in mind domestic sensitivities. 
• Rules of Origin:  AGOA has some of the most flexible rules of origin of any preference program.  There are, however, areas of the program where flexibility has been constrained.  For example, there are limits on the “cumulation” of labor costs across AGOA countries and a cap on the use of U.S. inputs in meeting the requisite “regional value content” rules.  Elimination of these limits could encourage greater integration into regional and U.S.-Africa value chains. 
• Eligibility Criteria:  AGOA’s eligibility criteria have played an important role in raising standards and improving rule of law throughout the continent.  However, they have not been updated since AGOA was first established.  Updating these criteria for example to include provisions relating to eliminating unwarranted SPS barriers and employment discrimination could be an important way to modernize the program.
• Eligibility Review Processes:  AGOA’s mechanism for ensuring countries meet eligibility criteria currently is all-or-nothing.  An approach that allows for partial and more immediate withdrawal may allow the Administration to take a more tailored and nimble approach to drive positive changes in beneficiary countries.

We look forward to working with you as you explore these and other issues in the process of moving forward with renewal.

Third, and finally, while the administration remains firmly committed to securing AGOA renewal, we need to begin  working with our African partners to develop a vision of a trade relationship that goes beyond one-way preferences in the mid- to long-term.  As I said, today’s world is different from the one when AGOA was first enacted, both in Africa and in its relations with major trading partners. Against this backdrop, we need to consider the way ahead and how different tools – from unilateral preference program, to reciprocal trade agreements – might evolve to be used with different partners to help us achieve our goals of broad-based economic growth and prosperity. 

U.S. Consumer Product Safety Commission/European Commission Training: Buyers & Sourcing Professionals Seminar in China

On August 29, 2014, in Shanghai, U.S. Consumer Product Safety Commission ("CPSC") staff and staff of the European Commission* will conduct free Product Safety Training for Buyers & Sourcing Professionals dealing in Electrical-Electric-Appliances, Apparel, and Toys in China. Buyers who source consumer products for eventual retail sale are key decision makers at the intersection of the production and retail value chains. They have the power to ensure products purchased for their companies or clients meet all safety requirements but too often, they lack the knowledge to fulfill their role. Product Safety Training for Buyers & Sourcing Professionals can help fill that gap. Focus is on products for children and on products that have demonstrated high risks of safety violations and hazards. The three training events will be hosted by the U.S. Chamber of Commerce in China.

Target groups for this training are resident-in-China buyers and sourcing professionals who purchase consumer products for major importers located in the United States and European Union. Many will be direct employees of U.S. or E.U. companies. Other potential attendees will be from specialized firms that handle purchasing for large global retailers, as well as from small and medium sized trading companies active in the consumer product export business.

To register or for more information, go to http://www.amcham-shanghai.org/AmChamPortal/Event/EventDetail.aspx?EventId=6336.

Training sessions will also be offered in Guangzhou on September 1 and Shunde on September 2.

English-Chinese interpretation will be provided.

*NOTE, European Commission presenter will cover toys only.

CPSC Staff to Confer with NFPA Upholstered Furniture Task Group

On August 5, 2014, Rik Khanna, Consumer Product Safety Commission Office of Hazard Identification and Reduction, is scheduled to participate in the National Fire Protection Association ("NFPA") Upholstered Furniture Main Task Group conference call regarding a voluntary standards development for upholstered furniture.

Patent Searches

In order to get a patent, an invention has to be useful, novel and not obvious.  In the US, the useful standard is pretty simple to meet:  for all intents and purposes the invention has to do something.  The arguments in getting a patent generally come down to novelty and obviousness.

To determine novelty and obviousness, the patent examiner will perform a “prior art” search to determine if the invention’s concept has been previously disclosed.  As a part of the process, the examiner will generate references to patents and publications for closely related concepts and inventions and then use these references to argue against issuing a patent for the application. 

It is always best for an applicant to have a patent search done before filing an application.  Not only does the search help to determine whether it is worth filing for the patent, but by having some idea of what the examiner is going to find it is often possible to write applications around potential conflicts with prior art.

There are several companies that do patent searches and I strongly encourage inventors to use them.  A proper search generally requires an understanding of the US Patent Classification System, the Cooperative Patent Classification System, knowledge of some pretty detailed search techniques and, in order to be efficient, access to expensive databases.  And then, once you have cleared these obstacles and found the patents, the inventor still has to read and evaluate the patents.  The truth is that even a low end patent search will give you better results than what inventors can do for themselves. 

Fortunately, there appears to be a good bit of competition among patent search companies.   Patent search costs are a function of the subject matter and the complexity of the invention.  A patent search for a simple mechanical invention will usually cost less than $1,000 from a high end company and will probably cost under $500 from lesser prestigious companies.  Simple chemical and electrical searches will start around $1500 from the better firms. 

Even from the best companies, patent searches are not perfect.  They will miss references that the examiners will find.  This is because patent examiners are very good at what they do.  They are experts in their fields with a lot of experience, access to the best internal and external databases, and, as employees of the USPTO, they have the support of an institution that has been doing this sort of work for over 200 years.  Applicants need to expect that examiners will find some unexpected references.

 Below is a summary of selected patents that have been recently issued in textile related classification codes:

Wear-resistant outsole:  A shoe sole with a perimeter made of a harder elastomeric material than the material used to form the traction elements that form the inner protion of the sole.  Patent:  8671592.  Invenor:  Dojan.  Assignee:  Nike, Inc.

Lightweight and flexible article of footwear:  A shoe an outer member including slots and an inner plate with protective strips that increases flexibility for the wearer.   Patent:  8671593.  Inventor:  Becker, et.al.  Assignee:  Nike, Inc.

Article of footwear with traction members having a low profile sole:  Cleat arrangement for a golf shoe.  Patent:  8671594.  Inventor:  Ortley and Grott.  Assignee:  Taylor Made Golf Incorporated.

Ornamentation for a footwear upper.  An ornament that can be attached to a shoe strap or shoelace.  Patent:  8671595.  Inventor:  Nelson.  Not Assigned.

Drawing frame for a spinning machine:  A drawing frame head that is detachable from the spinning frame.  This is clearly intended to simplify maintenance but the spinning machine may also be able operate without the head.  Patent:  8671657.  Inventor:  Malina.  Assignee:  Maschinenfabrik Rieter Ag

Self-expanding pseudo-braided intravascular device:  A self-expanding, pseudo-braided device embodying a high expansion ratio and flexibility as well as comformability and improved radial force. The pseudo-braided device is particularly suited for advancement through and deployment within highly tortuous and very distal vasculature. Various forms of the pseudo-braided device are adapted for the repair of aneurysms and stenoses as well as for use in thrombectomies and embolic protection therapy.Patent:  8671815.  Inventor:  Hancock et.al.  Assignee:  Abbot Vascular Solutions Inc.

Braiding device for catheter having acuately varying pullwires:  A braider for braiding wires to a tube comprising an iris assembly having stacked iris plates.. The braider includes a feeder assembly configured for advancing the tube through the center apertures and a braiding assembly configured for braiding a plurality of filaments around the tube and the plurality of wires as they are fed through the iris assembly.  Patent:  8671817. Inventor:  Bogusky.  Assignee:  Hanson Medical Inc.

System for adjusting the fit of a bra to a wearer's bosom:  A system for adjusting the fit of a bra includes a bra having cups, a bridge and an underwire channel sewn beneath each cup. The underwire residing in each channel is bendable along at least one axis, can be lengthened, and is capable of retaining its adjusted shape after being adjusted. Patent:  8672727. Inventor:  LaRoux.  Not Assigned.

Jim Carson is a principal of RB Consulting, Inc. and a registered patent agent.  He has over 30 years of experience across multiple industries including the biotechnology, textile, computer, telecommunications, and energy sectors.  RB Consulting, Inc. specializes in providing management, prototyping, and regulatory services to small and start-up businesses.  He can be reached via email at James.Carson.Jr@gmail.com or by phone at (803) 792-2183.

Program Provides Too Few Incentives to Help Boost Competitiveness of Domincan Apparel Exports, Says USITC

On July 25, 2014, the U.S. International Trade Commission ("USITC") published Investigation No. 332-503 USITC Publication 4476 Earned Import Allowance Program: Evaluation of the Effectiveness of the Program for Certain Apparel from the Dominican Republic.

Five years after its implementation, the Earned Import Allowance Program (EIAP) is not providing enough incentives to help reverse the decline in Dominican apparel exports to the U.S. market, as intended, reports the U.S. International Trade Commission (USITC) in its publication Earned Import Allowance Program: Evaluation of the Effectiveness of the Program for Certain Apparel from the Dominican Republic; Fifth Annual.

The EIAP allows apparel manufacturers in the Dominican Republic who use U.S. fabric to produce certain apparel to earn a credit that can be used to ship eligible apparel made with non-U.S.-produced fabric into the United States duty free. The Dominican Republic-Central America-United States Free Trade Agreement Implementation Act, as amended, requires the USITC, an independent, nonpartisan, factfinding federal agency, to evaluate annually the effectiveness of the EIAP program and make recommendations for improvements.

The USITC's fifth annual review was submitted to the U.S. House of Representatives Committee on Ways and Means and the U.S. Senate Committee on Finance on July 25, 2014. Highlights of the report follow.

• Of the 12 registered firms, only 5 firms are currently using the program, down from 7 firms reported in the fourth annual review.

• In 2013, U.S. imports of woven cotton bottoms from the Dominican Republic declined by 76 percent, by both quantity and value, compared to 2012. Also, U.S. exports to the Dominican Republic of cotton fabrics of a weight suitable for making bottoms fell for the second year in a row, declining by 25 percent by both quantity and value between 2012 and 2013.

• The USITC received several recommendations from industry and other sources concerning improvements to the EIAP. The recommendations were the same as those received during the previous four annual reviews-1) lowering the 2-for-1 ratio of U.S. to foreign fabric to a 1-for-1 ratio; 2) expanding the program coverage to enable other types of fabrics and apparel items to be included in the EIAP; and 3) changing the requirement that dyeing and finishing of eligible fabrics occur in the United States.

Clients of Agathon Associates and subscribers to Agathon Associates' Trade Advisor Service can read more at http://www.agathonassociates.com/textile-pri/cafta-dr/dr_2_for_1.htm. You will need to enter your username and password. If you do not know your username and password email David Trumbull at david@agathonassociates.com.

FTZ Approved for Coleman Company, But With No Duty Reduction on Textile Inputs

On July 25, 2014, the Foreign Trade Zone Board published in the Federal Register (79 FR 43390) Foreign-Trade Zone 119--Minneapolis, Minnesota; Authorization of Limited Production Activity; The Coleman Company, Inc. (Textile-Based Personal Flotation Devices); Sauk Rapids, Minnesota.

BACKGROUND.

On March 13, 2014, The Coleman Company, Inc. submitted a notification of proposed production activity to the Foreign-Trade Zones ("FTZ") Board for its facility at 1100 Stearns Drive, Sauk Rapids, Minnesota. The facility is used for the production of personal flotation devices and cushions constructed with textile fabrics. Production under FTZ procedures will exempt Coleman from customs duty payments on foreign status components used in export production. On its domestic sales, Coleman wanted to be able to choose the duty rates during customs entry procedures that apply to personal flotation devices (4.5%, 7.0%) and flotation cushions (6.0%) for the foreign status, which is lower than the rate of duty on the imported foreign components, which can be as high as 20%.

The components and materials sourced from abroad include: Plastic buckles; carrying bags of plastic and textile materials; woven nylon fabrics; woven polyester fabrics; woven fabrics of synthetic yarns; knit fabrics of elastomeric yarns; neoprene fabrics; webbing of man-made fibers; and, polyvinyl chloride foam (duty rate ranges from 5.3% to 20%).

The FTZ Board authorized the production activity described in the notification on a limited basis, subject to a restriction requiring that all foreign status textile fabrics and cases of textile materials (classified within HTSUS Subheadings 4202.92, 5407.42, 5407.51, 5407.52, 5407.82, 6004.10, 5906.91, and 5806.32) be admitted to the zone in domestic (duty-paid) status (19 CFR 146.43) or privileged foreign status (19 CFR 146.41). That means that in the case of the textile inputs, Coleman will continue to pay the full rate of duty unless the final product is exported.

The notice generated significant interest and several sets of public comments were received by the FTZ Board.

In support:

1. U.S. Representative Michele Bachmann (May 9, 2014)
2. Continental Press (April 23, 2014)
3. Duro Textiles, LLC (May 12, 2014)
4. Henderson Sewing Machine Company (April 17, 2014)
5. M-Associates (April 15, 2014)
6. Mitsubishi Electric Automation (April 21, 2014)
7. Outdoor Industry Association (March 31, 2014)
8. U.S. Representative Ed Perlmutter (May 8, 2014)
9. U.S. Representative Mike Pompeo (May 8, 2014)
10. Pregis Corporation (April 17, 2014)
11. SPSI Inc. (May 7, 2014)
12. T.J. Elias Sales and Service (April 29, 2014)

In opposition:

1. AFMA, NCTO, and USIFI (May 12, 2014)
2. Milliken and Company (May 12, 2014)

CPCS Staff to Attend AAFA Product Safety Meeting

On Tuesday, July 29th, Consumer Product Safety Commissioner Marietta Robinson, and staff members Anu Connor, Senior Counsel, Dottie Lee, Confidential Assistant, and Allyson Tenney, Lead Compliance Officer, Office of Compliance and Field Operations, are scheduled to attend the American Apparel and Footwear Association, Product Safety Council Meeting. Commissioner Robinson will deliver opening remarks and Allyson Tenney will deliver remarks on regulatory enforcement. This meeting is for members of AAFA’s Product Safety Council.

California Statute Regarding Made in USA Claims Reportedly Used Against Apparel Industry

According to a report by the legal and consulting firm Sandler and Travis, "Apparel companies are beginning to receive letters that raise the specter of significant potential liability for damages under California’s 'Made in USA' false advertising law." The California law is more stringent than U.S. Federal Trade Commission ("FTC") rules, with the result that an apparel article properly labeled in compliance with the FTC Wool Rules or Textile Rules, might be out of compliance with the California statute that requires that "the merchandise or any article, unit or part thereof has been entirely or substantially made, manufactured or produced outside of the United States."

Senators Ask for Government Accountability Office to Evaluate Trade Agreement Impacts on Manufacturing and Investigate Whether U.S. Companies Get Fair Shot at Foreign Government Contracts

WASHINGTON – In a letter sent to the Government Accountability Office (GAO) this week, U.S. Senators Tammy Baldwin (D-WI) and Jeff Merkley (D-OR) called for the investigative agency to open an inquiry into the impact of trade agreements on the U.S. federal government’s domestic procurement preferences, known as “Buy American,” and specifically the impact on U.S. manufacturing.  The Senators urged the agency to update previous findings that trade agreements had not delivered sufficient commercial value and provide recommendations to ensure there is truly a level playing field between the U.S. and our trade partners for U.S companies and workers in government procurement markets.

Under current policy, the U.S. generally grants its trade agreement partners access to the U.S. federal government’s procurement markets, where it purchases goods and services, and in return, U.S. companies are permitted equal access to overseas procurement markets by our trading partner governments.  This runs contrary to the normal “Buy American” policies that require that taxpayers’ dollars used when the U.S. government purchases goods and services be prioritized to purchase U.S. manufactured products.  Instead, it is based on the promise that U.S. workers and businesses will benefit equally from foreign governments purchasing American goods and services.  Whether those promises have been fully enforced has been an on-going concern of Americans businesses and workers.

As Senators Baldwin and Merkley wrote in the letter: “[W]hen allowed to play on a level playing field, American manufacturers can compete with the best in the world and U.S. firms and workers benefit with fair access to international markets.  But the playing field must be truly level for these benefits to accrue. […] We are concerned that the playing field has not been level.”

The senators urged the GAO to update its previous reports regarding the effectiveness of trade agreements and re-assess whether access to procurement markets is fair and even between both parties. They requested the GAO address four key areas:

• An investigation and full analysis of trade agreements that involve U.S. federal and sub-federal government procurement, particularly their impact on the U.S. economy and U.S. manufacturing.
• Updates on how recommendations from the last GAO report on government procurement – released in 1984 and which found agreements had less commercial value than originally anticipated – have been implemented. Specifically, the letter asks the GAO to evaluate the status of enforcement of present agreements on government procurement and offer options to strengthen enforcement of existing U.S. obligations.
• The extent to which foreign companies that compete for U.S. procurement contracts receive direct and indirect subsidies from their governments. The letter asks the GAO to address whether subsidies give foreign firms unfair competitive advantages for procurement contracts as compared to U.S. firms.
• The effects of U.S. procurement policy on small businesses, including how well small businesses can access and benefit from foreign markets.

Last December, Senators Merkley and Baldwin introduced the Level the Playing Field in Global Trade Act to fully account for unfair subsidies that exist in global trade.

An online version of the signed letter can be found here.

Congressional Hearings on AGOA Set For Next Week

U.S. House and Senate to hold hearings on the Africa Growth and Opportunity Act ("AGOA") next week.

House Ways and Means Committee Chairman Nunes has announced Hearing on Advancing the U.S. Trade Agenda: Trade with Africa and the African Growth and Opportunity Act, at 1100 Longworth House Office Building at 2:00 p.m. on Tuesday, July 29th. The focus of the hearing is on AGOA and U.S. trade policy in sub-Saharan Africa. The hearing focus will include: (1) deepening and expanding trade and investment ties with sub-Saharan Africa; (2) the effectiveness of AGOA and potential revisions to the program to promote improved utilization; (3) barriers to trade in Africa; (4) barriers to regional integration in Africa; and (5) capacity building and efforts to promote regional integration and integration into global supply chains, including through implementation of the World Trade Organization Trade Facilitation Agreement.

On Wednesday, July 30, 2014, at 10:00 a.m., the United States Senate Committee on Finance will hold Hearing The African Growth and Opportunity Act at 14: The Road Ahead at 215 Dirksen Senate Office Building.

In 2000, Congress first passed the African Growth and Opportunity Act to provide duty-free access to a wide variety of products from sub-Saharan African countries that meet certain criteria. Benefits under AGOA are extensive, allowing for duty-free access for many apparel and agriculture products that are not included in the Generalized System of Preferences ("GSP") and providing preferential treatment on about 2000 more tariff lines than GSP. In addition, AGOA includes certain special rules of origin to further encourage trade and development in Africa.

The program is designed to promote economic development in sub-Saharan Africa by granting increased access to U.S. markets. The AGOA Ambassadors Working Group estimates that AGOA has generated about 350,000 direct jobs and 1,000,000 indirect jobs in Sub-Saharan Africa and about 100,000 jobs in the United States.

Since adoption of AGOA in 2000, U.S. trade with sub-Saharan Africa has grown about four-fold, rising from $7.6 billion in 2001 to $24.8 billion in 2013. Approximately 90 percent of imports from AGOA-eligible countries entered under the AGOA program, though the level of utilization varies from country to country. Major products exported to the United States under AGOA include crude petroleum ($20 billion), automobiles and parts ($2.1 billion), refined petroleum products ($1.2 billion), and textiles and apparel ($907 million).

As Congress considers renewal of AGOA, which expires in September 2015, these hearings are important elements of the Committees' fact-gathering activities.

Army Boot Contract Awarded

McRae Industries, Inc., Mount Gilead, North Carolina, has been awarded a maximum $14,393,768 modification (P00103) exercising the second option period on a one-year base contract (SPM1C1-12-D-1057), with four one-year option periods. This is a firm-fixed-price contract for Army hot weather combat boots. Location of performance is North Carolina with a July 28, 2015, performance completion date. Using military services are Army and Marine Corps. Type of appropriation is fiscal 2014 defense working capital funds. The contracting activity is the Defense Logistics Agency Troop Support, Philadelphia, Pennsylvania.

Gingham Bill Advances to Third Reading at Mass. State House

A bill, H.2862, introduced in the Massachusetts House of Representatives by Harold P. Nauhton (Dem., Clinton), to designate gingham as the official textile of Massachusetts, has advanced to the House Committee on Bills in the Third Reading. The Committee considers all bills prior to their final reading, and examine, correct and recommend such amendments as may be necessary concerning duplication, grammatical errors, constitutionality, etc. Advancing to the Committee on Third Reading is general an indication that the bill has a good likelihood of being considered by the full house.

Comments Due Tuesday for Kravet FTZ Application

On May 27, 2014, the Foreign Trade Zone Board published in the Federal Register an application submitted by the South Carolina State Ports Authority, on behalf of Kravet Inc. The Kravet facility is used for the cutting and tagging of textiles, paper wall coverings and decorative trimmings to be used as samples. Production under FTZ procedures could exempt Kravet from customs duty payments on the foreign components used in export production. On its domestic sales, Kravet would be able to choose the duty rates during customs entry procedures that apply to commercial samples of fabric, paper wall coverings and decorative trimmings (duty-free) for the foreign inputs noted below. Customs duties also could possibly be deferred or reduced on foreign status production equipment. The request indicates that the savings from FTZ procedures would help improve the plant's international competitiveness.

Comments are due by Tuesday, July 28th.

Save the Date!

The SEAMS Fall Networking Conference has been set for October 23-25, 2014, at the OMNI Oceanfront Resort, Hilton Head, S.C. What for more details to follow.

Customs Rules of Classification of Ribbons Coated with Flock or Glitter

In a letter dated July 11, 2014, issued in response to a ruling request from CVS Pharmacy of Woonsocket, Rhode Island, U.S. Customs and Border Protection Ruled (Binding Ruling Letter N254606) on the tariff classification of eight samples, identified as styles 01 through 08, of Christmas ribbons, some of which had been coated with flock or glitter, saying--

"Your letter describes Style 01 as a textile ribbon composed of 90% polyester and 10% metallic, which has been cut from a wider piece of fabric and given a sonic edge, with an inserted wire in a crimped metallic selvage. The ribbon features a decorative plaid pattern formed by the polyester and metallized yarns.

"Your letter describes Style 02 as a textile ribbon composed of 100% nylon, which has been cut from a wider piece of fabric and given a sonic edge, with an inserted wire in a crimped metallic selvage. The ribbon features a floral pattern formed by glitter.

"Your letter describes Style 03 as a textile ribbon composed of 55% polyester and 45% nylon, which has been cut from a wider piece of fabric, and given a wired and merrowed edge. The ribbon features a poinsettia pattern formed by printing and glitter.

"Your letter describes Style 04 as a textile ribbon composed of 100% nylon, which has been cut from a wider piece of fabric, and given a wired and merrowed edge. The ribbon features a poinsettia pattern formed by flock printing.

"Your letter describes Style 05 as a textile ribbon composed of 100% polyester, which has been cut from a wider piece of fabric, and given a wired and merrowed edge. The ribbon has “Merry Christmas” printed along its length.

"Your letter describes Style 06 as a textile ribbon composed of 100% nylon, which has been cut from a wider piece of fabric, and given a wired and merrowed edge. The ribbon has a floral design formed by glitter.

"Your letter describes Style 07 as a textile ribbon composed of 62% nylon and 38% metallic, which has been cut from a wider piece of fabric and given a sonic edge, with an inserted wire in a crimped metallic selvage. The ribbon has stripes running the length of the fabric, formed by the metallized yarns.

"Your letter describes Style 08 as a textile ribbon composed of 100% nylon, which has been cut from a wider piece of fabric and given a sonic edge, with an inserted wire in a crimped metallic selvage. The ribbon has a decorative pattern formed by glitter.

"The metallized strips meet the dimensional requirements of textile strips contained in Section XI, Legal Note 1(g) of the Harmonized Tariff Schedule of the United States (HTSUS). According to the terms of Legal Note 1 to Chapter 54, HTSUS, such strips are not to be considered a man-made fiber.

"The applicable subheading for Style 01, 03, and 05 will be 5806.32.1040, HTSUS, which provides for … other narrow woven fabrics, …ribbons, of a width not exceeding 12cm, of polyester, not containing a woven selvedge. The duty rate is will be 6% as valorem.

"The applicable subheading for Styles 02, 04, 06, 07 and 08 will be 5806.32.1070, HTSUS, which provides for … other narrow woven fabrics, of man-made fibers… ribbons, of a width not exceeding 12 cm, of nylon, with other than woven selvedge. The rate of duty will be 6 percent ad valorem."

Army Coveralls Contract Awarded

Carter Industries, Inc., Olive Hill, Kentucky, has been awarded a maximum $9,417,600 modification (P00103) exercising the third option period on a one-year base contract (SPM1C1-11-D-1026) with three one-year option periods. This is a firm-fixed-price contract for improved combat vehicle crewman's coveralls, universal camouflage pattern. Locations of performance are Kentucky and New York, with a July 30, 2015 performance completion date. Using military service is Army. Type of appropriation is fiscal 2014 defense working capital funds. The contracting activity is the Defense Logistics Agency Troop Support, Philadelphia, Pennsylvania.

Patent Searches

In order to get a patent, an invention has to be useful, novel and not obvious.  In the US, the useful standard is pretty simple to meet:  for all intents and purposes the invention has to do something.  The arguments in getting a patent generally come down to novelty and obviousness.

To determine novelty and obviousness, the patent examiner will perform a “prior art” search to determine if the invention’s concept has been previously disclosed.  As a part of the process, the examiner will generate references to patents and publications for closely related concepts and inventions and then use these references to argue against issuing a patent for the application. 

It is always best for an applicant to have a patent search done before filing an application.  Not only does the search help to determine whether it is worth filing for the patent, but by having some idea of what the examiner is going to find it is often possible to write applications around potential conflicts with prior art.

There are several companies that do patent searches and I strongly encourage inventors to use them.  A proper search generally requires an understanding of the US Patent Classification System, the Cooperative Patent Classification System, knowledge of some pretty detailed search techniques and, in order to be efficient, access to some very expensive databases.  And then, once you have cleared these obstacles and found the patents, the inventor still has to read and evaluate the patents.  The truth is that even a low end patent search will give you better results than inventors can do for themselves. 

Fortunately, there appears to be a good bit of competition among patent search companies.   Patent search costs are a function of the subject matter and the complexity of the invention.  A patent search for a simple mechanical invention usually costs less than $1,000 from a high end company and will probably cost under $500 from less prestigious companies.  A search for simple chemical or electrical inventions will probably come in below $2000 from the better firms. 

Even from the best companies, patent searches are not perfect.  They will miss references that the examiners will find.  This is because patent examiners are very good at what they do.  They are experts in their fields with a lot of experience, access to the best internal and external databases, and, as employees of the USPTO, they have the support of an institution that has been doing this sort of work for over 200 years.  Applicants need to expect to be surprised by what examiners will find.

 Below is a summary of selected patents that have been recently issued in textile related classification codes:

Wear-resistant outsole:  A shoe sole with a perimeter made of a harder elastomeric material than the material used to form the traction elements that form the inner protion of the sole.  Patent:  8671592.  Invenor:  Dojan.  Assignee:  Nike, Inc.

Lightweight and flexible article of footwear:  A shoe an outer member including slots and an inner plate with protective strips that increases flexibility for the wearer.   Patent:  8671593.  Inventor:  Becker, et.al.  Assignee:  Nike, Inc.

Article of footwear with traction members having a low profile sole:  Cleat arrangement for a golf shoe.  Patent:  8671594.  Inventor:  Ortley and Grott.  Assignee:  Taylor Made Golf Incorporated.

Ornamentation for a footwear upper.  An ornament that can be attached to a shoe strap or shoelace.  Patent:  8671595.  Inventor:  Nelson.  Not Assigned.

Drawing frame for a spinning machine:  A drawing frame head that is detachable from the spinning frame.  This is clearly intended to simplify maintenance but the spinning machine may also be able operate without the head.  Patent:  8671657.  Inventor:  Malina.  Assignee:  Maschinenfabrik Rieter Ag

Self-expanding pseudo-braided intravascular device:  A self-expanding, pseudo-braided device embodying a high expansion ratio and flexibility as well as comformability and improved radial force. The pseudo-braided device is particularly suited for advancement through and deployment within highly tortuous and very distal vasculature. Various forms of the pseudo-braided device are adapted for the repair of aneurysms and stenoses as well as for use in thrombectomies and embolic protection therapy.Patent:  8671815.  Inventor:  Hancock et.al.  Assignee:  Abbot Vascular Solutions Inc.

Braiding device for catheter having acuately varying pullwires:  A braider for braiding wires to a tube comprising an iris assembly having stacked iris plates.. The braider includes a feeder assembly configured for advancing the tube through the center apertures and a braiding assembly configured for braiding a plurality of filaments around the tube and the plurality of wires as they are fed through the iris assembly.  Patent:  8671817. Inventor:  Bogusky.  Assignee:  Hanson Medical Inc.

System for adjusting the fit of a bra to a wearer's bosom:  A system for adjusting the fit of a bra includes a bra having cups, a bridge and an underwire channel sewn beneath each cup. The underwire residing in each channel is bendable along at least one axis, can be lengthened, and is capable of retaining its adjusted shape after being adjusted. Patent:  8672727. Inventor:  LaRoux.  Not Assigned.

Jim Carson is a principal of RB Consulting, Inc. and a registered patent agent.  He has over 30 years of experience across multiple industries including the biotechnology, textile, computer, telecommunications, and energy sectors.  RB Consulting, Inc. specializes in providing management, prototyping, and regulatory services to small and start-up businesses.  He can be reached via email at James.Carson.Jr@gmail.com or by phone at (803) 792-2183.

Government Proposes Classifying Outsourcers as Manufacturers

On May 22, 2014, the Executive Office of the President, Office of Management and Budget ("OMB") published in the Federal Registger (79 FR 29625) 2012 North American Industry Classification System ("NAICS")—Updates for 2017; Notice of Solicitation for Proposals To Revise Portions of NAICS for 2017.

One of the proposed changes, which if accepted would go into effect in 2017, relates to the classification of entities that arrange for and bring together all of the factors of production necessary to produce a good, accept the entrepreneurial risk of producing and bringing goods to market, and yet outsource these processes. In the proposal they are referred to as factoryless goods producers ("FGPs") Recent years have witnessed rapid and widespread specialization in goods manufacturing as global competition has motivated producers to seek more efficient production methods. This has resulted in outsourcing manufacturing transformation activities (i.e., the actual physical, chemical or mechanical transformation of inputs into new outputs) to specialized establishments, both foreign and domestic. NAICS 2007 did not provide clear guidance on classification of units that control the entire process but subcontract out all manufacturing transformation activities. The recommendation to OMB is classification of establishments that bear the overall responsibility and risk for bringing together all processes necessary for the production of a good in the manufacturing sector, even if the actual transformation is 100 percent outsourced.

Classifying FGPs as "manufacturers" will affect several government statistical programs such as:

1. Bureau of Labor Statistics ("BLS")
   • Quarterly Census of Employment and Wages ("QCEW"),
   • Current Employment Statistics ("CES"),
   • Job Openings and Labor Turnover Survey ("JOLTS"),
   • Producer Price Index Program ("PPI)",
   • Major Sector Productivity, Industry Productivity, Occupational Employment Statistics ("OES"), and
   • other BLS programs that produce estimates using the NAICS classification system.

2. Bureau of Economic Analysis ("BEA")
• Industry Accounts (including Input-Output tables),
• International Area, National Income and Product Accounts, Regional Accounts, and
• other BEA programs that produce estimates using the NAICS classification system.
3. Census Bureau
• Industry statistics from the Economic Census;
• Annual and Monthly Wholesale Trade Surveys;
• the Annual Survey of Manufacturers;
• Monthly Manufacturers' Inventories, Shipments, and Orders ("M3");
• Manufacturing and Energy Consumption Survey ("MECS");
• County Business Patterns ("CBP");
• Quarterly Survey of Plant Capacity Utilization ("QPC");
• Annual Capital Expenditures Survey ("ACES");
• Business R&D and Innovation Survey ("BRDIS");
• Business Expense Survey ("BES");
• Quarterly Financial Report ("QFR"); and
• other series that are published using NAICS.

Südwolle Group Opens North Carolina Warehouse to Service U.S. Textile, Legwear, and Apparel Markets

Südwolle Group, a manufacturer of pure wool and wool blend worsted spun yarns for weaving and circular and flat knitting, will open a new 18,000 sq. ft. distribution facility in Mount Airy, NC. The company, headquartered in Nürnberg, Germany, has operations in Germany, Poland, Italy, Romania, Australia, and China. The new Mount Airy distribution center is Südwolle Group’s first U.S. location and will begin operations in mid-July 2014.

Made in USA Brand, LLC Agrees to Drop Deceptive Certification Claims

A company that provides a “Made in USA” certification seal to marketers has agreed to settle Federal Trade Commission charges that it deceived consumers by allowing companies to use the seal without either independently verifying that those companies’ products were made in the United States, or disclosing that the companies had certified themselves.

The company, Made in USA Brand, LLC, is required under the proposed settlement to stop its deceptive claims.

The Columbus, Ohio-based Made in the USA Brand, LLC charged $250 to $2,000 for a one-year license to use the certification mark, according to the FTC. But the company did not independently evaluate the products before certifying them, and had no procedures to determine whether marketers complied with the FTC’s Made in USA standard, according to the complaint.

Read more HERE.

Federal Trade Commission requirement for labeling of textile and apparel products are complex and cover such areas as:

• country of origin,

• fiber content,

• care labeling, and

• identification manufacturer, importer, or other dealer.

The penalties for mislabeling can be high, in some cases as high as $16,000 per offense (that's per garment!).

David Trumbull, Principal, Agathon Associates, has 20-years experience working with the FTC. Agathon Associates can assist you with LABEL ADVISOR, which offers "Smart guidance for U.S. label compliance: SO SMART, SEW RIGHT." For more information call 202-657-6008 and talk to David.

Darlington announces the hiring of industry veteran David Turk as the textile mill continues to grow

WESTERLY, RHODE ISLAND – July 14, 2014 - The leading warp-knit fabric manufacturer announced the incorporation of David Turk to their sales team. He is an experienced and respected industry veteran that brings more than 30 years of experience in textiles and who possesses strong relationships with key accounts. "I am very proud of the achievements of our current sales team and I am certain that by incorporating David to the team it will help us accelerate and achieve our continued growth and expansion plans as well as to continue exceeding our current customers expectations" said Steve Perry, Senior Vice President of Darlington Fabrics.

From their manufacturing facility located in Rhode Island, Darlington Fabrics services apparel manufacturing companies located in the Americas and is focused on helping them meet the demand for speed-to-market trends and taking advantage of the benefits given by free trade agreements with Central America, Mexico, Peru and Colombia, while also serving Berry Amendment compliant programs. "We are very much aware that our customers not only want to buy the best quality warp knit fabrics, but that they also want and deserve the best service including design, product development, printing capabilities and logistics that will provide them permanent competitive advantages to successfully compete in this globally competitive industry. David's experience, knowledge, focus on finding solutions to customers' needs and most importantly, his leadership and communication skills will help us deliver our value proposition to new markets and segments in America" S. Perry, added.

With this new addition to their already seasoned sales team they expect to increase their market share in the region and to continue transforming their customers' needs into quality warp knit fabrics for the athletic, swimwear, intimate apparel, military and medical apparel industry.

Darlington Fabrics is a division of The Moore Company, founded in 1909 and focused on innovating in performance fabrics and finishes. Sister divisions include The George C, Moore Company, Fulflex, Moeller Marine, Moeller Plastics, and AMER-SIL.

Comment Period Extended for CSI Calendering FTZ Application

On July 18, 2014, the FTZ Board published notice in the Federal Register (79 FR 41959) Foreign-Trade Zone (FTZ) 39--Dallas-Fort Worth, Texas, Application for Production Authority, CSI Calendering, Inc. (Rubber Coated Textile Fabric), Extension of Comment Period on Submission of New Evidence. Comments are due by August 15, 2014.

Sensing the Motion at SPINEXPO New York 2014

Attendees at the 6th edition of SPINEXPO NEW YORK, July 15-17, 2014, got a preview of autumn/winter 2015/2016 knitwear trends, whenit'll all be about Sensing the Motion.

Ring Spun Singles Micro Modal Yarn Removed from CAFTA Short Supply List

On Friday, July 18th, the Committee for the Implementation of Textile Agreements ("CITA") will publish a notice in the Federal Register of its determination to approve a request to to remove certain ring spun single yarns of micro modal fibers, as specified below from Annex 3.25 ("short supply list") of the CAFTA-DR (Item #50). In accordance with CITA’s procedures, the subject yarn will be removed from Annex 3.25 effective 180 days from the date of publication.

As of January 15, 2015, entries of apparel or fabrics containing the subject yarn will not be eligible for duty-free treatment under the CAFTA-DR commercial availability ("short supply") provision.

CPSC Meetings July 22nd Regarding Mattress and Furniture Flammability

Consumer Product Safety Commission Acting Chairman Robert Adler, Chief of Staff Jason Levine and Senior Counsel Sarah Klein meeting with Veena Singla, Staff Scientist and Daniel Rosenberg, Senior Attorney, Natural Resources Defense Council (NRDC) and Dr. Susan Shaw, SUNY Albany School of Public Health and Dr. Ami Zota, George Washington University Department of Environmental and Occupational Health will meet to discuss CPSC’s work on a national flammability standard for upholstered furniture, including information about the observed effects of the mattress flammability standard and to share NRDC’s work on California’s furniture standards and the broad coalition of public health, environmental and firefighter groups engaged in furniture flammability standards as well as health concerns associated with the use of flame retardant chemicals in furniture. The meeting was requested by Avinash Kar, Attorney, NRDC. For additional information contact Ophelia McCardell, (301) 504-7731.

Commissioner Ann Marie Buerkle, Nancy Lowery, Special Assistant, Gib Mullan, Chief Counsel, and Katelyn Costello, Executive Assistant, meeting with Natural Resources Defense Council; Veena Singla, Staff Scientist NRDC; Daniel Rosenberg, Senior Attorney, NRDC; Eve Gartner, Staff Attorney, EarthJustice; Dr. Susan Shaw from SUNY Albany School of Public Health; Dr. Ami Zota from George Washington University Department of Environmental and Occupational Health. The meeting will be to discuss flammability standards and flame retardant chemicals in furniture. The meeting was requested by Avinash Kar. For additional information contact Katelyn Costello, Executive Assistant, (301) 504-7237.

Robert Howell, Deputy Executive Director, Safety Operations; George Borlase, Assistant Executive Director, Office of Hazard Identification and Reduction; Andy Stadnik, Associate executive Director, Laboratory Sciences; Rohit Khanna, Fire Prevention Engineer; Hyun Kim, General Attorney, Office of the General Counsel; and Patricia Pollitzer, Supervisory General Attorney, Office of the General Counsel, will be meeting with representatives of the National Resources Defense Council (NRDC). Representing the NRDC are Veena Singla, Staff Scientist; Daniel Rosenberg, Senior Attorney; and Avinash Kar, Attorney. The NRDC representatives will share information about their work on furniture flammability standards in California and the coalition of public health, environmental, and firefighter groups engaged on the furniture flammability issue. They will also share information about health concerns associated with the use of flame retardant chemicals in furniture. To the extent possible, CPSC staff will discuss the agency’s ongoing work to develop furniture flammability performance standards. The meeting was requested by the NRDC. For additional information contact Robert Howell, (301) 504-7621 or rhowell@cpsc.gov.

Alice Alice …

At the end of its session, the Supreme Court released its opinion about the final patent related case of the year:  Alice Corporation Pty. Ltd. v. CLS Bank International et. al.

The facts of the case are fairly straight forward. 

CLS Bank facilitates currency exchange transactions.  Specifically, CLS Bank acts as an intermediary for currency exchange contracts.  The purpose of this intermediation is to protect against settlement risk, or the risk that a party will pay out the currency they sold, but will not receive the currency it bought.  In short it is the risk that one of the partners will take the money and run.   The idea of the intermediary is that both parties provide their currency to a third party who holds the currency in escrow until the both parties complete their transactions.

This is not a new idea.  In fact, the Supreme Court opinion references a text written in 1896 that describes the concept in detail. 

Alice Corporation received patent 5970479 that patented the concept of a computer program that automated the job of an intermediary.  The patent protected the following algorithm: 

1) Receive contract information input from a first party;

2) Received contract information input from a second party;

3) Link the two inputted contracts together; and then,

4) Close and settle the contracts.

Once Alice Corporation got this patent, they went to town with patents 6912510, 7149720, and 7725375 to bolster this protection from every imaginable angle.

The Supreme Court ruled that the Alice patents were invalid.  The court could have taken the simple route and ruled that applying a generic computer algorithm to a well know procedure is too obvious to get a patent.  Instead they ruled that Alice was ineligible for a patent because it was an abstract idea. 

This ruling goes straight to the heart of what can be patented.  For years, the rule has been that to get a patent the invention must be a process, machine, manufacture, or composition of matter.  The exceptions to this rule are that laws of nature, natural phenomenon and abstract ideas cannot be patented.  While inventions can be based on newly discovered laws of nature, natural phenomenon and abstract ideas, to qualify for a patent they typically have to be applied to or turned into a process, machine, manufacture, or composition of matter.  

The grey area here has been business method and software patents.  In previous decisions, the Supreme Court has ruled that business method and software could, in the right circumstances, be patentable.  With this ruling, the Supreme Court has simply said that in the wrong circumstances business methods and software will not be patentable.  Unfortunately, they left it to the lower courts to figure out what the appropriate circumstances will be. 

 Below is a summary of selected patents that have been recently issued in textile related classification codes:

Stab resistant knit fabric having ballistic resistance made with layered modified knit structure and soft body armor construction containing the same:  A dual layer knit construction for use in body armor.  Patent 8671462.  Inventors:  Garcia and Kolmes.  Assignee:  Kolmes.

Protective glove:  A glove used by motorcycle riders designed with reinforcements to protect hands in the event of an accident.  Patent 8671463.  Inventor:  Hawkes.  Assignee:  Planet Knox Limited.

Temperature regulating garment:  A warm-up jacket designed to be worn over scrubs in a hospital operating room by people not scrubbed in.  The jacket has panels that allow temperature regulation for the wearer.  Patent:  8671464.  Inventor:  Silverberg.  Not Assigned.

Shading composition:  A whitening agent for use in laundry that reduced residual accumulation of the agent on cottons when used applied to cotton blends.  Patent 8673024.  Inventor:  Batchelor, et.al.  Assignee:  Conopco Inc.

Production of and drying of copolymer fibers:  A continuous process method for drying (reducing water) the copolymerization of para-phenylenediamine, 5(6)-amino-2-(p-aminophenyl)benzimidazole; and terephthaloyl dichloride.  The process is less damaging to the fiber than existing technology.  Patent:  8671524.  Inventors:  Allen and Newton.  Assignee:  E I Du Pont De Nemours And Company.

Shoe cover:   A shoe cover having a covering sized to receive a shoe and a sole coupled to the covering. In one example embodiment, the covering is made of an elastic material and the sole includes a serrated edge for expanding a perimeter portion of the sole.  Patent:  8671588.  Hampton.  Assignee:  Freakwear, LLC

Shoe sole having forwardly and rearwardly facing protrusions:  A shoe sole designed with opposing protrusions intended to increase foot stability for the wearer.  Patent 8671589.  Inventor: Bond and Keating.  Assignee:  K-Swiss Inc.

Shoe stability layer apparatus and method:  A footpad mounted into a shoe on top of the sole.  The footpad is fitted with anchors that mount into the sole to improve stability for the wearer.  Patent: 8671590.  Inventor:  Rasmussen and Taylor.  Assignee:  Nelwood Corporation.

Massaging footwear:  A footwear article that has an insert pad filled with loose particulate material which is configured within the pad to provide the feeling of walking on a sandy beach and with the same massage affect to the foot as walking on a sandy beach. The pad is particularly configured to prevent the loose particulate material inside of it from flowing to the sides of the pad and destroying the massaging affect.  Patent:  8671591.  Inventor:  Brown.  Assignee:  Brownmed Inc.

Jim Carson is a principal of RB Consulting, Inc. and a registered patent agent.  He has over 30 years of experience across multiple industries including the biotechnology, textile, computer, telecommunications, and energy sectors.  RB Consulting, Inc. specializes in providing management, prototyping, and regulatory services to small and start-up businesses.  He can be reached via email at James.Carson.Jr@gmail.com or by phone at (803) 792-2183.