Search for Finer Yarn Becomes a Trade Tangle

This is a yarn about yarn, one that has a Georgia textile manufacturer tangled up with other domestic mills in an international trade dispute about its quest for a particular type of fine-spun cotton yarn.

The saga began when Galey & Lord Inc. of Atlanta was searching for a source of compacted, plied, ring-spun cotton yarns to fill an order for a big customer and found it was no longer made domestically. Compacted yarn, which is used to make a high-end fabric, goes through a special spinning process that produces a smooth yarn with less air between the fibers -- hence making it less "hairy."

American mills say there are least two other processes that remove short fibers from the yarn, creating the same reduced level of hairiness. But Galey & Lord, a leading maker of denim and twill, said it needed the real thing. So it petitioned the Committee for the Implementation of Textile Agreements last May to use imported yarn, under a provision that allows the government regulators to investigate whether there is a domestic "short supply" situation.

(For those who don't dwell deep in the federal government's regulatory thicket, CITA is an interagency group made up of officials from the departments of Commerce, Treasury, Labor and State, and the U.S. Trade Representative's office. The group has supervised the implementation of international textile trade agreements since 1972. It is a small but powerful player in the global textile market; last year the United States imported $89 billion in apparel and textiles.)

Last September, CITA pronounced the yarn not readily available in commercial quantities from U.S. suppliers, opening the way for Galey & Lord to import yarn from China to make the fabric -- twill for men's and women's shirts, blouses, trousers and pants. A report by the U.S. International Trade Commission backed up the decision.

Since 2001, CITA has granted approval in half of the 60 cases it has considered for the short supply designation, under laws such as the Caribbean Basin Trade Partnership Act and the Andean Trade Promotion and Drug Eradication Act.

But that wasn't the end of the tale.

The National Council of Textile Organizations , the trade association that represents the domestic textile industry, filed a petition on Jan. 10 asking the government to reconsider. And in an unusual move, CITA is entertaining a change of heart. It has asked for comments by Friday.

The NCTO said Galey & Lord, recently renamed Swift Galey and not a member of the group, should not be allowed to shop abroad for the yarn because there were perfectly good substitutes available in this country. The association said compacted yarn is no longer made in the United States, but the substitutes are indistinguishable.

"We view this decision as a mistake," said Michael Hubbard, vice president of the trade group, referring to CITA's initial finding. "There are seven or eight domestic companies that can provide these yarn counts and this yarn."

A Commerce Department official said the case is being looked at again because the NCTO came up with new information, such as fabric samples it had tested to show the substitute yarn is a dead ringer for the foreign yarn.

Carlos Moore, a textile trade consultant representing Galey & Lord, said the customer calls the shots and will be able to tell the difference between compacted yarn and a substitute. Moore used to be head of the predecessor trade association that represented many of the same U.S. mills now clamoring to reopen the case.

CITA's move to reconsider has riled foreign and domestic textile industries, their customers and the lawyers who represent them. "If you are planning your business, would you order this fabric right now?" asked Brenda Jacobs, an attorney with Sidley & Austin, which represents an importers' group. "This is having a devastating effect on Galey & Lord."

A reversal also would imperil, she said, one of the advantages of a short supply decision: preferential duty-free treatment for the customer of the fabric in bringing the finished goods back into the United States after being cut and sewn elsewhere. In this case, the company said the fabric will be made in its McDowell plant in North Carolina and finished at its South Hill plant in South Carolina. The order was placed by Gap Inc., which now makes similar apparel in the Far East, Moore said.

Moore said the Gap will ship the fabric for assembly to the Dominican Republic and then bring it back into to the United States duty-free. "This is a net plus for U.S. production and jobs," Moore said.

He said any unraveling of the initial decision will probably lead Galey & Lord to an appeal of its own. "The rules say CITA can consider revoking if a product is being made in commercial quantities in the United States. That is not the case here."

And the company is likely to get lots of support from big apparel importers. Jacobs said the U.S. Association of Importers of Textiles and Apparel , which she represents, will coordinate with the mill in fighting any change.

"This is the reason [domestic mills] have lost a lot of business," Jacobs said. "In Asia, they say, 'You tell us what you want.' "