Olivia Webb | Richmond County Daily Journal
A congressional hearing on CAFTA fraud — and its effects on the American textile industry — was held Thursday, with two North Carolina mill owners testifying.
“It’s costing jobs,” said Sarah Pierce, senior vice president of the National Council of Textile Organizations on Wednesday. “It’s causing plants to close.”
In 2005, then-congressman Robin Hayes (R-N.C.) cast the deciding vote in favor of passage of the Central American Free Trade Agreement. A controversial follow up to the North American Free Trade Agreement, the law eliminated tariffs on the majority of U.S. exports to El Salvador, Costa Rica, Guatemala, Honduras and and now the Dominican Republic.
As a result, American fiber producers can send their yarn to one of the participating countries where it is made into a finished product. It is then possible for that finished product to be shipped back to the U.S. again with greatly reduced tariffs under the Caribbean Basin Initiative.
Officials from NCTO say that Pakistani and Chinese yarn spinners are using the CAFTA region to bring their finished products into the U.S. duty-free by fraudulently claiming that American yarn was used.
“They can sell it at a cheaper price, and that hurts our members,” said Pierce. “Since the beginning of CAFTA, the administration at the time promised that customs enforcement would be stepped up; but enforcement went in the opposite direction.”
Dan Nation, division president of Gastonia-based Parkdale Mills, is one of the mill owners who testified to the effects of CAFTA fraud in front of Washington lawmakers, including Congressman Heath Shuler (D-N.C.), Chairman of the House Committee on Small Business Subcommittee on Rural Development, Entrepreneurship and Trade.
“At the peak of our growth, Parkdale operated 38 facilities in four states, employing over 4,000 people,” reads Nation’s statement. “In the last 12 years, we have been forced to close 19 of those facilities; resulting in over 2,200 jobs lost, not including all of the adjacent jobs supported by these manufacturing jobs.”
Nation pointed out that all of those facilities were located in small towns throughout the Southeastern United States.
“These towns have lost the majority of their manufacturing tax base, creating further financial stress,” said Nation. “Conservatively, we estimate that 1,200 of the 2,200 jobs Parkdale had to eliminate could have been saved with 100 percent effective customs enforcement over the last six years.”
Also testifying was Harding Stowe, former Chairman of third-generation Gaston County textile company Stowe Mills — which he said was forced to close down in January. According to NCTO, Stowe noted “that his company supplied U.S. Customs with regular information on which companies were using the illegal yarns and where the yarns were coming from but that Customs did not act.”
Congressman Larry Kissell (D-N.C.) who was present at the hearing, said the testimonies and information brought forth proved “what many of us knew to start with — that this is a bad deal for American businesses and America workers.”
“CAFTA is fundamentally flawed,” said Kissell. “It contains too many loopholes and simply provides too many opportunities to beat the system, and cheat American workers out of any fair chance to compete.”
Ken Goodman, owner of Richmond Yarns in Ellerbe, said that while CAFTA is beneficial to his business, he is aware of the problems caused by fraudulent transfer — both now and in the past.
“This has gone on for 40 years,” said Goodman on Wednesday. “The government would pass all these regulations, like the multi-fiber agreement back in the 1970s that wouldn’t let blended fiber come into the country. Then the customs officials would turn their heads and ignore the rules.”
In Goodman’s opinion, a lot of problems would be taken care of if the federal government would just enforce the laws on the books. Pierce said that is exactly why the NCTO has called Thursday’s hearing.
“We know for a fact that there is a high incidence of fraud,” said Pierce. “Our hope is that customs will be more focused in their enforcement.”
Pierce said NCTO continues to discuss with Shuler legislation that would streamline some of U.S. Customs processes.
“We’re not saying we need more regulation; we’re just saying the rules need to be strengthened to protect American businesses,” said Pierce.
“I am hopeful these hearings will help put a stop to the fraud taking place in connection with CAFTA, and will also make our government more vigilant in the future,” said Kissell. “To make sure we take better care of American workers and businesses and not enter into any more unfair, unenforceable trade deals.”
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