Duty On Women’s Jeans To EU Increased to 38%!

EU has slapped, effective from 1st May 2013, a duty of 26% in addition to 12% existing duty on women’s jeans from USA  taking the total  duty to 38%.

The increased duties come from the EU’s World Trade Organization dispute with the United States over the Continued Dumping and Subsidy Offset Act, also known as the Byrd Amendment.This duty rate hike on jeans and other U.S. exports is a continuation of sanctions authorized by the World Trade Organization in retaliation for the U.S. failure to fully comply with a WTO ruling against the Continued Dumping and Subsidy Offset Act of 2000. Commonly referred to as the Byrd Amendment, this law allowed the U.S. to distribute the additional duties collected on imports of unfairly traded goods to the U.S. industries affected by such practice. The law was found to be a violation of WTO rules and despite a repeal of the law its effects were allowed to continue. As a result, the WTO allows other countries to raise tariffs on goods imported from the U.S. up to a certain amount, which varies each year.

This duty imposition will affect the Californian apparel industry the where a host of premium denim labels do their productions including those from True Religion, AG Adriano Goldschmied,  J Brand  and many other denim brands based out of LA. Most of the brands have European markets where they sell jeans at a premium prices. Women’s jeans are ,of course ,an important component of these exports .

Will this duty slap make a big impact on the US exporters ? It will , only if the quantities of women’s jeans shipped are large and the average prices are high.  Lets analyse the figures for the year 2010, 2011 and 2012 for the quantities shipped from US to EU 27 countries , their average prices and values in the table below. With the change in duty structure, the impact on the imports is also analysed and its final effect on retail prices.

Table for Women’s Jeans Exports From US to EU 2010-2012

 
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As we can see from the table above , between 600,000 and 1 million pieces of women’s jeans are being exported from US to EU every year. The average price of about Euro 34-38 indicates that these are mainly premium denim qualities .At current levels of import duty of 12% , the imports cost around Euro 40 –44. The retail price of such jeans can be safely assumed to be in the range of Euro 100-120 giving a 2.5 times retail .

Now if the duty is increased by 26%, the impact on the importer would have to shell out an additional amount of about 8-9 Euros. This would make a serious impact as the retail price would have to be increased by about 20-25 Euros to offset the increase in duty or the other alternative would be to keep the margins much lower – which would be difficult.

The South California apparel industry is not likely to be very happy with this development and impact on their sales. It also does not make much sense that the Men’s jeans continues to attract the same duties and the women’s jeans are impacted by over 20 Euros.  It is also possible that US and EU may arrive at a settlement to revoke these additional duties. In any case, the exports of women’s jeans from US to EU are likely to take a hit in the next  few months – even warranting shifting of productions to other places.

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