Central American Cos. Lining Up to Buy Fabric From Mexico

Tag : Denim Fabric

At the beginning of August, two 40-foot metal containers filled tothe brim with Mexican-made denim landed on the door step of Koramsa , the largest blue-jeans manufacturer in Guatemala.
For the first time in history, Koramsa will be able to take thisfabric from its neighbor to the north, cut it into thousands ofpants and then ship them back to the United States without havingto pay any duties or be subject to quota.
The same thing is happening in the Dominican Republic. Grupo M , one of the largest pants makers in the island nation, is placingmajor denim orders with Mexican textile factories to take advantageof Mexican cumulation, the newest provision within the Dominican Republic–Central American Free Trade Agreement , which has been gradually building up steam.
With retailers looking more to the Western Hemisphere forjust-in-time delivery, the race is on in Central America to befirst in line for this Mexican fabric, which can save factoryowners as much as 30 to 40 cents per garment. “All themanufacturers are eager to use it,” said Joe Stephenson,president of Rocedes Apparel , a Nicaraguan apparel factory with 2,500 workers who cut and sewschool uniforms, workwear and five-pocket jeans for Americancustomers. “Fabric throughout the region is scarce.”
Cumulation works this way: 100 million square meters of Mexicanwoven fabric can be sent to Central America each year to make duty-and quota-free clothing destined for the United States. There is anannual 20 million-square-meter cap on denim fabric and a 45million-square-meter limit on cotton and man-made bottom-weightfabric. Also, fabric is purchased on a first-come, first-servedbasis, which means as soon as the Mexican fabric quota is used up,no more fabric can be shipped that year.
The first-come, first-served model was strongly opposed by mostCentral American manufacturers that vociferously lobbied Washingtonand the U.S. Trade Representative about it. Central America favoreda per-country allotment system that would have allowed apparelfactories to predict more accurately when the fabric quota would beused up. “It makes it very difficult for our customers toprogram their business,” said Dominic Poon, president of Twin Dragon Marketing Inc. in Gardena, Calif. His company has a joint-venture denim fabricfactory in Victoria, Mexico, that employs about 650 workers. Almostall the plant’s denim production right now goes to Mexicanfactories making blue jeans destined for the U.S. market.