Where textile factories flourished, the remnants struggle for survival

In his forty-year career, William Lucas has seen virtually every step in the erosion of the American apparel industry. As general manager of Eagle Sportswear, a Middlesex, N.C., company that cuts, sews and assembles clothing, he hopes to keep what's left of that industry intact.

Mr. Lucas, 59, has invested hundreds of thousands of dollars in training his employees to use more efficient techniques that come with financial bonuses to get employees back to work faster.

But he fears his investments could be undermined by a US trade rule.

The rule, known as de minimis, allows foreign companies to ship goods worth less than $800 directly to U.S. customers while avoiding tariffs. Mr. Lucas and other textile makers in the Carolinas, once a textile hub, argue that the supply — nearly a century old but exploding in use — is motivating retailers to rely even more on foreign manufacturers to keep prices low.

Defenders of the rule say a lack of American competitiveness is not to blame. But domestic manufacturers say it mainly benefits China, at the expense of American manufacturers and workers.

“It's just hard to compete with that,” Mr. Lucas said. “Someone just has to change the law. Someone just needs to change the rules.”

During the pandemic, as e-commerce purchases surged, so did the use of de minimis.

In fiscal year 2016, 150 million packages entered the United States tariff-free under this policy, but by 2023 that number had risen to more than a billion, according to Customs and Border Protection. About half consists of textile and clothing products.

A conference report found in June that Shein and Temu, ultra-fast fashion retailers founded in China, accounted for nearly 30 percent of sub-de minimis parcels. (Shein and Temu have said they are open to a rework of the exemption.) But while U.S. manufacturers say the rule is one of their biggest challenges, it's not the only one.

Apparel sales are coming off the pandemic peak and are down. That means fewer orders for the remaining operators in the Carolinas. Bryan Ashby, president of Carolina Cotton Works of Gaffney, S.C., said he purchased equipment a few years ago to handle higher capacity, but in late summer he noticed his buyers pulling out.

Eight textile factories in the southern United States closed between August and December, according to the National Council of Textile Organizations, a lobbying group. In November, one yarn factory in North Carolina attributed part of its demise to the increasing use of de minimis.

“When you have factories open and closing for so long, it's a canary in the coal mine in terms of how policies and economics contribute to the economic damage the industry is facing,” said Kim Glas, president of the council.

For most of the 20th century, mills were plentiful in the region. That began to change in the 1990s, after the North American Free Trade Agreement was signed, which eliminated U.S. tariffs on products from neighboring countries, and major multinational companies began moving apparel production to Mexico. In 2001, when China joined the World Trade Organization, retailers flocked to Asia in search of cheap labor to produce their goods. According to the Bureau of Labor Statistics, employment in the U.S. apparel industry has fallen 65 percent since 1994.

The remaining businesses are largely family-run and privately owned. They consistently send money back to their companies to pay for expensive new equipment and automation to stay competitive. Many produce items for the U.S. military, which requires some garments to be American-made, or for companies whose mission is just that. According to the American Apparel and Footwear Association, only 2.9 percent of clothing sold in the United States was made domestically in 2022.

Halsey Cook, CEO of Milliken, a 159-year-old manufacturer in Spartanburg, S.C., that makes items such as military clothing, automotive carpeting and merchandise for Patagonia and Carhartt, said de minimis made the textile industry “feel bad the pain in a new way.” ”

“That clothing industry had largely already gone abroad,” he said. The remaining American textile manufacturers have adapted to the reality of free trade agreements, Mr. Cook said, but the tremendous growth in the use of de minimis “has just completely opened up and undermined that system.”

In the cotton fields, ginning mills, yarn mills, dye factories and cut and sew shops of the Carolinas, conversations are animated as they turn to the law of commerce, which depends on the work being done.

Parkdale Mills, one of the nation's largest yarn manufacturers, has a facility in Gaffney, SC that processes only cotton. Men transport bales of cotton on forklifts, and automated equipment cleans the cotton and transforms it into spun yarns that can be made into fabric. Many employees at Parkdale have been there for decades, and Davis Warlick, the executive vice president, greets his employees on the floor with warm familiarity.

“We are trying to create more jobs,” Mr. Warlick said after touring the 400,000-square-foot facility. But he said he and his associates remained fearful. “All of that is threatened every day by one bad, ill-informed decision on Capitol Hill. And all this disappears and they do not understand.

The apparel industry is one of the most price-sensitive sectors and retailers will take every opportunity to save as much money as possible.

“If you erode any aspect of the supply chain, it hurts everyone,” said Ms. Glas of the National Council of Textile Organizations. That includes American farmers and those who work with them, she added.

Tatum Eason knows this well. She owns Enfield Cotton Ginnery in eastern North Carolina, which cleans hundreds of bales of cotton for farmers in the surrounding community. She rinses away the dirt and other impurities from the cotton free of charge and makes money by selling the cottonseed released during cleaning. (That cottonseed is later used for cottonseed oil and feeding livestock in the United States and tilapia fish in Saudi Arabia, she said.)

In 2023, she processed half of the cotton she used the year before. And with high interest rates making operational loans more expensive for farmers and the price of cotton futures falling, she thinks the coming year could also be challenging. Her business depends on farmers' optimism, and the poor climate could mean they grow less cotton in April.

She had filled her office with a carousel of bags of Miss Vickie's potato chips and a gum machine; great incentives to get the farmers to come back to her, so that she could encourage them that it was worth growing cotton.

“We brainstorm about what we can do in our business so that we know for sure what we're going to gin every year,” she said, sitting in her wood-paneled office. “It's worrying.”

The e-commerce boom caused by the pandemic wasn't the only factor in the proliferation of de minimis shipments. In 2016, Congress increased the de minimis cap from $200 to $800 in an effort to lower costs for importers, speed up delivery times for small and medium-sized businesses, and reduce customs and border protection paperwork.

The textile and clothing industry wants to rein in the use of this provision, but has not yet agreed on a proposal to send lawmakers. But there seems to be agreement that manufacturers in China and across Asia will have free access to the US consumer market.

There are bills in Congress that would ban some countries, such as China and Russia, from using this provision, but none call for its elimination.

Supporters of de minimis say eliminating them could lead to higher costs for consumers and businesses that import goods. The competitive problems facing the textile industry are not caused by this provision, said John Pickel, senior director of international supply chain policy at the National Foreign Trade Council, a lobbying group that supports de minimis.

“I think it's a bit of a red herring to hang your hat on de minimis as some sort of bogeyman of why certain domestic industries are not competitive,” Mr. Pickel said.

As details and bills are published in Washington, U.S. manufacturers continue to fill orders.

In a nondescript one-story building at Eagle Sportswear, a staff of 75 people fills orders for hoodies, shorts and sweatpants for customers like the U.S. Army and American Giant, a privately held retailer focused on selling domestically made clothing .

Up to five workers stand side by side and share the tasks required to complete a garment. It's a departure from the traditional 'batch sewing' approach, where one person sits and works on an individual task before a garment moves through the production line. By having multiple hands and eyes on a piece of material and addressing it immediately, the company aims to improve quality control and provide more value to customers.

Pay starts at €11 per hour and can go up to €17, including bonuses for achieving production goals. It used to take an hour to make a garment, Mr. Lucas said, but that time has been reduced to 43 minutes.

Mr. Lucas says he has had to charge American Giant more to make some of his clothing in the past year, partly because of orders that require smaller batches. Bayard Winthrop, who founded American Giant in 2012 and put together a domestic supply chain that can make his company's $138 cotton hoodies, says that's OK.

Many retailers in his position have decided to go abroad to produce more for less. Keeping manufacturing — and those jobs — in the United States is more important to him, he said.

“The people here should be celebrated as the heroes of this country, and we have lost our way for a long time,” he said, sitting in Mr. Lucas at Eagle Sportswear. “I just don't know why. I think it should be celebrated more – more celebrated from a policy perspective.”