Fashion operates in a space with relatively minimal regulations, particularly when compared to other industries in the United States. In the absence of stringent rules, and in the face of a growing footprint thanks to increasingly complex supply chains and rising rates of consumption, and consumers that are increasingly demanding information about the environmental, social, and governance (“ESG”) elements of companies’ operations, fashion industry entities have largely turned to self-regulation. This has prompted an onslaught of mechanisms – from third-party certifications, such as B Corp. status, and controversial standardized measures like the Higg Index to the adoption of brand-crafted ESG-centric action plans – that are almost entirely devoid of legal consequences in the event that a company and/or its board fails to follow through.
As for the fashion and apparel-focused regulations that do exist, they are not without drawbacks and/or loopholes. Laws that aim to ensure the safety of consumers, for instance, have been enforced with “an undercurrent of caveat emptor,” according to Melissa Gamble, an assistant professor in the Fashion Studies Department at Columbia College Chicago – or in other words, the laws make it so that “buyers are responsible for checking the quality and suitability of goods before a purchase is made.” At the same time, federal wage and hour laws are “often rendered ineffective [at protecting garment workers] when manufacturers subcontract cut and sew work to other companies,” Gamble says, thereby enabling these brands to avoid liability by arguing that they cannot be responsible for what they – as the retailer and not the manufacturer – cannot control.
While this has been the status quo for the industry for quite some time, change appears to be afoot. Signals are coming by way of new government initiatives and new laws that are being implemented in Europe. As part of a more extensive climate bill, France, for example, passed a law requiring a “carbon label” to be included on garments and textiles to help inform consumers about the impact of their purchases. This law follows closely on the heels of an “anti-waste” law passed in 2020 by the French government that prohibits the destruction of excess inventory and samples, among other things, Gamble notes, saying that, taken together, these developments indicate that “fashion industry regulations and the larger regulatory environment is, indeed, shifting.”
All the while, the U.S. is seeing a rise in fashion-centric legislation that is worth keeping an eye on. With that in mind, here is a running list of key domestic legislation that industry occupants should be aware of – and we will continue to track developments for each and update accordingly …
(1) The Americas Trade and Investment Act
Introduced: March 6, 2024 by Sens. Bill Cassidy (R-LA) and Michael Bennet (D-CO)
Snapshot: The Americans Trade and Investment Act (“America Act”) is intended to “transform and unleash economic potential in the United States and Latin America through encouraging reshoring and nearshoring industry from China.” The bipartisan bill includes “over $14 billion in incentives for for apparel, footwear, and accessories reuse and recycling, onshoring/reshoring, closing the de minimis loophole, addressing forced labor, and more,” according to its sponsors.
Key Provisions (for the apparel industry): Apparel and textile provisions in the new bill include a 15 percent net income exclusion for businesses engaged in collecting, reselling, reusing, renting, repairing, sorting, pre-processing, and/or recycling apparel, footwear, accessories and home linens; $10 billion in loans and $3 billion in grants for: (i) programs to carry out reuse and recycling; (ii) manufacturing support programs to build new facilities, expand or retrofit existing facilities, and provide low carbon emissions transportation for covered product collection/drop-off or mail-back, sortation, pre-processing, reuse, and/or recycling; and (iii) provision of components and machinery via grants and loans to the businesses to provide components, chemicals/solvents, or machinery necessary for covered product transportation, collection, mail-back, sortation, pre-processing, reuse or recycling.
Additionally, the bill would pave the way for a $1 billion innovation program for research and development related to textile reuse and recycling, and the establishment of a $100 million public education program.
Potential Implications: The bill, if enacted, could serve to chip away at the dominance of fast fashion giants like Shein and Temu, which have been accused of shipping Chinese-made goods directly to consumers in the U.S. and exploiting tax rules in the process. Both companies have come under fire for relying on a trade loophole that enables them to benefit from tax exemptions and less oversight from U.S. Customs when they ship packages with contents that are valued at less than $800. “Temu and Shein are building empires around the de minimis loophole in our import rules – dodging import taxes and evading scrutiny on the millions of goods they sell to Americans,” Representative Mike Gallagher, a Wisconsin Republican who chairs the House Select Committee on the Chinese Communist Party, said in a statement this summer. The America Act directly speaks to that by way of its aim to close the de minimis loophole.
(2) Import Security and Fairness Act (S.2004)
Introduced: June 15, 2023 by Sens. Sherrod Brown (D-OH) and Marco Rubio (R-FL)
Snapshot: S.2004, a bill to amend the Tariff Act of 1930 relating to de minimis treatment under that Act, would “close a key loophole” that foreign companies exploit to avoid paying duties and fees to unfairly compete in the U.S. marketplace.
Potential Implications: “Right now, packages under $800 in valuation are exempted from U.S. duties, taxes, and fees. The number of packages using this loophole to avoid duties has exploded in recent years, to more than two million packages per day. Competitors will often split large shipments into many small packages to cheat the rules and evade the duties they owe, gaining an unfair competitive advantage,” Rep. Brown said in a release. The “bipartisan, bicameral legislation would ensure low-value shipments from non-market economies, such as China, are no longer exempt from paying any duties, taxes, or fees to the U.S. Government.”
“China exploits our capital markets and uses slave labor to undercut American businesses,” said Sen. Rubio. “It is bad for our country to let China flood our country with duty-free packages using the de minimis exception. The Import Security and Fairness Act will close this loophole and take another critical step to stop China from cheating on trade.”
Status: Jun. 15, 2023 – Read twice and referred to the Committee on Finance.
(3) De Minimis Reciprocity Act of 2023 (S.1969)
Introduced: June 14, 2023 by Sens. Bill Cassidy (R-LA) and Tammy Baldwin (D-WI)
Snapshot: S. 1969, a bill to amend the Tariff Act of 1930 to require reciprocity with respect to de minimis entries of articles, would bar Chinese exports from entry via the expedited “de minimis” channel and reduce the threshold for duty-free imports into the U.S. to an amount that matches the threshold our trade partners use, ensuring reciprocity and increasing transparency at our borders. The De Minimis Reciprocity Act would also: (1) Exclude untrustworthy countries from using the ‘trusted’ de minimis channel; (2) only allow express carriers to facilitate de minimis imports into the U.S. to help better at stop counterfeits and fentanyl at the border; (3) Require more information on every package entering the U.S.; and (4) Use the revenue proceeds to establish a fund for reshoring industry from China.
Potential Implications: “Our customs laws are outdated. China is taking advantage of that by importing billions of dollars of cheap goods into the U.S. with no oversight. This bill will allow U.S. manufacturers to compete fairly for U.S. store shelves and counter those who wish to use our trade system to launder money or smuggle counterfeits and drugs,” said Sen. Cassidy.
“A trade loophole is allowing Chinese companies to import goods in the U.S. with no oversight – letting them bring in cheap, counterfeit goods that undercut American manufactures and traffic drugs into our communities,” said Sen. Baldwin. “Our bipartisan bill will close this loophole to create a level playing field for our Made in America manufactures, curb the illicit drugs like fentanyl from coming into the country, and help ensure Americans are not supporting goods made with forced labor.”
Status: Jun. 14, 2023 – Read twice and referred to the Committee on Finance.
(4) New York EPR for Textiles Bill (A8078/S6654)
Introduced: May 3, 2023 by Sen. Brian Kavanagh
Snapshot: The bill (A8078/S6654) would establish extended producer responsibility for textiles; requires a producer, either individually or cooperatively in a group or with a representative organization to submit to the department of environmental conservation a plan for the establishment of a collection program for textile covered products no later than December 31, 2024.
Status: The bill is currently in the Senate Environmental Conservation Committee.
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