Union Minister of Textiles Smriti Zubin Irani on Wednesday said that GST imposed on the apparel sector amounts lesser than taxes imposed under the pre GST regime. GST rates for garments and made up articles is 5% of sale value not exceeding Rs. 1000 per piece and 12% for articles of sale value exceeding Rs. 1000 per piece. The GST rates are lesser than the pre-GST incidence of taxes on these goods, Irani said in written replies in the Rajya Sabha. To reduce the cost of garment industry, GST rate on manmade fibre yarns has been reduced from 18% to 12%. Further, the refund of accumulated input tax credit on fabrics has also been allowed to reduce cost of fabrics which is a major input for garments, she added. As per the data of Directorate General of Commercial Intelligence and Statistics, export of textile and apparel including handicrafts has increased by 0.2% from USD 40.1 billion in 2014-15 to USD 40.4 billion in 2018-19. Increase in imports is primarily due to increase in imports of MMF and cotton textiles. To increase competitiveness of textile industry, Government announced a Special Package for garments and made-ups sectors. The package offers Rebate of State Levies (RoSL), labour law reforms, additional incentives under Amended Technology Upgradation Fund Scheme (ATUFS) and relaxation of Section 80JJAA of Income Tax Act, she added. Products such as fibre, yarn and fabric in the textile value chain are being strengthened and made competitive through various schemes-Powertex for fabric segment, ATUFS for all segments except spinning and Scheme for Integrated Textile Parks (SITP) for all segments. Assistance is also provided to exporters under Market Access Initiative (MAI) Scheme, the minister said. Government has enhanced interest equalization rate for pre and post shipment credit for exports done by MSMEs of textile sector from 3% to 5% from2.11.2018. Benefits of Interest Equalization Scheme has been extended to merchant exporters from 2.01.2019 which was earlier limited to only manufacturer exporters, she added. To contain increase in imports of textile and apparel, Government increased Basic Customs Duty on 504 lines comprising apparel, carpets, fabric, madeups and others from 10% to 20%, Irani said.
Source: SME Times
The industry says sales in the domestic market have slumped by 20-25 per cent in recent weeks. The financial crisis at non-banking financial companies (NBFCs) has hit India’s textile industry, as unavailability of working capital has restricted companies from capacity expansion and made difficult the servicing of existing loans. Largely comprising micro, small and medium enterprises (MSMEs), the industry largely used NBFCs for working capital —commercial banks were slow in extending credit. Hence, “textile players, big or small, are facing a credit squeeze, with sluggishness in sales”, said Premal Udani, managing director at Kaytee India, a city-based children's garment maker and exporter. “There is a sluggishness in apparel sales, set to continue for at least the next three months. We hope it would bounce back with a robust Diwali,” said Rahul Mehta, president of the Clothing Manufacturers Association of India (CMAI). The industry says sales in the domestic market have slumped by 20-25 per cent in recent weeks. To enhance liquidity from existing resources, many brought forward the usual ‘end of season’ sale by two weeks, to around the second week of June this year as compared to the first week of July or even after in past years. “Many companies in the textile sector have undergone loan restructuring,” says R K Dalmia, director of Century Textiles & Industries, of the problem with lenders. “A number of companies have delayed payment of instalments and interest, resulting in banks becoming more cautious. Even companies with a sound balance sheet are facing intensified due-diligence, surveillance and monitoring on borrowing. Unlike immediate release of working capital in the past, lenders are taking a cautious approach today.” Rising import from Bangladesh has also been an issue; CMAI says the cumulative average growth rate of apparel shipment from that country is 52 per cent. Large retailers are allegedly importing apparel made of Chinese fabric from Bangladesh at nil duty, under our free trade agreement with the latter country. However, the same agreement does not permit duty-free export from here. “We have a good market of ethnic and seasonal wear in Bangladesh but apparel export attracts 125 per cent of import duty there. Hence, the textile industry wants the government to make a mandatory provision to prompt Bangladeshi exporters to source a portion of fabric requirement from India,” said Mehta.
Source: Business Standard
Trade talks between the US and India, which resumed on Thursday after a brief lull, will focus on tariffs, data localisation and e-commerce rules as officials from both sides try to iron out differences in the areas over the two-day meeting, a government official has said. “The initial talks between visiting officials from the US and their Indian counterparts to break the ice between the two sides started on Thursday. It will gather pace on Friday when the comprehensive dialogue takes place to discuss the pending matters in details,” the official told BusinessLine.
‘Relationship-building’
The team led by Assistant USTR for South & Central Asia, Christopher Wilson, arrived in New Delhi for “relationship-building” with their Indian counterparts just two days after US President Donald Trump tweeted that India’s high tariffs are no longer acceptable to the country. Talks between the trade teams had come to a standstill for some time when both sides initiated trade measures against each other last month. Commerce & Industry Minister Piyush Goyal is also scheduled to meet the team from the US Trade Representative’s (USTR) office on Friday. “Since India’s election period has now passed, USTR officials are visiting India for relationship-building with Indian government counterparts, including introductory meetings for the new Assistant USTR for India, Christopher Wilson. AUSTR Wilson and the Deputy Assistant USTR Brendan Lynch are in New Delhi on July 11-12,” according to a USTR spokesperson. The meeting was scheduled after Trump and Prime Minister met in Osaka last month on the sidelines of the G-20 conference and decided to instruct their trade teams to re-start talks. The US is India’s largest trade partner and imports a large variety of items from the country whichinclude several labour-intensive products.
Areas in focus
While tariffs on a number of products such as smartphones, other IT and telecom items and Harley Davidson motorbikes are one of the focus issues for the US for the talks, the other two are e-commerce rules and data localisation. The USTR has earlier pointed out in a reported that the data localisation requirements in India would serve as significant barriers to digital trade between the two countries and should be removed. The report also said that India’s draft national e-commerce policy, which also advocates putting restrictions on cross-border data flows, is “discriminatory” in nature. A limited trade pact being worked out by India-US before the general elections, which included all three issues, got derailed after Washington decided to withdraw a scheme offering duty-free entry to over 3,000 products from India early June as soon as the new government was sworn in. India then imposed retaliatory tariffs on 28 US products with effect from June 16, after delaying them for a year, to punish the US for not acceding to its request for the withdrawal of penal duties on its steel and aluminium levied last year.
Source: The Hindu Business Line
“Though it is not decided who will go where but prima facie it seems that the commerce and industry minister will go to Washington,” said one official in the know of the details Commerce and industry minister Piyush Goyal may visit Washington to meet United States Trade Representative (USTR) Robert Lighthizer to resume bilateral trade talks after the leaders of the two countries met at the G20 Osaka Summit last month and agreed on a meeting between their commerce ministers. “Though it is not decided who will go where but prima facie it seems that the commerce and industry minister will go to Washington,” said one official in the know of the details. This comes as American trade officials are visiting New Delhi for relationship-building with Indian government counterparts, including introductory meetings for the new assistant USTR for India. Assistant Christopher Wilson and deputy assistant Brendan Lynch are in New Delhi July 11-12. “Since India’s election period has now passed, USTR officials are visiting India for relationship-building,” a USTR spokesperson said. The official said that members of the delegation met their counterparts on Thursday. Another official in the know of the details said that Wilson is leading a delegation to New Delhi to discuss bilateral and economic issues with his counterparts in line ministries and departments of government of India.??Both sides will hold an official-level comprehensive dialogue on Friday and the visiting USTR delegation will also call on Goyal on the same day. “Relevant issues for both countries on trade and commerce will be discussed during the meeting,” the official added. Sources in the ministry of external affairs (MEA) said that informal meetings are taking place on Thursday and formal talks will take place on Friday. “Now there are quite a few issues on the table which you are aware. Our approach is to engage with them very constructively, in a very positive manner,” the MEA source said.
Following Osaka
The revival of the talks comes after Prime Minister Narendra Modi and US President Donald Trump, at the Osaka G20 Summit, agreed for an early meeting of their commerce ministers to sort out the trade issues. As per the MEA source, the two leaders had “a very good meeting” in Osaka where trade was also discussed. “I think it is important to keep in mind when we engage on this issue that the trajectory of the relationship remains positive, we have to keep in mind the bigger picture and within that big picture try to address all the issues which are on the table,” the source added. On Tuesday, Trump again warned India if its “unacceptable” high tariff regime. “India has long had a field day putting Tariffs on American products. No longer acceptable!" Trump tweeted then. Besides meeting officials from MEA and the Ministry of Commerce and Industry, the delegation is also meeting officials from the Ministry of Electronics and Information Technology, among others.?? This is the first meeting of the two sides after the US dragged India to the World Trade Organization (WTO) for raising tariffs on 28 American goods following the US putting an end to preferential benefits to Indian exports last month. Talks were suspended when Washington terminated the Generalised Scheme of Preferences to $6.35 billion Indian exports?? India’s exports to the US amounted to $52.4 billion in FY19, while imports were worth $35.5 billion.
Source: Economic Times
Government takes various measures to increase competitiveness of textile industry under GST regime. GST rates for garments and made up articles is 5% of sale value not exceeding Rs 1000 per piece and 12% for articles of sale value exceeding Rs 1000 per piece. The GST rates are lesser than the pre-GST incidence of taxes on these goods. To reduce the cost of garment industry, GST rate on manmade fibre yarns has been reduced from 18% to 12%. Further, the refund of accumulated input tax credit on fabrics has also been allowed to reduce cost of fabrics which is a major input for garments. As per the data of Directorate General of Commercial Intelligence and Statistics, export of textile and apparel including handicrafts has increased by 0.2% from US$ 40.1 billion in 2014-15 to US$ 40.4 billion in 2018-19. Increase in imports is primarily due to increase in imports of MMF and cotton textiles. The Union Minister of Textiles, Smriti Zubin Irani, informed the Rajya Sabha that the government has taken various measures to increase competitiveness of textile industry. Government announced a Special Package for garments and made-ups sectors. The package offers Rebate of State Levies (RoSL), labour law reforms, additional incentives under Amended Technology Upgradation Fund Scheme (ATUFS) and relaxation of Section 80JJAA of Income Tax Act. The RoSL scheme has been replaced by the new RoSCTL (Rebate of State and Central Taxes and Levies) scheme from 7th March 2019 and will remain in force up to 31 March 2020. The rates under Merchandise Exports from India Scheme (MEIS) have been enhanced from 2% to 4% for garment and made-ups, 5% to 7% for handloom and handicrafts from 1st November 2017. Products such as fibre, yarn and fabric in the textile value chain are being strengthened and made competitive through various schemes-Powertex for fabric segment, ATUFS for all segments except spinning and Scheme for Integrated Textile Parks (SITP) for all segments. Assistance is also provided to exporters under Market Access Initiative (MAI) Scheme. Government has enhanced interest equalization rate for pre and post shipment credit for exports done by MSMEs of textile sector from 3% to 5% from 2 November 2018. Benefits of Interest Equalization Scheme has been extended to merchant exporters from 2 January 2019 which was earlier limited to only manufacturer exporters. To contain increase in imports of textile and apparel, Government increased Basic Customs Duty on 504 lines comprising apparel, carpets, fabric, madeups and others from 10% to 20%.
Source: Business Standard
Under the Central Sector Scheme Government of India implementing Silk Samagra through Central Silk Board with a total outlay of Rs. 2161.68 crore for three years (2017-2020) for development of sericulture in the country, said an official release on Wednesday. It focuses on improving quality and productivity of domestic silk thereby reducing the country’s dependence on imported silk, it added. Under the scheme, assistance is extended to sericulture stakeholders for the beneficiary oriented components like, raising of Kissan nursery, plantation with improved Mulberry varieties, Irrigation, chawki rearing centres with incubation facility, construction of rearing houses, rearing equipment, door to door service agents for disinfection and input supply, support for Improved reeling units like Automatic Reeling units, multi-end Reeling machines, Improved Twisting machines and support for post yarn facilities for quality silk and fabric production, said the release. Under North East Region Textile Promotion Scheme (NERTPS) implemented to promote Textile Industry in the North East Region by the Ministry of Textiles, 38 Sericulture projects have been implemented in the identified potential districts under three broad categories viz., Integrated Sericulture Development Project (ISDP) and Intensive Bivoltine Sericulture Development Project and Aspirational Districts. Total cost of these projects is Rs. 1,106.97 crore, of which Government of India’s share is Rs. 955.07 crore.Objective of these projects is to establish sericulture as viable commercial activity in NER by creating necessary infrastructure and imparting skills to the locals for silkworm rearing and allied activities in the value chain, said the release.
Source: SME Times
Official data released on Wednesday showed that employment in the textiles sector has increased for the last few years. As per the latest available Annual Survey of Industries, employment in the Textiles and Wearing Apparel were 25.27 lakh in 2014-15, 26.48 lakh in 2015-16 and 26.97 lakh in 2016-17, Textiles Ministry data showed. Government has been implementing various schemes for welfare and development of textile workers/weavers including handicraft artisans. Under the group insurance scheme for powerloom workers, insurance cover is provided to all powerloom weavers/workers in the case of natural death, accidental death as well as partial and permanent disability due to accident. Additionally, the weavers/workers enrolled under this scheme are entitled for educational grant of Rs. 600/- per child half-yearly for two children studying in 9th to12th standard for a maximum period of 4 years.Under the scheme, total number of powerloom weavers/workers enrolled was 1.11 lakh in 2015-16, 1.32 lakh in 2016-17 and 1.62 lakh in 2017-18. Under the Textile Workers Rehabilitations Fund Scheme (TWRFS) which has been merged with the Rajiv Gandhi Shramik Kalyan Yojana (RGSKY) of the Ministry of Labour& Employment, the textile workers rendered jobless due to permanent closure of the mills, are provided a relief of 75% of the wage employment in the first year, 50% in the second and 25% in the third year. Under the “Handloom Weavers Comprehensive Welfare Scheme, (HWCWS), life and accidental insurance are provided to handloom weavers/workers in the age groups of 18-50 years. It was, then, converged under Mahatma Gandhi BunkarBimaYojana (MGBBY). The HWCWS has been merged under Pradhan MantriJeevanJyotiBimaYojana (PMJJBY) and Pradhan Mantri Suraksha BimaYojana (PMSBY). Total of targeted enrollment of weavers/workers under the PMJJBY and converged MGBBY are 5.32 lakh for 2017-18 and 6.65 lakh for 2018-19 which include 3.84 lakh for general states and 2.84 lakh for North Eastern States. As add on benefit to the above, scholarship@Rs. 180/- per month per child isprovided toa maximum of two children of the beneficiaries studying 9th to 12th standard. Welfare programmes being implemented for handicraft artisansare Rajiv Gandhi Shilpi Swasthya Bima Yojana (RGSSBY), BimaYojana for Handicrafts Artisans (Aam Admi Bima Yojana (AABY), support to artisans in indigent circumstances, credit guarantee scheme, interest subvention scheme and issue of identify cards and creation of data-base.
Source: SME Times
A huge jump in duty-free garment imports from Bangladesh under the free trade agreement has put the domestic industry in a fix. This comes amidst slowing domestic demand and banks curtailing credit to 80 per cent of MSMEs (micro, small and medium enterprises) in the sector. Import of garments from Bangladesh was up 82 per cent to $365 million last fiscal. It has been growing steadily at a CAGR (compounded annual growth rate) of 52 per cent and is expected to touch $3.6 billion by 2024-25. This will render about 10 lakh people jobless with most of the small garment industry shutting shop. Bangladesh, which has signed an FTA with both India and China, has been sourcing fabric duty-free from China and exporting garments to India, thus providing a back-door entry for Chinese fabrics into the country.
Garment fair
Ironically, export of garments from India to Bangladesh attract a duty of 125 per cent, said Rahul Mehta, President, Clothing Manufacturers Association of India, at an event to announce the launch of the 69th National Garment Fair between July 15 and 18 in Mumbai. The government should ensure that Bangladesh sources a part of its fabrics requirement from India as putting a cap on their export looks difficult, he said. The association expects business transactions worth ₹800 crore with the participation of 1,000 brands, 899 stores and 45,000 retailers in the fair. Premal Udani, former Chairman, Apparel Export Promotion Council, said Bangladesh’s garment export was at $3 billion in 2005 and India’s was at $5 billion, but today their exports have touched $36 billion while India is struggling at $16.5 billion. Vietnam, which was not even counted among the top exporters then, has recorded garment export of $24 billion last year, he said. Instead of announcing piece-meal policy measures, he said the government should come out with stated policy for the next five years to boost exports. This will help manufacturers plan their expansion and achieve scale, he said. For the first time ever, garment exports had fallen by four per cent to $16.1 billion last fiscal, against $16.7 billion logged in 2017-18, Udani said. However, exports have revived partially in the last two months with the government’s export incentive schemes. On the Union Budget, Mehta said the Finance Minister has hinted at special sourcing concessions for foreign-owned single- and multi-brand but details are not yet out. It will be a big blow if the government eases the current mandatory 30 per cent domestic sourcing norm, he said. A Bloomberg report adds: Bangladesh which is the world’s second-largest garment exporter, has seen the value of its overseas sales rise to a record $40.5 billion in the year ended June 30, coinciding with US President Trump boosting tariffs on $200 billion of Chinese goods to 25 per cent from 10 per cent. The US-China trade war has seen American and Chinese orders for more than half of the 1,981 tariffed products so far being re-routed to other countries, including Vietnam and Malaysia. For Bangladesh, which aims to double total exports to $72 billion by 2024, snaring part of the $41 billion of the clothing business that goes to China will provide a fillip to an economy that the Asian Development Bank forecasts will expand a record 8 per cent for the next two years.
Source: The Hindu Business Line
India's MSMEs and their business owners are finding new-age digital start-ups and alternate lending platforms to be the most effective institution to disperse credit. About 80-90% of world trade today relies on trade finance. It is one of the most reliable forms of financing with less than 1% of transactions facing default. Despite this, the global trade finance gap was estimated at US$ 1.6 trillion in 2016. For Asian developing economies alone, the estimated shortage is US$ 692 billion. The access to trade finance is further restricted in case of Micro Small and Medium Enterprises (MSMEs). According to a survey by the Asian Development Bank (ADB), rejection rates for trade finance applications are as high as 56% in case of Small and Medium sized Enterprises (SMEs). These rejections have far reaching effects on the overall economy as they cause trade financing gaps among developed and developing countries. Therefore, there is a major need for reform in the global trade finance policies for the growth and development of MSMEs all across the world.
Impact on overall GDP
In the last five decades MSMEs have emerged as a highly potent and dynamic sector of the Indian economy. They perform a major role in the economy by providing employment to a large number of unskilled and semi-skilled people, contributing to exports, raising manufacturing sector production and extending support to bigger industries by supplying raw material, basic goods, finished parts and components, etc. India’s MSMEs base is the largest in the world after China. As per the official estimates, there are about 63.05 million micro industries, 0.33 million small, and about 5,000 medium enterprises in the country. MSMEs accounted for 30% of India’s GDP, 45% of India’s total manufacturing, and 40% of India’s exports in FY18. One of the major problems faced by MSMEs is the scarcity of sources of funds due to lack of financial inclusion. An estimated 75% of MSMEs secure funding through informal sources . Financial literacy is a consequential factor, since there is a lack of knowledge and awareness of appropriate banking finances designed for MSMEs. With change in policies and introduction of government reforms to streamline the flow of credit like Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Micro Units Development and Refinance Agency (MUDRA) and Stand up India the scenario is changing slowly.
Challenges with conventional sources of finance
MSME’s are heavily dependent on the domestic market but there is a need to look beyond. With the wave of globalization MNCs /International companies are looking at the Indian market with keen interest, as a market as well as a source of finished goods. MSMEs have made use of this opportunity and are exploring overseas markets, leading to an increased demand for trade finance. In addition to securing financing MSMEs also have to deal with the vagaries of shipping. The processes involved in shipping and financing are quite complex and tedious. The paperwork involved in securing and managing any type of loan is still daunting, but for trade finance, which is probably the most ‘in the moment’ kind of financing, speed is of the essence and when that speed is not there it’s particularly irksome. Today, India's MSMEs and their business owners are finding new-age digital start-ups and alternate lending platforms to be the most effective institution to disperse credit. A report titled ‘Credit disrupted: Digital MSME lending in India’ estimated that in 2018, the total MSME credit demand would have been Rs 45 lakh crore, of which Rs 25 lakh crore would have been met through formal channels with the borrowing done in the entity’s or proprietor’s name. However, as much as Rs 20 lakh crore is seen as the unmet credit demand which is financed through informal channels [5]. Thus alternate financing channels along with digitization are the need of the hour for MSMEs. In today’s scenario ease of doing things is prioritized and time invested is quite valuable. There is a need for solutions that increase efficiency and at the same time are sustainable. Trade and Finance go hand in hand as processes, hence combining them is an obvious step forward. This makes for a smooth and effortless experience for those involved. The use of digital technology has had a huge role in the development of trade finance solutions. Blockchain is the next frontier for trade finance. Each block contains a cryptographic hash of the previous block a timestamp, and transaction data and thus, a blockchain is resistant to modification of the data. Some of the technologies that financial institutions are exploring in various domains is to digitise the lending process using blockchains. Trade finance solutions – other alternatives that must be explored Companies such as Blend Finance, Cargill Trade Finance, Interlink Capital, Kotak Mahindra, Meg Fin India provide offerings such as structured trade finance, equity broking and other such solutions to startups, SMEs and MSMEs. Maersk Trade Finance have been very active in offering a combination of trade finance and shipping solutions to the MSME sector since their inception in 2016. Such companies bring with them a knowledge of the underlying business that is probably difficult if not impossible for a traditional financial institution to replicate. Knowing what someone has been transporting in and out of the country for ten years or more gives a particular comfort in boosting that business. Based on that comfort a non - FI, can provide export or import funding to SMEs, mid-sized companies and of course to large corporates.
Source: Economic Times
Central agencies told to drop restrictive, discriminatory criteria from tenders against domestic companies. The central government plans to ease eligibility criteria for participation in tenders for public procurement to promote local manufacturing and domestic suppliers by dropping conditions such as minimum Rs 1,000-crore turnover and export experience to G8 countries. To promote local manufacturing under Make in India, the Department for Promotion of Industry and Internal Trade (DPIIT) has issued an order to various central agencies asking them to ensure their tenders don’t include conditions that are “restrictive and discriminatory against local suppliers”, a department official said. DPIIT has told these agencies to publicise tender conditions such as excessive turnover and experience requirement, additional requirement of bank guarantee, export experience and foreign technical standards. The order covers conditions such as mandatory presence in Gartner Magic Quadrant for IT and telecom products, mandatory USFDA or EU CE compliance in medical devices, Rs 1,000-crore turnover norm for procurement of Rs 70 crore, 10 years’ experience and export to G8 countries, and technical parameters favouring foreign products, among others. “We received more than 370 complaints of violation of the public procurement order of 2017 of which we resolved twothirds wherein agencies were asked to re-tender,” said the official cited earlier. Central agencies undertake massive public procurement every year, DPIIT said in its order issued last month. “However, the benefits of this procurement at times do not accrue to the domestic industry even where it is technically and financially competitive due to restrictive and discriminatory conditions being imposed against domestic players,” it said. The order indicated that giving preference to foreign brands such as Cisco, NEC and Siemens NSE -3.75 % for telecom products needs to be done away with.
Source: Economic Times
It results in an arbitrage between FPIs, per their legal status,and thus paints India as a country lacking stable tax policy. FPIs, with investments in Indian equity markets of around $450 bn, are a critical source of capital for the growth of the Indian economy. FPIs play a large role in helping the government reach its ambitious target of divestment and fund India’s current account deficit. Unfortunately, India’s unstable and unpredictable tax regime is giving them pause. Frequent changes in taxation and regulations, and the imposition of new surcharges without a formal consultative process are tarnishing the perception of Indian capital markets among FIIs.
The imposition of long term capital gains (LTCG) taxes in last year’s budget has already taken its toll on FPI interest in India. We have not yet seen the full impact because, since the imposition in last year’s Budget, markets in India have been depressed. Once markets recover, the full brunt of the imposition of the capital gains taxes and surcharges will become evident. India must head this off. Equity markets are an important barometer on the state of the economy. Today, a large retail population invests savings in equities. Equity markets are important for raising resources for companies and for private equity funds exiting private companies. A problem for one constituency of the market is thus a problem for all, because of the interconnectedness of financial markets. If India aspires to replicate China’s economic success, an investor-friendly policy framework is a prerequisite. India stands alone, perhaps the only country in the world that taxes the income of foreign residents from the income earned on the sale of shares. Most countries exempt FPIs from taxation in their jurisdiction. The current regime makes investing in India less competitive and goes against global best practices. The MSCI India index has delivered a compounded five-year annual return of 3.5%, ( far) less than the returns delivered by China (estimated 7%) and the US (estimated 18%). Last year’s Budget imposed a tax on FPIs’ LTCG at the rate of 10% plus a surcharge, taking it to 10.9%. The latest Budget raises this tax to 14.92% for FPIs set up as non-corporate bodies. This raises the effective rate of capital gains tax on FPIs constituted as non-corporate entities vis-a-vis those organized as corporate entities or firms. For instance, the effective peak tax rate on short term capital gains tax on sale of equity shares for a FPI constituted as a company will be 16.38%, whereas the corresponding rate for a FPI organised as a trust will be 21.37%. Imposing LTCG created several operational challenges dissuading genuine FIIs from investing in India. In order to mitigate any friction on account of taxation, the government should revert to the earlier regime of exempting FPIs from LTCG taxation. Taxing LTCG strikes at the heart of the fund management business. First, capital gains are not an income, they are not something that come to you regularly. Second, the current tax regime goes against the nature of the business of fund management, especially for foreign funds, which are open-ended. Over the course of the year, the FPI fund entity has to estimate and pay the tax, making it difficult to calculate the NAV of a fund, leaving it subject to interpretation and unfairly penalising some investors. The problem arises because the taxable entity in India is the “fund” and it is not possible to attribute the taxes paid to the underlying investor. The fund can’t issue a tax credit certificate to each individual investor to claim the credit for the taxes paid in India. This leads to a situation where the investor would be taxed twice on the same income, once in India and the second time in their country of residence. The taxes are effectively an expense for the investor and would make a sharp dent on their returns from Indian markets. In addition, around 50% of the world invests passively via index funds/ETFs. Returns on index funds/ETFs in India are unable to replicate the returns on the index because the index does not have any taxes in it. Thus, all India index funds are underperforming their benchmark index, making them even more uncompetitive compared to their global counterparts. Most US pension funds are not subject to capital gains tax in the US, so taxing their capital gains in India eats into their returns without giving them the ability to get a tax credit. Moreover, in a year when the rupee depreciates, the FPI fund entity would be paying taxes on notional gains in rupees while the fund would be losing capital in dollars. These issues create substantial hurdles for new foreign portfolio flows. Additional surcharges on capital gains tax worsen the situation. A significant proportion of FPIs, an estimated 40%, and (about 95%) of Cat III AIFs are set up in non-corporate form and represent small investors through pension plans or otherwise. This has the potential to cause negative impact on small investors and, therefore, be very disruptive for the capital markets. As things stand, these pooling vehicles have not been able to provide adequate returns from Indian markets. Our research shows there is no other tax jurisdiction that targets non-corporate entities such as “trust” structures. Why this mistrust of trust structures in India when the NIIF was itself set up by the Government of India as a trust? (May be, UTI too). Most pension funds (global FPIs) and Category III AIFs (India-based pooled funds) are set up in the form of umbrella trusts with segregated schemes to effectively ring fence liabilities (on similar lines as ‘mutual funds’ in India). These are global standards used by large and small institutions for ease of doing business and consistency. Admittedly, a differential surcharge is currently applicable to corporate vehicles vis-a-vis others. With the proposal to now increase the surcharge, the impact on the effective tax rates for FPIs (driven by their legal status) is highly significant. In addition, given that this change will be effective April 1, 2019, in the case of open ended funds, where investors have already exited, the implementation of the higher tax will create additional challenges. Such a high delta in effective tax rates, in our opinion, is possibly unintended and certainly not desirable. It results in an arbitrage between FPIs, driven by their legal status, and thereby has the potential to tarnish India’s reputation as a country with stable tax policy for foreign investors. There is no apparent basis for taxing FPIs differentially based on their legal status. The higher surcharge will impact a number of large foreign mutual funds and pension funds investing in the Indian markets for the long term, which are typically organised as non-corporate vehicles in their home countries. This will certainly impact the competitiveness of Indian capital markets and impede their ability to attract fresh flows.
Source: Financial Express
Indian textile industry is waking up to the possibilities of using Industry 4.0 concepts. In May, when Indian actress Deepika Padukone took the red carpet at the annual Met Gala in New York (the event of the year for the who’s who of the global fashion industry), most people appreciated her look, which was a perfect fusion of a Disney princess and a Barbie doll in an all-pink gown. However, what was lost on her admirers was that 160 hours of cutting-edge technology such as 3D printing and stereolithography had gone into making her dress. Stereolithography is the process of 3D printing where a structure is constructed layer by layer, using a plastic-like liquid that ...
Source: Business Standard
Dive Brief:
Dive Insight:
China is still the number one source of textiles heading into the U.S. by a wide margin. May imports from China were five times larger than the second largest source country, India. Handfield said it was surprising the trade war hasn't had a larger impact on Chinese sourcing. The fact that sourcing from China continues to increase is a sign companies may be looking to diversify their sourcing rather than move it fully out of China — a task many companies have described as impractical. Growth in Chinese textile imports is slightly smaller if viewed as the first five months of the year rather than just May. Between January and May 2019 imports from China rose 2.4% compared to the same period of time in 2018, while imports from South Korea rose 24% in this time and India increased by 16%.These shifts started to appear in 2018, when imports from South Korea and Cambodia increased significantly. "The Commerce Department data bear out exactly what we expect as a result of tariffs," Institute for Supply Management CEO Tom Derry told Supply Chain Dive in an email. "Textiles are one of the world’s most portable and lowest-tech industries." Moving sourcing or production to other low labor cost countries allows importers to avoid the country of origin tariffs, Derry said. Some Chinese exporters have repackaged goods to look as though they come from Vietnam or another country not affected by tariffs. This is something Vietnam has said it is trying to crack down on, according to Reuters. Handfield said Bangladesh, from which textile imports rose almost 3% YoY in May, was one surprise in the data. "I thought perhaps they would enjoy more of this growth," he said. "However, people are still a bit dubious about Bangladesh after Rana Plaza, and I feel like there will be more growth here in the next year."
Source: Supply Chain Dive
|
Item |
Price |
Unit |
Fluctuation |
Date |
|
PSF |
1203.33 |
USD/Ton |
0% |
7/11/2019 |
|
VSF |
1732.33 |
USD/Ton |
0% |
7/11/2019 |
|
ASF |
2262.06 |
USD/Ton |
0% |
7/11/2019 |
|
Polyester POY |
1230.95 |
USD/Ton |
0.83% |
7/11/2019 |
|
Nylon FDY |
2441.54 |
USD/Ton |
0.60% |
7/11/2019 |
|
40D Spandex |
4301.77 |
USD/Ton |
0% |
7/11/2019 |
|
Nylon POY |
5493.47 |
USD/Ton |
0% |
7/11/2019 |
|
Acrylic Top 3D |
1431.50 |
USD/Ton |
0% |
7/11/2019 |
|
Polyester FDY |
2296.21 |
USD/Ton |
0% |
7/11/2019 |
|
Nylon DTY |
2412.48 |
USD/Ton |
0% |
7/11/2019 |
|
Viscose Long Filament |
1366.10 |
USD/Ton |
0% |
7/11/2019 |
|
Polyester DTY |
2659.54 |
USD/Ton |
0.27% |
7/11/2019 |
|
30S Spun Rayon Yarn |
2419.74 |
USD/Ton |
0% |
7/11/2019 |
|
32S Polyester Yarn |
1932.89 |
USD/Ton |
0% |
7/11/2019 |
|
45S T/C Yarn |
2630.47 |
USD/Ton |
0% |
7/11/2019 |
|
40S Rayon Yarn |
2703.14 |
USD/Ton |
0.54% |
7/11/2019 |
|
T/R Yarn 65/35 32S |
2259.88 |
USD/Ton |
0% |
7/11/2019 |
|
45S Polyester Yarn |
2092.75 |
USD/Ton |
0% |
7/11/2019 |
|
T/C Yarn 65/35 32S |
2397.95 |
USD/Ton |
0% |
7/11/2019 |
|
10S Denim Fabric |
1.33 |
USD/Meter |
0% |
7/11/2019 |
|
32S Twill Fabric |
0.76 |
USD/Meter |
0% |
7/11/2019 |
|
40S Combed Poplin |
1.03 |
USD/Meter |
0% |
7/11/2019 |
|
30S Rayon Fabric |
0.62 |
USD/Meter |
0% |
7/11/2019 |
|
45S T/C Fabric |
0.68 |
USD/Meter |
0% |
7/11/2019 |
Source: Global Textiles
Note: The above prices are Chinese Price (1 CNY = 0.14533 USD dtd. 11/07/2019). The prices given above are as quoted from Global Textiles.com. SRTEPC is not responsible for the correctness of the same.
The recent signing of the Vietnam-European Union (EU) Free Trade Agreement (EVFTA) is expected to open up numerous chances for Vietnam’s garment & textile businesses to boost exports and expand markets. However, in order to fully tap into the opportunities, enterprises are required to further invest in purchasing modern equipment and improve administration work and quality of products, aiming to enhance their competitiveness. Expanding market shares As one of the biggest companies in the southern province of Dong Nai, most of the commodities manufactured by Dong Nai Garment Corporation (Donagamex) are subject to overseas exports, of which the EU market accounts for 30%. According to Donagamex General Director Bui The Kich, EVFTA offers a good opportunity for garment & textile enterprises to integrate extensively into the global supply chain. Notably, when EVFTA comes into effect, businesses are not only entitled to tax incentives but are also favoured to expand business activities and boost exports. However, in order to enhance their competitiveness in the EU market, enterprises are forced to make in-depth investments, especially concerning advanced equipment and technologies, aiming to improve labour productivity and diversify goods models. In fact, Vietnamese garment & textile companies are hoping that the EU market will bring a big boost to each enterprise and the whole sector. At the same time, by accessing EU equipment and technology, Vietnam’s garment & textile industry will be modernised in the future. Sharing the same view, Deputy General Director of Garmant 10 Corporation - Joint Stock Company (Garco 10) Bach Thang Long said that most of the world’s major garment & textile exporting countries, including China, India, Bangladesh, Myanmar and Cambodia, have yet to sign a trade agreement with the EU. Therefore, this will be a chance for Vietnamese firms to speed up. Currently, the volume of exports to the EU takes up 32% of Garco 10’s total exports. If making good use of the EVFTA incentives, the company will be able to raise the figure by an additional 15%. Nonetheless, the biggest hindrance to Garco 10 and other businesses is to meet the rules of origin of materials stipulated by the deal. If they fail to satisfy, Vietnamese firms will inevitably not benefit from the agreement, and even face numerous difficulties when competing against foreign enterprises. Cao Huu Hieu, Executive Director of Vietnam National Textile and Garment Group (Vinatex), emphasised that businesses are expecting EVFTA to open up new opportunities for Vietnam, as the country’s market share in the EU still remains modest, only fluctuating at 2%. The EU’s import trends in the last six months show that China is gradually losing its share in this market. Thanks to its preferential tariffs with the EU, Bangladesh is currently the country benefiting the most from the agreement. While waiting for EVFTA to officially take effect, Vietnam’s garment & textile companies need to proactively adjust their production and business strategies and learn to firmly grasp strict requirements when participating in exporting products to the EU market, particularly the issue of rules of origin, in order to enjoy preferential tariffs under the agreement. Proactively preparing sources of materials When EVFTA comes into effect, some tariff lines will decrease immediately by 0% or gradually decline according to the roadmap, thus creating opportunities for Vietnam’s garment & textile industry to accelerate exports to the EU market. So far, the average tax rate of garment & textile products has always been around 16%, while some emerging competitors of Vietnam’s garment & textile industry, such as Myanmar and Cambodia, are entitled to a preferential tax rate of 0% because these are underdeveloped countries. As a developing nation, Vietnam is subject to a higher export tariff, making the exploitation of the EU market not as effective as expected. Referring to this issue, Vice Chairman of Vietnam Textile and Apparel Association (Vitas), Truong Van Cam, said the growth rate of Vietnam’s garment & textile industry in recent years has always remained high, at two digits. Regarding 2018 alone, Vietnam’s garment & textile exports to the EU market reached more than US$4.2 billion, only behind the United States (with over US$13 billion). Although considered a moderate exporter to the market, Vietnam’s garment & textile industry has still yet to stand on par with other countries subject to similar tariffs, such as India, China and Bangladesh, on account of their better export planning to the EU. Therefore, when EVFTA takes effect, it will open up many opportunities for the garment & textile industry, especially concerning tariffs. Accordingly, if Vietnam meets the fabric-forward rules of origin, it will enjoy a preferential tariff of 0%. However, the difficulty currently faced by Vietnam’s garment & textile sector is that its fabric sources are depending too much on foreign countries, with import revenues of US$7 billion from China (55%), US$2.1 billion from the Republic of Korea (16%), US$1.6 billion from Taiwan (China), and US$750 million from Japan. According to EVFTA regulations, only fabrics imported from the Republic of Korea to manufacture exports to the EU are recognised to meet the fabric-forward rules of origin and enjoy a tariff of 0%. Meanwhile, fabrics imported from other countries will not be recognised. Bui Kim Thuy, an economic expert, said that, regarding textile and apparel, EVFTA seems to be less strict than the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), because the EVFTA rules of origin only stipulate from the fabric stage forward. But this still remains a bottleneck of Vietnam’s garment & textile industry as it currently has to import fabrics from non-member markets of EVFTA. However, EVFTA has a more flexible provision allowing the “third party cumulation”. This means if Vietnam and the EU simultaneously have FTAs with a partner, Vietnam is permitted to use inputs from that third party partner and consider them originating. For example, Vietnam and the EU currently have FTAs with the Republic of Korea, so Vietnam can cumulate inputs from the Republic of Korea to enjoy preferential taxes under EVFTA. Thus, in the future, if some ASEAN countries or some FTA partners of Vietnam have FTAs with the EU, Vietnam will have much more markets to import raw materials that satisfy EVFTA’s rules of origin. Truong Van Cam, Vice Chairman of Vitas, stated that the EU is a very demanding market, with strict requirements on the quality, hygiene and safety of products, as well as on the environmental and labour issues. These will be challenges for businesses. Therefore, Vietnamese firms need to thoroughly learn about EVFTA’s regulations to seize opportunities to boost the production of exports. In addition, cooperation and coordination between large enterprises, both at home and abroad, should be strengthened to manufacture fabrics, with the origin-related requirements being ensured. Next, businesses also need to improve the quality of human resources and apply modern scientific and technological advances to increase productivity, reduce costs and enhance competitiveness. Vinatex Executive Director Cao Huu Hieu affirmed that the EU is not an easily-accessed market because it has many member countries, the orders are relatively small compared to the US orders, the time to change product patterns is relatively close, and customers are quite careful and demanding in the stages of product quality and safety management. However, the EU market’s advantage is that the average import unit price is quite good. In the future, with the benefits from tax cuts, Vietnam’s garment & textile enterprises will definitely be bolder in promoting, exploiting and developing the EU market. Home How exporters handed the benefit of devaluation to buyers (Source: The News, July 12, 2019) Pakistan’s elect economic squad, handpicked after haphazard trial-and-error shakeups, is cock-a-doodle-dooing over a recent volumetric growth in exports, while being well-aware of the fact that there has been no improvement to write home about in terms of value. This sad reality should be a matter of grave concern and not glorification as this phenomenon is Pakistan specific. There are times when the global economy or a particular sector is in recession and to spur demand the producers are forced to reduce rates. But if the unit price of exports declines for other reasons; it indicates flaws in the system. Usually as a result of low unit price the exports increase both in volume and value economic. This at least benefits the exporting country in earning higher foreign exchange. The increase in volumes with a slight decline in exports should have been investigated. Was it in line with global trends? Which other currencies of our competitors have declined as sharply as ours? Why our exports did not benefit from the huge depreciation of rupee? Why was the impact of Rs44 billion worth of subsidies on exporters not reflected in the exports’ value? We do not have the record of per unit decline in value of our regional competitors, but we do know, irrespective of an increase or a decline in unit value, the exports from India, Bangladesh, Vietnam and Cambodia are on rise. And the exports of these countries are rising in textiles that account for 65 percent of our exports. Another fact that should be noted is that the currencies in these economies are largely stable. This gives Pakistani exporters an advantage of around 40 percent in the last 18 months. The question is that why our exports did not benefit from the rupee depreciation. The answer is simple; our exporters have passed on the benefit of rupee depreciation to the foreign buyers. This is despite the fact that Pakistan’s textile exports are the cheapest among its competitors. We compete with India in cotton yarn. The Indian cotton yarn is 14 percent more expensive than Pakistan’s. In cotton cloth, our competitor is again India. Similarly, the average export price of Indian cloth is 28 percent higher than ours. In knitwear and readymade garments Pakistan’s regional competitors are China, India, Bangladesh, Vietnam, and Cambodia. In these countries per unit price of cloth products is much higher than Pakistan. There’s no clue as to why Pakistani exporters lowered their unit prices facing no competition. One thing that comes to mind is that perhaps Pakistani exporters are easily blackmailed by foreign buyers, who know they wouldn’t get rates cheaper than Pakistan’s from anywhere else. Every time rupee depreciates those overseas buyers demand discount that is at least 50 percent of the depreciation. In case of exporters’ reluctance they approach other suppliers in Pakistan and manage to get away with the lowest rates. The exporters do not see depreciation as an opportunity to increase export but they deem it as a way to consolidate their customers and also benefit from the remaining 50 percent depreciation. They conveniently forget that every time rupee loses its value inflation and of course the prices of local inputs go up accordingly. This eats up most of the gains that expect to get from the depreciation that was not passed on to the buyers. It is interesting to review the trend of textile products’ prices in Pakistan and India. Pakistan was exporting cotton yarn at $2.63/kg in 2017-18. The price declined to $2.60/kg in 2018-19. This is a nominal decline of one percent. India on the other hand was exporting cotton yarn at $3.12/kg in 2017-18 that declined to $3.11/kg. This amounts to 0.3 percent decline. The Indian cotton yarn is over 15 percent more expensive than Pakistan’s. The export price of Pakistan’s cotton cloth products declined 19 percent from $0.98/square-meter in 2017/18 to $0.70/square-meter in 2018/19. On the other hand, the export price of same Indian products dropped 8.5 percent from $1.7/square-meter in 2017/18 to $1.07 in 2018-19. That means Indian products lost their value half as less compared to Pakistan. In knitwear exports the unit price of Pakistan product declined by 5 percent compared to 3.8 percent decline in the value of same Indian products. In garments the per unit value decline for Indian exports was 3.8 percent, while for Pakistan recorded a fall of whooping 19 percent, while Indian knitwear and garments fetch higher prices than Pakistan’s. Home Textile industry prefers safeguard policy to fiscal incentives (Source: Jakarta Post, July 11, 2019) The subdued textile and textile products industry is not impressed by the government policy to offer “jumbo” tax deductions as the industry considers that the safeguard policy will be more helpful to protect the industry from the storm of imported products. Indonesian Association of Synthetic Fiber Producers (APSYFI) secretary-general Redma Gita Wirawasta said on Wednesday that what was needed by the textile industry was for the domestic market to absorb the products it had manufactured. He said APSYFI members planned to reduce the production target in the second half by 15 to 20 percent because of the declining demand from the textile industry. “The most important thing for us is that we can sell [our products] rather than getting incentives but not being able to do business,” Redma said as quoted by kontan.co.id during an event to evaluate the performance of the synthetic fiber industry in the first half of 2019. The government issued Government Regulation (PP) No. 45/2019 on June 25 to regulate a tax deduction of up to 300 percent, which aimed at boosting investment, research and development (R&D) as well as the participation of businesses in improving Indonesia’s human resources. Redma stressed that without any fiscal incentives, the business would grow if the government could help boost the market demand by controlling imports. He explained that in the period between 2007 and 2018, imports of textiles and textile products grew 12.3 percent, while exports only grew 3.1 percent. He said the storm of imports had seriously affected the industry. He revealed that in 2018, the factory utility of fabric was at 61.5 percent of its installed capacity, fiber at 67.7 percent, yarn at 76.5 percent and garments at 86.9 percent, while in 2017, the factory utility of fabric was at 56 percent, fiber at 67.7 percent, yarn at 75.8 percent and garments at 80.1 percent Home
Source : Nhan Dhan
British high commissioner to Ghana Iain Walker recently pledged the UK Government’s support to the Kumasi Metropolitan Assembly (KMA) to make Kumasi a leading industrial hub of West Africa as both the countries signed a new strategic partnership agreement focusing on six economic areas of mutual benefits under the UK-Ghana Business Council (UK-GBC). The agreement, signed at a regional business forum in Kumasi, covers six sectors: agribusiness, extractive, garment-textile, digital, pharmaceutical and financial services, according to a press release from the British High Commission in Accra. It is under three themes made up of domestic revenue mobilisation, ease of doing business and infrastructure. The forum focused on the Ashanti Region where the UK Government had supported some major projects, including the Kejetia market, the expansion of the Kumasi Airport and the construction of Bekwai hospital.
Source: Fibre2Fashion
While Chinese factories suffer, manufacturers in other Asian hubs become beneficiaries up to a point. The world’s largest supplier of consumer goods says China’s factories are getting “urgent and desperate” as worried U.S. retailers accelerate a move out of the country amid heightened trade tensions. China will see more factory shutdowns as the trade war that’s roiled the global supply chain exacerbates an exodus, said Spencer Fung, chief executive officer of Li & Fung Ltd. The company, which designs, sources and transports consumer goods from Asia for some of the world’s biggest retailers including Walmart and Nike, is being pushed by American clients to shift production out of China. “U.S. clients are definitely very, very worried,” Fung said in an interview with Bloomberg. “Everyone is making razor-thin margins already and most people have a huge percentage in China. So if the biggest source increases the price by 25%, they are worried,” he said, referring to the scale of tariffs threatened on all Chinese imports to the U.S. by President Donald Trump. Though Fung didn’t specify Walmart by name, the U.S. retailer is the company’s second-biggest customer after Kohl’s, accounting for 7.6% of revenue, according to Bloomberg data. A spokeswoman for Walmart declined to comment.
Seismic Shift
The European Union said Wednesday it has trimmed its forecasts for economic growth next year as global trade tensions weigh on the bloc's export-focused manufacturers. The EU executive commission reduced its forecast for next year for both the 19-country eurozone and the 27 countries that are due to remain in the bloc after Britain leaves, which is scheduled to happen at the end of October. Eurozone growth is expected to pick up from 1.2% this year to just 1.4% in 2020, down from a previous estimate of 1.5%. Growth in the EU - without Britain - is forecast to rise from 1.4% to 1.6% next year, down from the 1.7% estimated previously. The European commissioner in charge of economic affairs, Pierre Moscovici, said there were risks to the region and highlighted "growing trade tensions." "A couple of sectors have been hit hard: external trade and manufacturing," he said while presenting the EU's interim forecast. He said that growth was being supported by a strengthened labor market, but there is still a risk that the economy might do worse than forecast due to "any further escalation of trade tensions." The U.S. government has imposed tariffs on several countries, including EU states but particularly China. The battle between the U.S. and China has weighed on business sentiment around the world and also has knock-on effects on European businesses, which produce and sell in each of those markets.
Source: Herald Standard
Lopsided development of its various segments and dependence on imports have weakened the textile industry`s competitiveness and creativeness, experts said. Nguyen Van Tuan, chairman of the Viet Nam Cotton and Spinning Association, told Thoi Bao Kinh Doanh (Business Times) newspaper that while the yarn and apparel segments had grown strongly, others like dyeing were poorly developed, causing a bottleneck. Besides, garment companies were hugely dependent on imported fabric, he said. In 2017, for instance, 6.5 billion metres of cloth were imported, or two thirds of the industry`s entire demand. Viet Nam Customs data shows imports in May were worth US$1.35 billion, taking the total for the year to US$5.43 billion, a 5.8 per cent rise year-on-year. "Because of dependence on imported fabric, companies have lost their creativity and so cannot add value," Tuan said. Concurring with the idea, Tran Thi Thu Hien of Chien Thang Garment Company said the main weakness of garment companies was their dependence on imported cloth, mostly from China. That was also a reason Vietnamese companies were expected to face difficulties after the country joined free trade agreements like the CPTPP since China is not a member of these agreements. Besides, the huge fabric import was a paradox considering two thirds of the fibre produced in the country, or 750,000 tonnes, were exported every year at increasingly lower prices. Experts attributed this to the poor development of the dyeing segment. They said local companies lacked proper awareness of the dyeing process. They also lacked the technologies, human resources and skills required to develop this sector. Furthermore, there were no industrial zones fully equipped to serve the dyeing industry, they said. Tuan said developing the fabric and dyeing segments would be the key factor in the growth of the garment and textile industry. He called for establishing industrial zones specialising in dyeing and cloth production. Attracting foreign direct investment in the industry was also a key requisite for its development, he said. Besides, there was a need for training human resources, he added. Experts said most garment and textile companies had to hire foreign experts in dyeing, which pushes up their production costs. So investing in the training of human resources was vital to developing the dyeing segment, they added.
Source: Pulse News
How can a garment's origin be derived in a safe and credible way? How can the producer guarantee that it has been produced in a socially, environmentally and economically sustainable way? Now, a new, secure traceability system has been developed in a research project at the University of Borås. Information asymmetry, counterfeits, and lack of transparency—in one-word lack of traceability—is a major challenge in the global textiles and clothing supply chain. QR codes and RFID chips are currently used as traceability tools. However, these are easy to copy. Tarun Kumar Agrawal, during his doctoral studies in textile management at the Swedish School of Textiles, University of Borås, has developed a new traceability system to solve this. "The textile supply chain is a complex network and a lot can happen in the process between the various production lines or stages—from the production of fiber and yarn and on to weaving or knitting the textile, the garment production, the transportation to the retailers, and finally to the consumer. Moreover, consumers want to know where the garment they buy come from, what it is made of, and if it is ethically produced. At the same time, the producers want to show, that their products keep promised quality and are sustainable, and they want to be able to protect themselves from counterfeiting," he says. At the product level: Unique cryptotag printed on the garment. In his project, Tarun Kumar Agrawal has looked at traceability at the information and product levels, and how it can be ensured that the information passing the systems is reliable. He has also developed a unique cryptotag that is printed on the finished garment. "The tag contains tiny particles, which randomly form a unique pattern. By image reading it is possible to identify these patterns, similar as when indentifying a fingerprint. The new traceability system then connects data to the tag," he explains.The tag has been developed and tested at the lab scale and shows promising results on durability, for example washability, abrasion resistance and stretchability. "It is important that the tag is durable and that the particles, that form the unique pattern, consist and can be read off. This is also important when the garment is worn out and goes to recycling, in order to be able to deduce what material the textile consists of, for example, if it is pure or mixed material," he continues.
At the information level: Block chain technology use
The traceability system has been developed to be completely open, so that the stakeholders, who are connected to it, can follow what is happening, from production of raw material to finished garment, and further out to the customer, through the entire supply chain. "The system lacks central authority, which means that there is no individual party that owns and verifies the information transfer. Instead, so-called block chain technology has been used, which is the same technology behind virtual currency transactions, such as bitcoin, to make the information transfer secure. This reduces the risk of the information being manipulated by one single party. Since the system is open to all connected stakeholders, they can follow the production process all the way. The technology helps to develop a technology-based trust among the stakeholders. And, the customer can further know the history of the garment using the system," he says. The traceability system is very promising, and the next step is to scale it up, and to improve the algorithm that has been used. "Now we look forward for cooperation with some companies to try and test the system on their supply chains."
Sustainable development has been a fundamental aspect of the project.
"Investing in the infrastructure is crucial for the industry—to implement sustainable development, as well as taking responsibility for the production and consumption. With control and transparency of the supply chain for the production of textiles and garments, it will also be possible to actualize reduced climate impact. Global partnerships is the main key in the work for sustainable development," concludes Tarun Kumar Agrawal.
Source: Physics.org
