The full report is available HERE
Key findings of this year’s report:
#1 U.S. fashion companies are deeply concerned about the deteriorating U.S.-China bilateral relationship and plan to accelerate “reducing China exposure” to mitigate the risks.
- Respondents identified “Finding a new sourcing base other than China” as a more prominent challenge in 2023 than the previous year (i.e., 4th in 2023 vs. 11th in 2022).
- This year, over 40 percent of respondents reported sourcing less than 10 percent of their apparel products from China, up from 30 percent of respondents a year ago and a notable surge from only 20 percent in 2019. Similarly, a new record high of 61 percent of respondents no longer use China as their top supplier in 2023, up from 50 percent of respondents in 2022 and much higher than only 25-30 percent before the pandemic.
- Nearly 80 percent of respondents plan to reduce apparel sourcing from China over the next two years, with a record high of 15 percent planning to “strongly decrease” sourcing from the country. This strong sentiment was not present in past studies. Notably, large-size U.S. fashion companies (with 1,000+ employees) that currently source more than 10 percent of their apparel products from China are among the most eager to de-risk.
#2 Tackling forced labor risks in the supply chain remains a significant challenge confronting U.S. fashion companies in 2023.
- “Managing the forced labor risks in the supply chain” ranks as the 2nd top business challenge in 2023, with 64 percent of respondents rating the issue as one of their top five concerns.
- Most surveyed U.S. fashion companies have taken a comprehensive approach to mitigating forced labor risks in the supply chain. Three practices, including “asking vendors to provide more detailed social compliance information,” “attending workshops and other educational events to understand related regulations better,” and “intentionally reducing sourcing from high-risk countries,” are the most commonly adopted by respondents (over 80 percent) in response to forced labor risks and the UFLPA’s implementation.
- Since January 1, 2023, U.S. Customs and Border Protection (CBP)’s UFLPA enforcement has affected respondents’ importation of “Cotton apparel products from China,” “Cotton apparel products from Asian countries other than China,” and “Home textiles from China.”
- U.S. fashion companies are actively seeking to diversify their sourcing beyond Asia to mitigate the forced labor risks, particularly regarding cotton products.
#3 There is robust excitement about increasing apparel sourcing from members of the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR).
- CAFTA-DR members play a more significant role as an apparel sourcing base this year. Over 80 percent of respondents report sourcing from CAFTA-DR members in 2023, a notable increase from 60 percent in the past few years. Also, nearly 30 percent of respondents placed more than 10 percent of their sourcing orders with CAFTA-DR members this year, a substantial increase from only 19 percent of respondents in 2022 and 10 percent in 2021.
- About 40 percent of respondents plan to increase apparel sourcing from CAFTA-DR members over the next two years. Most respondents consider expanding sourcing from CAFTA-DR as part of their overall sourcing diversification strategy.
- With U.S. fashion companies actively seeking immediate alternatives to sourcing from China and Asia, respondents emphasize theincreased urgencyof improving textile raw material access to promote further U.S. apparel sourcing from CAFTA-DR members. “Allowing more flexibility in sourcing fabrics and yarns from outside CAFTA-DR” was regarded as the top improvement needed.
#4 US fashion companies demonstrate a solid dedication to expanding their sourcing of clothing made from recycled or other sustainable textile fibers:
- Nearly 60 percent of respondents say at least 10 percent of their sourced apparel products already use recycled or other sustainable textile fibers. Another 60 percent of surveyed companies plan to “substantially increase sourcing apparel made from sustainable or recycled textile materials over the next five years.”
- Addressing the higher sourcing costs and the low-profit margins are regarded as the top challenge for sourcing clothing using recycled or other sustainable fiber.
- About 60 percent of respondents also call for policy support for sourcing clothing using recycled or other sustainable textile materials, such as preferential tariff rates and guidance on sustainability and recycling standards.
#5 Respondents strongly support and emphasize the importance of the early renewal of the African Growth and Opportunity Act (AGOA) and extending the program for at least another ten years.
- Respondents sourcing from AGOA members are typically large-scale U.S. fashion brands or retailers (with 1,000+ employees). Generally, these companies treat AGOA as part of their extensive global sourcing network and typically source less than 10 percent of the total sourcing value or volume from the region.
- About 40 percent of respondents view AGOA as “essential for my company to source from AGOA members.”
- About 60 percent of respondents say the temporary nature of AGOA “has discouraged them from making long-term investments and sourcing commitments in the region.” Many respondents expect to cut sourcing from AGOA members should the agreement is not renewed by June 2024.
- About one-third of respondents currently sourcing from AGOA explicitly indicate, “Ethiopia’s loss of AGOA eligibility negatively affects my company’s interest in sourcing from the entire AGOA region.” In comparison, only about 17 percent of respondents say they “have moved sourcing orders from Ethiopia to other AGOA members.
Other topics covered by the report include:
- 5-year outlook for the U.S. fashion industry, including companies’ hiring plan by key positions
- The competitiveness of major apparel sourcing destinations in 2023 regarding sourcing cost, speed to market, flexibility & agility, and compliance risks (assessed by respondents)
- Respondents’ qualitative comments on the prospect of sourcing from China and “re-risk”
- U.S. fashion companies’ latest social responsibility and sustainability practices related to sourcing
- U.S. fashion companies’ trade policy priorities in 2023
Background
This year’s benchmarking study was based on a survey of executives from 30 leading U.S. fashion companies from April to June 2023. The study incorporated a balanced mix of respondents representing various businesses in the U.S. fashion industry. Approximately 73 percent of respondents were self-identified retailers, 60 percent self-identified brands, and 65 percent self-identified importers/wholesalers.
The respondents to the survey included both large U.S. fashion corporations and medium to small companies. Around 77 percent of respondents reported having more than 1,000 employees. And the rest (23 percent) represented medium to small-sized companies with 100-999 employees.
FASH455 Global Apparel & Textile Trade and Sourcing 
This report was very interesting to read about. It was refreshing to see that many companies are reducing their exposure to China and are trying to find suppliers outside of China. Although, China is one the most efficient and cheapest sourcing hub’s in the world, they also have many unregulated practices like forced labor, child labor, and workers that are underpaid. Companies are not wanting to be as associated with China for these reasons and other reasons as well. Many are moving their practices to other countries, which is exciting because more countries will start being able to compete with China’s manufacturing and production. The Section 301 tariff has been implemented in order to slow down trade with China due to these reasons. Many U.S. fashion companies are choosing to become more educated on their supply chains and also becoming educated on ways to mitigate forced labor. This is a very good step in the right direction for us because China and other countries participating in forced labor in years to come, will no longer be able to just fly under the radar like they have been doing. Sustainability has also been on the rise, according to this report, more companies are turning towards using more recycled, sustainable materials. This was very exciting to read about, especially because the fashion industry is one of the biggest waste producing industries in the world. By companies being more aware of materials they are using will not only help the environment, but will also allow them to attract more consumers because, especially with the newer generations sustainability is an important factor when making purchases. This report gave me a lot of hope for the future because I was glad to see the companies and the USFIA are actually trying to make much needed changes in the industry. Hopefully this trend of change in the industry will stick and more companies will try to have better, safer, and more sustainable supply chains.
It’s really interesting to hear the stats of companies pulling out of sourcing in China because its sounds like a lot of them. Despite this, China is still a huge apparel hub and they seem unphased.
This is also interesting because Trump was going back and forth with China with the Section 301 tariff and they refused to budge, yet it appears they were losing a lot of business. I’s surprised it took them so long to agree to review their intellectual property issues and to import more from the US.
It is really interesting that many brands do not want to source from AGOA region unless the agreement is renewed. There is many benefits for countries in this region and for the brands sourcing from AGOA. Apparel goods can be exported to the US with reduced tariffs, allowing these countries to produce and trade goods that are economically efficient and giving them a chance to compete in the US apparel sector. In order for a country to be eligible they have to fit under certain criteria such as certain economic qualities, human rights, and adhering to specific rules and regulations. This helps create cohesive supply chains and productions while the country is reforming better policies. This not only benefits African countries economically, but the US brands as well. Brands are increasing imports from this agreement in order to benefit from larger import duty savings.
I believe it is beneficial for all U.S. fashion brands to source from places other than China, due to China’s unfair trade practices. This year, over 40 percent of U.S. fashion companies reported that they are sourcing less that 10 percent of their products from China. An all-time record high of 61 U.S. companies now do not have China as their top supplier. It is great to see that CAFTA-DR is playing a more significant role in 2023, as about 80 percent of U.S. fashion companies sourced there. Also, 40 percent of fashion companies plan to increase sourcing from CAFTA-DR members over the next couple of years. U.S. companies are also seem to be prioritizing sustainability as at around 60 percent of U.S. fashion companies stated that at least 10 percent of their sourced apparel products are using recycled or other sustainable textile fibers.
I am very happy to see more and more trends towards recycled materials usage and production plans that include recycling. The mention of having more preferred tariff rates for recycled materials usage is something I also believe in, but it doesn’t currently work. Some of the most advanced clothing manufacturers are based in China. Due to the overall stigma with China, people often overlook it as a place to manufacture sustainably. This is very far from the case due to the advancements in technology in some of these factories as well as the mindset held by the manufacturers. With legislation that supports trade preferences for sustainable apparel, I think it would be awesome to see these factories celebrated for the good they are doing for the world, not grouped together with the others just because of where they are based. This is not the norm, but we should remember that these technologies and applications do in fact exist.
This was a super informative article and I found it to be a really interesting read. I liked the insight about companies’ sourcing decisions in 2023. Labor costs, sourcing destinations, and sustainability are among some of the key factors. As per labor costs, the higher the labor cost, the higher companies have to mark clothing prices and cut costs on other aspects. Companies are trying to find a place to source from that has low labor costs so that they can make the most profits. Sourcing destinations play a significant role as each country has their own strengths and weaknesses involving the sourcing process. Depending on what matters most to the company, they might want to source from one country because of the low sourcing costs. On the other hand, if speed to the market is the companies main priority, sourcing from the US would be a better option. Each country has their strengths and weaknesses so companies have to decide which sourcing region fits their needs best. Sustainability is a factor that has been up and coming in the last few years. This can greatly affect a companies sourcing decisions. If you want clothing to be made from recycled materials and have low impact on the environment, a company would base their decisions on those factors. This benchmarking study offers a lot of valuable information and makes it easy to understand why companies source from the places they do.
The USFIA Fashion Industry Benchmark discussed the challenges facing the sourcing industry and our goals on how to address them. I think the most powerful part of the benchmark was the statistics from the brands detailing their efforts to stop or differ sourcing from China. While over 40% of these brands claim to only be sourcing 10% from China, it remains the largest location for sourcing. We continue this discussion often in class, how the solution is shifting that business to other countries, ideally the CAFTA-DR. However, that is harder than said. Tying this to our learnings of our Section 301 trade agreement with China, raising tariffs isn’t enough, brands are looking to the U.S. for support. I think it is exciting that people are starting to really care about ethical sourcing, so while there are a lot of challenges this offers prospects of opportunity for a better fashion industry.
I highly enjoyed reading this study. This study gives important insights into the changing goals and difficulties that American fashion companies will face in 2023. There is a clear sense of urgency to “de-risk” by lowering dependency on China, which reflects both compliance risks associated with forced labor and broader geopolitical tensions. It’s interesting to see how businesses are actively expanding their sourcing methods, especially with regard to CAFTA-DR members, which is consistent with the near-shoring movement as a whole. Although the focus on sustainability is encouraging, the issues with cost and profitability show that more strong policy incentives are required to make sustainable sourcing possible. Also the uncertainty surrounding the renewal of AGOA shows how crucial stable trade policies are to attracting sustained investment in Africa. With everything that was stated in this study, I agree with how it emphasizes how difficult it is to manage global sourcing in the fast-paced legal and economic landscape of today