Garments export crisis exacerbated as EgyptAir suspends shipping on passenger flights

Aswat Masriya , Friday 27 Nov 2015

Based on recommendations by U.S transportation safety experts, EgyptAir suspends shipping of commercial cargo on its passenger flights

File Photo: An EgyptAir airline crew member walks near an EgyptAir plane on the runway at Cairo Airport, September 5, 2013. (Reuters)

EgyptAir's decision to suspend the shipping of commercial cargo on passenger flights bound for New York and Canada created a crisis in the export of Egypt's spinning, weaving and garments sector, with Qualified Industrial Zones (QIZ) exporters being the hardest hit by the decision.

EgyptAir said in a statement on Thursday, that the decision to suspend the transfer of goods on passenger flights is based on recommendations by the U.S. transportation safety delegation, which visited Egypt last week, in the aftermath of the Russian jet crash on Oct. 31.

The airliner is believed to have been downed by a "terrorist act", according to statements by the Kremlin. An Egypt-led international investigation is yet to announce its findings.

The textile, garments and furniture sectors top the list of Egypt's exports to the U.S.

According to statements by the ministry of industry and foreign trade, Egyptian exports to the U.S. between January and August 2015 totalled $974 million, of which $446 million are textiles and cotton products.

Mohamed Qassem, chairman of the Readymade Garment Export Council, said that EgyptAir's decision will have a "negative impact" on exporting garments to North America and "will give the impression to our customers that Egypt is not safe".

Qassem said that the U.S. is the largest market market for Egyptian garments as all exported products are pure Egyptian cotton traded under the QIZ agreement.

Egypt signed the QIZ with the U.S. and Israel in December 2004, giving Egyptian products access to U.S. markets without customs or quotas on condition that the Israeli component represents no less than 10.5 percent of the finished product.

Based on statements by the Egyptian ministry of trade and industry, the value of Egyptian exports to the U.S. through the QIZ agreement was about $824.2 million in 2014, of which $816.7 million from the spinning, weaving and garments sector.

Qassem said that about 10 percent of total monthly exports are delivered by air freight, the majority of which using passenger flights.

He added that even though it is a small percentage, "it's very important as it is linked with contracts that require rapid delivery of products."

He said that the council has received a barrage of complaints from factory owners affected by the decision and is working on putting forward alternatives to resolve the crisis.

"But Egypt will have to take serious security measures at airports," he added.

According to Magdy Tolba, former head of the Textile Exports Council whose businesses also function within the QIZ framework, the level of textile cargo transported by air is on the rise because of the overall deterioration of economic conditions.

He explained that over the past four years, the spinning and weaving industry has faced obstacles that led to production delays, so exporters increasingly resorted to air shipments to meet their delivery deadlines.

Tolba said that exporters will now have to rely on the few shipping companies available, which he expects will hike the price of the service, increasing the production cost and decreasing profits.

According to new rules also mean that "carriers flying cargo bound for the United States from Egypt must now be quarantined for 48 hours upon arrival and before transits on domestic flights from local airports." 

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