Download Fabric Forward - United States Fashion Industry Association

What You Always Wanted to
Know About Textile Trade
Agreements…
But Didn’t Know Who to
Ask…
U.S. Trade Representative
Key Textile and Apparel
Trade Terms and
Definitions
For FTA’s and Preference
Programs
Textile and Apparel -- Key Trade Terms
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Cumulation – Yarns and/or fabrics from one FTA partner country to be used in another FTA partner
country and qualify for duty-free benefits (In NAFTA and the future TPP agreement, cumulation is
among FTA partners only) . Example: in CAFTA certain woven fabrics from Mexico (NAFTA) can
be used for the manufacture of apparel in the CAFTA region and qualify for CAFTA benefits, i.e.
duty-free access to the U.S. market.
Tariff Preference Level (TPL) – An exception to the rule of origin in FTAs that allows for a certain
quantity of textile and apparel goods (usually yarns, fabrics and cut pieces) from a third-country (a
country who is not a party to the agreement) to qualify for the FTA benefits. Example: Under the
U.S.-Bahrain FTA, Bahrain can use up to 65 million sme of yarns and fabric from any other country
and the products made from those yarns and fabrics (up to the 65 million limit) still qualify for dutyfree access to the U.S. market.
Short Supply/Commercial Availability -- Fibers, yarns, and fabrics determined not to be available
in commercial quantities in a timely manner from within the FTA partner countries may be sourced
from outside the countries for use in qualifying textile and apparel products. For example, a fabric
that is determined not to be commercially available under the U.S.-Australia FTA may come from a
third-party, i.e. China, be cut-and-assembled into a garment in Australia, and imported to the U.S.
duty-free.
Quotas – Limitation on the quantity of goods that may be imported into a country from designated
countries during a specified period of time.
Textile and Apparel -- Key Trade Terms
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Textile and Apparel Safeguards -- Allows the U.S. or certain FTA partner countries to impose
import quotas and/or duties on certain textile and apparel imports from the partner country if it is
determined that such imports are causing or threatening to cause disruption of the market.
Square Meter Equivalents (sme) – A notional, common unit of quantity, constant across apparel
categories. Conversion factors are used to convert units of quantity into SME. Common
measurement used to determine specific quantities of yarns, fabric, and apparel allowed under
exceptions to the rule of origin, i.e. TPLs, cumulation.
Third Country – A country outside of the FTA or preferential trade arrangement, but is not a party
to the agreement and is not required to adhere to the rules of origin under the agreement but may
supply inputs to the FTA countries.
Wholly-Assembled** – A good is wholly assembled if all of its components, of which there must be
at least two, pre-existed in essentially the same condition as found in the finished good and were
combined to form the finished good. For example, the sewing together of the sleeves and the body
of a shirt would be considered to be wholly assembled.
Knit-to-Shape -- A good is considered “knit-to-shape” if 50 percent or more of the exterior surface
area of the good is formed by major parts that have been knitted or crocheted directly to the shape
used in the good, with no consideration being given to patch pockets, appliqués, or the like. Minor
cutting, trimming, or sewing of those major parts shall not affect the determination of whether a good
is “knit-to-shape.”
** The Department of Commerce recently re-affirmed its interpretation that wholly-assembled includes dyeing and
finishing. This interpretation could be debated via legislation in the future.
Harmonized Tariff System (HTS)
• International agreement that assigns a 6-10 digit
code to every product.
• Tariff rates can be compared internationally for all
products through the HTS.
Rules of Origin
• Specify the terms and conditions
required for a good to qualify or to
be considered “originating” in a
trade agreement or preference
legislation.
• Rules of Origin for textiles and
apparel:
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Fiber Forward
Yarn Forward
Fabric Forward
Cut and Sew
RVC (Regional Value Content)
Fiber Forward
• Fibers must be formed in
the countries which are a
party to the trade
agreement.
Yarn Forward
• Yarn must be formed in
the countries that are a
party to the trade
agreement (fiber can
come from anywhere).
Fabric Forward
Requires that fabric is formed
(knitted or woven) in the
countries that are party to the
agreement with yarn from
anywhere in the world.
Cut and Sew
Garments must be cut and sewn
or assembled in the countries
which are a party to the trade
agreement
Regional Value Content
• Inputs, and assembling processes of at least a
certain percentage of the total value must take
place in the countries which are a party to the
trade agreement
Free Trade Agreements (effective date)
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Panama (EIF October 2012)
Colombia (May 2012)
Korea (March 2012)
Peru (February 2009)
Oman (January 2009)
Bahrain (August 2006)
CAFTA-DR
El Salvador (March 2006)
Honduras/Nicaragua (April 2006)
Guatemala (July 2006)
Dominican Republic (March 2007)
Costa Rica (January 2009)
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Morocco (January 2006)
Australia (January 2005)
Singapore (January 2004)
Chile (January 2004)
Jordan (December 2001)
NAFTA (January 1994)
Israel (September 1985)
FTA Rules of Origin for
Textiles and Apparel
Generally speaking, the textile and apparel rule of origin for U.S. FTAs is
the "yarn-forward" standard:
 Requires that the yarn production and all operations "forward" (i.e., fabric production
through apparel assembly) occur in either the United States and/or the FTA partner
country(s).
 There are some exceptions to the yarn-forward rule of origin. These exceptions
generally allow fibers, yarns, and fabrics to be sourced from outside the FTA partner
countries.
 Exceptions include TPLs, value-added rules, cumulation, short supply and earned import
allowances.**
 The textile and apparel provisions of most FTAs provide for a short supply mechanism to
allow manufacturers to access fiber, yarns and fabrics that are not commercially available
within the FTA partner country(s). For some FTAs this requires a negotiated agreement
among the party countries and for others it is an administrative process managed by the
Committee for the Implementation of Textile Agreements (CITA).
Free Trade Agreements (FTAs)
Free Trade Agreements (FTAs) – Rules of Origin
Country
Exceptions to Yarn
Forward
Additional Information
Textile
Safeguard
Australia
Limited Cut-and-Sew*
7% de minimis exception*
Yes
Bahrain
Limited Cut-and-Sew*
7% de minimis exception*
TPL -- 65 million sme for Cotton and MMF(expires in
2016)
Yes
CAFTA-DR
Knit Fabric – Fiber
Forward
Wool – Fabric Forward
U.S. Formed Fabric of
Foreign Yarn – Value
Added Rule
10% de minimis exception*
TPL – 100 million sme for Nicaragua*
1.1 million sme for Costa Rica*
(TPLs expire after 10 years)
Cumulation – 100 million sme for Mexico*
2 x1 Earned Import Allowance program for the DR*
Yes
*de minimis – Unless otherwise specified, de minimis does not apply to elastomeric yarn; all elastomeric yarn must originate within the FTA zone.
*Australia Cut and Sew – For a list of qualifying goods, see http://web.ita.doc.gov/tacgi/fta.nsf/FTA/Australia?opendocument&country=Australia
*Bahrain Cut and Sew – For a list of qualifying goods, see http://web.ita.doc.gov/tacgi/fta.nsf/FTA/Bahrain?opendocument&country=Bahrain
*Nicaragua TPL – Under the TPL, woven trousers exported to the U.S. must adhered to a one-for-one match. This means that woven trouser
manufacturers must use an equivalent amount of U.S. fabric that matches the amount of foreign fabric being utilized under the TPL.
*Costa Rica TPL -- 1 million sme TPL for certain wool apparel and 100,000 sme TPL for certain women’s knit swimwear.
*Mexico Cumulation – Cumulation begins at 100 million sme and grows to 200 million sme if CAFTA-qualifying trade grows. Cumulation is for
woven fabrics only with varying limits for different woven fabrics.
*Earned Import Allowance Program is covered in detail on a separate slide
Free Trade Agreements (FTAs)
Free Trade Agreements (FTAs) – Rules of Origin
Country
Exceptions to Yarn
Forward
Additional Information
Textile
Safeguard
Yarn Forward
7% de minimis exception*
TPL – 3 million sme (reduced to 2 million sme in
11th year of agreement)*
No
Israel
35% value-added rule
Under the value added rule, fibers, yarns and/or
fabrics can come from anywhere as long as 35%
of the value of the product is added in Israel.
No
Jordan
35% value-added rule
Same as Israel
No
Yarn Forward
7% de minimis exception*
TPL – 30 million (expires in 2016, with reductions
in the TPL beginning in year five)
Limited Cotton Cumulation*
Yes
Yarn Forward
7% de minimis exception*
TPL – 50 million sme for Cotton and MMF apparel
(expires in 2019)
Yes
Chile
Morocco
Oman
*de minimis – Unless otherwise specified, de minimis does not apply to elastomeric yarn; all elastomeric yarn must originate within the
FTA zone.
*Chile TPL – 1 million sme for cotton/MMF fabric, 2 million sme (reduced to 1 million sme in 11th year) for cotton/MMF apparel
*Morocco Cumulation - 1,067,257 kg of cotton goods not qualifying under ROO can come in duty-free if they use cotton from LDCs in
Sub-Saharan Africa
Free Trade Agreements (FTAs)
Free Trade Agreements (FTAs) – Rules of Origin
Country
Exceptions to Yarn Forward
Additional Information
Textile
Safeguard
NAFTA
MMF Sweaters – Fiber Forward
Certain Men’s Dress Shirts – Cut & Sew
Women’s Fine Cotton Underwear &
Nightwear – Cut & Sew
Brassieres – Cut & Sew
7% de minimis exception*
Extensive TPL regime that varies by product
and is different for Mexico and Canada*
Expired
Peru
Brassieres – Cut & Sew
Knit Fabric – Fiber Forward
Nylon Filament Yarn – Can be sourced
from Mexico, Canada, or Israel
Viscose Rayon Filament Yarn – Can be
sourced from anywhere
10% de minimis exception*
Narrow Elastic Fabric, Visible Lining
Fabrics, Sewing Thread and Pocketing
Fabrics must be sourced within the region
Yes
Singapore
Brassieres – Cut & Sew
Linen/Silk Apparel – Cut & Sew
7% de minimis exception*
TPL – 25 million sme, expired in 2012
No
Colombia
Brassieres – Cut & Sew
Knit Fabric – Fiber Forward
Nylon Filament Yarn – Can be sourced
from Mexico, Canada, or Israel
Viscose Rayon Filament Yarn – Can be
sourced from anywhere
10% de minimis exception*
Narrow Elastic Fabric, Visible Lining
Fabrics, Sewing Thread and Pocketing
Fabrics must be sourced within the region
Yes
*de minimis – Unless otherwise specified, de minimis does not apply to elastomeric yarn; all elastomeric yarn must originate within the
FTA zone.
*NAFTA TPLs - For a breakout of TPLs, see http://web.ita.doc.gov/tacgi/fta.nsf/FTA/NAFTA?opendocument&country=NAFTA
Free Trade Agreements (FTAs)
Free Trade Agreements (FTAs) – Rules of Origin
Country
Exceptions to Yarn
Forward
Additional Information
Korea
Yarn Forward
7% de minimis exception*
Rule of origin excludes certain components –
sewing thread, narrow fabrics and pocketing
fabrics -- that are required under CAFTA-DR and
important to U.S. producers.
Panama
(Pending)
Yarn Forward
Nylon Filament Yarn – Can
be sourced from Mexico,
Canada, or Israel
Certain Socks – Sewn &
Assembled from U.S. knit-toshape
Certain Guayabera-Style
Dresses and Shirts – Cut &
Sew
10% de minimis exception*
Narrow Elastic Fabric, Visible Lining Fabrics,
Sewing Thread and Pocketing Fabrics must be
sourced within the region
Textile
Safeguard
No
Yes
*de minimis – Unless otherwise specified, de minimis does not apply to elastomeric yarn; all elastomeric yarn must originate within the
FTA zone.
CAFTA-DR
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Central America is the second largest textile export market for U.S. (after
NAFTA)
In 2010, nearly 70 percent of U.S. imports of apparel under CAFTA-DR
were sewn from regional fabric and yarn.
2011 agreed upon technical fixes. Awaiting legislative implementation
End of 2014 expiration of Nicaragua Tariff Preference Limits (TPLs)
DR-CAFTA Sourcing Database connects American businesses with
regional manufacturers.
CAFTA-DR Fixes (Awaiting Legislation)
• Elastomeric in Short Supply
• Sewing Thread
• Rib Trim
• Four Technical Fixes
KORUS (EIF March 15th, 2012)
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Of yarn/fabric/apparel imports from Korea:
• Upon EIF, 84% became duty free
• 11% reduced to 0% in equal annual stages over 5 years
• 5% reduced to 0% in equal annual stages over 10 years
Major U.S. Textile & Apparel Imports from Korea:
• Woven synthetic fabrics
• Knit cotton/synthetic fabrics
• Woven made up clothing accessories/garment parts
Colombia FTA (EIF May 15, 2012)
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Over 80 percent of U.S. exports of consumer and industrial products to
Colombia will become duty free immediately
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U.S. exports will expand by $1.1 billion, supporting thousands of
additional American jobs*
– Will boost U.S. GDP by $2.5 billion.*
*International Trade Commission
Colombia FTA vs. ATPDEA
(Identical to Peru FTA)
ATPDEA
U.S.-Colombia FTA (05-152012)
Scope/coverage
Apparel, luggage
Expiration
Renewed only for
Ecuador. Peru and
Columbia FTA’s have
replaced ATPDEA.
Unilateral program,
duty free for qualifying
apparel/luggage
entering the U.S.
All textile, apparel, luggage,
and footwear
No expiration date.
Certainty for investors
Provision
Market Access
Bilateral, reciprocal trade
agreement. Immediate
duty-free access for
qualifying goods entering
Colombia and U.S.
Cumulation limited to the
U.S. and Colombia.
Accumulation - ‘build-up’ of
goods
U.S.- Andean regional
accumulation with
restrictions
Rule of origin
U.S. - Andean yarn
U.S. - Colombia yarn
forward with restrictions forward. Certain yarns and
fabrics follow a fiber forward
rule.
Panama FTA (exp. EIF Oct 15th 2012)
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The Panama FTA is scheduled to Enter into Force on October 15, 2012
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Panama is one of the fastest growing economies in Latin America,
expanding 6.2 percent in 2010, with similar annual growth forecast
through 2015.
Trade Preference Programs
(year initially enacted – current expiration)
African Growth and Opportunity Act (AGOA)
2000-2015
Caribbean Basin Trade Partnership Act (CBTPA)
1983-2020
Jordan/Egypt Qualifying Industrial Zones (QIZs)
1997/2005-no expiration date
(Jordan FTA supersedes Jordanian QIZ)
Haiti Economic Lift Program (HELP) and Haitian Hemispheric Opportunity
through Partnership Encouragement Act (HOPE II)
2006-2020
Egypt
Qualifying Industrial Zones (QIZs)
EGYPT QIZs
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In early 2005, QIZs began operating in seven designated industrial locations in Egypt.
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The QIZs now encompass 15 designated industrial zones and we are in discussions to
add new regions.
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The rules of origin for the Egyptian QIZs require that 35 percent of the product’s value
is manufactured in Egypt, of which 10.5 percent must be of Israeli origin.
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The rule of origin is the same for all products, including textiles and apparel.
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Jordan QIZ’s were superseded by the FTA
African Growth & Opportunity Act (AGOA)
Qualifying Countries
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Benin
Botswana
Burkina Faso
Cameroon
Cape Verde
Chad
Ethiopia
The Gambia
Ghana
Kenya
Lesotho
Liberia
Malawi
Mali
Mauritius
Mozambique
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Namibia
Niger
Nigeria
Rwanda
Senegal
Sierra Leone
South Africa*
Swaziland
Tanzania
Uganda
Zambia
*South Africa does
not qualify as an
LDC and is ineligible
for 3rd party fabric
provision
Caribbean Basin
Trade Partnership Act (CBTPA)
• CBTPA represents the second comprehensive expansion of the
Caribbean Basin Initiative (CBI).
• 8 designated Caribbean countries are currently eligible for CBTPA
benefits.
Haiti - HOPE II: Background
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The Haitian Hemispheric Opportunity through Partnership
Encouragement Act of 2008 (HOPE II) allows duty-free access to the
U.S. market for certain Haitian-made apparel and other articles, with the
goals of fostering stability and economic development in Haiti.
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Expands the benefits provided to Haiti under the original 2006 HOPE Act
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Haiti is required to establish an independent labor ombudsman with
monitoring, evaluation and technical support from the International Labor
Organization under the TAICNAR program (Technical Assistance Improvement and Compliance
Needs Assessment and Remediation Program)
HOPE II and HELP: Specifics
Duty-free treatment for…
– …up to 200 million square meter equivalents (SME) of knit apparel (with some t-shirt
and sweatshirt exclusions, which utilize CBTPA) and 200 million SMEs of woven
apparel without regard to the country of origin of the fabric or components, as long
as the apparel is wholly assembled or knit-to-shape in Haiti. Certain textile madeups are also eligible.
– …knit or woven apparel under a “two for one” earned import allowance program
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Haitian goods to enter the United States duty-free if shipped either
directly from Haiti or through the Dominican Republic.
 Detailed webinar available on otexa.ita.doc.gov
Preference
Program
Qualifying Products
Additional Information
Egypt
QIZs
35% QIZ added value, of which
10.5% must come from Israel
AGOA
Apparel made in designated LDCs
can be made of 3rd-party yarns or
fabrics*
Apparel made of U.S. or subSaharan African yarns and fabrics
Apparel made of yarns and fabrics
in Short Supply
Textile
Safeguard
EIF
Added Value may originate in QIZ
country, Israel, or the U.S.
No
Egypt 2004
Specific Cap for 3rd party yarn – 3.5%
of preceding year’s total apparel
imports*
Yes
2000
3rd-party fabric provision awaiting extension legilslation
*For information on qualifying countries under Categories 0 and 9, see spreadsheet at
http://otexa.ita.doc.gov/SpreadSheets/AGOA_ELIGIBILITY_INCL_CAT_0.xls
*AGOA Imports have never exceeded 1% of total U.S. apparel imports
Preference
Program
Qualifying Products
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CBTPA
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HOPE II
/HELP
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Additional Information
Apparel sewn from fabric
made and cut in the U.S. of
U.S. yarn
Apparel of U.S. fabric made of
U.S. thread cut and sewn
using U.S. thread
Knit Apparel
T-Shirts
Brassieres
Certain other apparel*
Knit Apparel subject to TRQ of 970
million SMEs
T-Shirts subject to TRQ of 12 million
dozens
Qualifying Countries: Barbados,
Belize, Guyana, Haiti, Jamaica,
Panama,
St. Lucia, Trinidad and Tobago
(99% of CBTPA comes from Haiti)
Apparel wholly assembled in
Haiti which satisfies value
requirement (50% through
2014)
All woven apparel wholly
assembled in Haiti
Certain other apparel and
luggage*
Most categories of apparel imports
are subject to a quantitative limit,
excepting Brassieres, luggage, and
some other apparel categories
Textile
Safeguard
EIF
Yes
2000
No
HOPE II
2008;
HELP 2010
*Additional qualifying apparel under CBTPA can be found at http://otexa.ita.doc.gov/AGOA-CBTPA/Title_II.doc
A summary of CBTPA qualifying goods is available at http://otexa.ita.doc.gov/AGOA-CBTPA/summary_sheet.pdf
*99.7% of CBTPA duty-free imports (>$400,000,000) come in from Haiti. The U.S. also imports approximately
$230,000,000 from Haiti under HOPE II and HELP.
*Additional qualifying apparel under HOPE II/HELP can be found at
http://web.ita.doc.gov/tacgi/eamain.nsf/6e1600e39721316c852570ab0056f719/abf187b4c9ffc0f9852574d00058ff56?Op
enDocument
THE TRANS-PACIFIC PARTERNSHIP (TPP)
Under Negotiation
with 9 countries…
Australia
Brunei
Chile
New Zealand
Malaysia
And joining the talks soon!
Canada
Mexico
Peru
Singapore
Vietnam
United States
TPP: In Negotiation
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High-standard “21st Century” FTA with Vietnam, Malaysia, Australia, New
Zealand, Singapore, Peru, Chile, and Brunei, with Mexico and Canada
joining the talks soon. Designed as a platform to add additional partners.
•
Streamlines foreign regulatory processes in TPP markets to facilitate
greater participation by U.S. companies
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US proposes a primarily yarn-forward rule of origin to assure that dutypreference does not go to third-parties. We suggest a temporary shortsupply list to assist with a transition in sourcing and provide opportunities
to encourage investment in TPP Countries.
Who’s Who
Office of Textiles and Apparel
The Department of Commerce Office of Textiles and Apparel or OTEXA
administers the implementation of textile trade agreements, assists in the
formulation of trade policy, performs research and analysis, compiles industry
data, and promotes U.S. textiles and apparel.
OTEXA chairs the interagency Committee for the Implementation of Textile
Agreements or CITA which supervises the implementation of all textile trade
agreements.
www.otexa.ita.doc.gov
U.S. Trade Representative
USTR is part of the Executive Office of the President. Through an interagency
structure, USTR coordinates trade policy, and frames issues for presidential
decision. The Textiles Office is responsible for developing and coordinating U.S.
international trade policy, and overseeing negotiations with other countries with
regard to textiles and apparel.
ITEC: Trade Enforcement
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Inter-agency Trade Enforcement Center (ITEC)
– Established by President Obama’s executive order in February 2012 as part of the
National Export Initiative to double exports.
– New office in USTR to monitor trade agreement implementation and combat unfair
trade practices.
•
Collaboration with U.S. Customs and Border Patrol to ensure that Rules
of Origin requirements are met.
•
Eliminating Non-Tariff Barriers to trade in foreign countries to ensure
market access
Assistant U.S. Trade Representative
for Textiles and Apparel
Gail Strickler
Assistant United States Trade Representative for Textiles and Apparel
(202) 395 – 2026
[email protected]
U.S. Customs and Border Protection
Natalie Hanson
International Trade Specialist at the CBP Textile Policy Branch
(202) 863-6494
[email protected]
www.cbp.gov/xp/cgov/about/organization/assist_comm_off/international_trade.xml
Textile and Apparel
Trade Associations
American Apparel and Footwear Association (AAFA)
www.apparelandfootwear.org
American Fiber Manufacturers Association (AFMA)
http://www.fibersource.com/afma/afma.htm
American Manufacturing Trade Action Coalition (AMTAC)
www.amtacdc.org
National Council of Textile Organizations (NCTO)
www.ncto.org
National Textile Association (NTA)
www.nationaltextile.org
U.S. Importers of Textile and Apparel (USA-ITA)
www.usaita.com
U.S. Industrial Fabrics Institute (USIFI)
www.usifi.com