What You Always Wanted to Know About Textile Trade Agreements. But Didn t Know Who to. U.S. Trade Representative
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1 What You Always Wanted to Know About Textile Trade Agreements But Didn t Know Who to Ask U.S. Trade Representative
2 Key Textile and Apparel Trade Terms and Definitions For FTA s and Preference Programs
3 Textile and Apparel -- Key Trade Terms 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.
4 Textile and Apparel -- Key Trade Terms 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.
5 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.
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7 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: Fiber Forward Yarn Forward Fabric Forward Cut and Sew RVC (Regional Value Content)
8 Fibers must be formed in the countries which are a party to the trade agreement. Fiber Forward
9 Yarn must be formed in the countries that are a party to the trade agreement (fiber can come from anywhere). Yarn Forward
10 Requires that fabric is formed (knitted or woven) in the countries that are party to the agreement with yarn from anywhere in the world. Fabric Forward
11 Cut and Sew Garments must be cut and sewn or assembled in the countries which are a party to the trade agreement
12 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
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14 Free Trade Agreements (effective date) 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) Morocco (January 2006) Australia (January 2005) Singapore (January 2004) Chile (January 2004) Jordan (December 2001) NAFTA (January 1994) Israel (September 1985)
15 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).
16 Free Trade Agreements (FTAs) Country Free Trade Agreements (FTAs) Rules of Origin 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 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 *Bahrain Cut and Sew For a list of qualifying goods, see *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
17 Free Trade Agreements (FTAs) Free Trade Agreements (FTAs) Rules of Origin Country Exceptions to Yarn Forward Additional Information Textile Safeguard Chile Yarn Forward 7% de minimis exception* TPL 3 million sme (reduced to 2 million sme in 11 th 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 Morocco 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 Oman Yarn Forward 7% de minimis exception* TPL 50 million sme for Cotton and MMF apparel (expires in 2019) Yes *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 11 th 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
18 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 Colombia Brassieres Cut & Sew Linen/Silk Apparel Cut & Sew 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 7% de minimis exception* TPL 25 million sme, expired in % de minimis exception* Narrow Elastic Fabric, Visible Lining Fabrics, Sewing Thread and Pocketing Fabrics must be sourced within the region *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 No Yes
19 Free Trade Agreements (FTAs) Free Trade Agreements (FTAs) Rules of Origin Country Exceptions to Yarn Forward Additional Information Textile Safeguard 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. No 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 Yes *de minimis Unless otherwise specified, de minimis does not apply to elastomeric yarn; all elastomeric yarn must originate within the FTA zone.
20 CAFTA-DR 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 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.
21 CAFTA-DR Fixes (Awaiting Legislation) Elastomeric in Short Supply Sewing Thread Rib Trim Four Technical Fixes
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26 KORUS (EIF March 15 th, 2012) 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
27 Colombia FTA (EIF May 15, 2012) Over 80 percent of U.S. exports of consumer and industrial products to Colombia will become duty free immediately 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
28 Colombia FTA vs. ATPDEA (Identical to Peru FTA) Provision ATPDEA U.S.-Colombia FTA ( ) Scope/coverage Apparel, luggage All textile, apparel, luggage, and footwear Expiration Renewed only for Ecuador. Peru and Columbia FTA s have replaced ATPDEA. No expiration date. Certainty for investors Market Access Accumulation - build-up of goods Unilateral program, duty free for qualifying apparel/luggage entering the U.S. U.S.- Andean regional accumulation with restrictions Bilateral, reciprocal trade agreement. Immediate duty-free access for qualifying goods entering Colombia and U.S. Cumulation limited to the U.S. and Colombia. Rule of origin U.S. - Andean yarn forward with restrictions U.S. - Colombia yarn forward. Certain yarns and fabrics follow a fiber forward rule.
29 Panama FTA (exp. EIF Oct 15 th 2012) The Panama FTA is scheduled to Enter into Force on October 15, 2012 Panama is one of the fastest growing economies in Latin America, expanding 6.2 percent in 2010, with similar annual growth forecast through 2015.
30 Trade Preference Programs (year initially enacted current expiration) African Growth and Opportunity Act (AGOA) Caribbean Basin Trade Partnership Act (CBTPA) 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)
31 Egypt Qualifying Industrial Zones (QIZs) EGYPT QIZs In early 2005, QIZs began operating in seven designated industrial locations in Egypt. The QIZs now encompass 15 designated industrial zones and we are in discussions to add new regions. 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. The rule of origin is the same for all products, including textiles and apparel. Jordan QIZ s were superseded by the FTA
32 African Growth & Opportunity Act (AGOA) Qualifying Countries Benin Botswana Burkina Faso Cameroon Cape Verde Chad Ethiopia The Gambia Ghana Kenya Lesotho Liberia Malawi Mali Mauritius Mozambique 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 3 rd party fabric provision
33 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.
34 Haiti - HOPE II: Background 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. Expands the benefits provided to Haiti under the original 2006 HOPE Act 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)
35 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 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
36 Preference Program Qualifying Products Additional Information Textile Safeguard EIF Egypt QIZs 35% QIZ added value, of which 10.5% must come from Israel Added Value may originate in QIZ country, Israel, or the U.S. No Egypt 2004 AGOA Apparel made in designated LDCs can be made of 3 rd -party yarns or fabrics* Apparel made of U.S. or sub- Saharan African yarns and fabrics Apparel made of yarns and fabrics in Short Supply Specific Cap for 3 rd party yarn 3.5% of preceding year s total apparel imports* Yes rd -party fabric provision awaiting extension legilslation *For information on qualifying countries under Categories 0 and 9, see spreadsheet at *AGOA Imports have never exceeded 1% of total U.S. apparel imports
37 *Additional qualifying apparel under CBTPA can be found at A summary of CBTPA qualifying goods is available at *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 endocument Preference Program CBTPA Qualifying Products Additional Information Textile Safeguard 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) EIF Yes 2000 HOPE II /HELP 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 No HOPE II 2008; HELP 2010
38 THE TRANS-PACIFIC PARTERNSHIP (TPP) Under Negotiation with 9 countries Australia Brunei Chile New Zealand Malaysia Peru Singapore Vietnam United States And joining the talks soon! Canada Mexico
39 TPP: In Negotiation High-standard 21 st 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 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.
40 Who s Who
41 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.
42 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.
43 ITEC: Trade Enforcement 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
44 Assistant U.S. Trade Representative for Textiles and Apparel Gail Strickler Assistant United States Trade Representative for Textiles and Apparel (202)
45 U.S. Customs and Border Protection Natalie Hanson International Trade Specialist at the CBP Textile Policy Branch (202)
46 Textile and Apparel Trade Associations American Apparel and Footwear Association (AAFA) American Fiber Manufacturers Association (AFMA) American Manufacturing Trade Action Coalition (AMTAC) National Council of Textile Organizations (NCTO) National Textile Association (NTA) U.S. Importers of Textile and Apparel (USA-ITA) U.S. Industrial Fabrics Institute (USIFI)
African Growth and Opportunity Act (AGOA)
African Growth and Opportunity Act (AGOA) Gail W. Strickler Assistant United States Trade Representative for Textiles and Apparel AGOA Overview - The legislation provides duty-free access to all clothing
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