Summary of U.S.-Colombia FTA Textile and Apparel Provisions. May 2012

Transcription

1 Summary of U.S.-Colombia FTA Textile and Apparel Provisions May 2012 International Development Systems 1140 Connecticut Ave. NW, Suite 950 Washington, DC

2 Table of Contents Overview General Rules of Origin Product Specific Rules of Origin Textiles: Yarns Textiles: Fabric Textile: Made-ups Apparel: Visible Lining Apparel: Essential Character Apparel: Narrow Elastic Fabric Apparel: Sewing Thread Apparel: Pocketing Apparel: Sets Apparel: De Minimis Apparel: Nylon Filament Yarn Commercial Availability/Short Supply Textile Safeguard Provision Folklore Provision Customs Cooperation Certification and Documentation Requirements Regional Cumulation Committee on Textile and Apparel Trade Matters Appendix A: ATPDEA vs. Colombia FTA Side-by-side Appendix B: Products Covered by Visible Lining Provision Appendix C: Short Supply List 2

3 Overview Background The U.S.-Colombia Free Trade Promotion Agreement creates reciprocal market access opportunities for U.S. and Colombian textile and apparel companies. In 2004, President George W. Bush and Colombian President Alvaro Uribe began negotiations for the Free Trade Agreement (FTA). The FTA was signed on November 22, Colombia's Constitutional Court completed its review of the agreement in July The U.S. Congress then took on the agreement and passed the implementing legislation on October 12, President Obama signed the bill into law on October 21, The FTA was implemented on May 15, Summary Implementation of the Colombia Free Trade Agreement (FTA) marks the shift from the Andean Trade Promotion and Drug Eradication Act (ATPDEA) to the Free Trade Agreement. With the FTA in force, Colombia is not eligible for benefits under ATPDEA, or the Generalized System of Preferences (GSP) program. Unlike ATPDEA, the FTA has no expiration date and is a bilateral and reciprocal trade agreement which includes immediate duty-free status for qualifying goods. There are some differences in the Rules of the FTA versus ATPDEA. A detailed breakdown of the differences is provided in the Annex A: ATPDEA vs. Colombia FTA Side-by-Side. The General Rule of Origin for textiles and apparel, which are subject to a Yarn Forward Rule of Origin, is more stringent than for other merchandise. For apparel, this means that garments must be made in the U.S. or Colombia from fabric produced in the U.S. or Colombia using yarn spun or extruded in the U.S. or Colombia. While this standard applies only to the portion of the garment that determines essential character, the agreement includes familiar Chapter Rules that require the use of qualifying inputs for visible lining, sewing thread, narrow elastic fabrics, and pocketing fabric. Elastomeric yarn contained in the essential character component of a garment is must be wholly formed in the U.S. or Colombia. The U.S.-Peru FTA and the U.S.-Central America FTA (CAFTA) contain the same provision. This is a tougher Rule of Origin than used in the Andean Trade Promotion and Drug Eradication Act (ATPDEA). One of the biggest changes from the ATPDEA is that Colombia can no longer use yarns and fabrics produced in other ATPDEA countries. Under the textile and apparel safeguard, import relief may remain in effect for up to three years. The general Colombia FTA safeguard allows a relief period of up to four years. The textile and apparel safeguard provision expires five years after the FTA enters force. 3

4 U.S. Textile and Apparel Imports from Colombia As shown below, U.S. imports from Colombia peaked in Following the implementation of ATPDEA in 2002, imports from Colombia began to rise quickly, ultimately reaching an all-time high of million SME. Since then shipments from Colombia fell consistently, with a brief recovery in Currently, U.S textile and apparel imports from Colombia continue to fall. 180,000, ,000, ,000, ,000, ,000,000 80,000,000 60,000,000 40,000,000 20,000,000 0 U.S. Textile and Apparel Imports from Colombia, SME The composition of U.S. imports from Colombia has shifted over time. In 1995 eighty-five percent of the U.S. textile and apparel imports were apparel. Eight years later, apparel represented only forty-three percent of all U.S. imports from Colombia. In 2003 the majority of U.S. imports were made-ups. In 2011, U.S. apparel imports are seventy percent of all U.S. imports. Currently, Colombia is the thirtieth largest producer of U.S. apparel imports. By comparison, U.S. imports of made ups from Colombia are only twenty-three percent. 4

5 The evolution of the composition of trade for U.S. imports from Colombia is illustrated in the following three charts: Madeups 9% Yarn 0% Fabric 6% Yarn 2% Fabric 1% apparel 43% Apparel 85% Madeups 54% Yarn 4% Fabric 3% 2011 Made-ups 23% Apparel 70% 5

6 For the year ending March 2012, looking at the U.S. imports from Colombia by category and SME, the leading category is 363, Cotton Terry and Other Pile Towels. This is the only category with a double-digit market share. Following is a list of the top categories of U.S. imports from Colombia by SME: 363: Cotton Terry & Other Pile Towels, 13.61% 352: Cotton Underwear, 1.69% 369: Other manufactures n.e.s., 1.08% 620: Other Man-Made Fiber Fabric of Synthetic Filament Yarns, 0.93% 632: Man-Made Fiber Hosiery, 0.69% By value, during 2011 the leading U.S. imports from Colombia are: 347: Cotton Trousers, Shorts, etc. Men s and Boys, 17.27% 363: Cotton Terry & Other Pile Towels, 8.56% 352: Cotton Underwear, 8.50% Reviewing the U.S. imports from Colombia by HTS number, following are the top ten textile and apparel imports from Colombia by value: HTS# Cat. Description Million $ Men's Not Knit Cotton Trousers & Breeches, Blue Denim Terry Cotton Towels, other than Dish Towels Men's Not Knit Trousers & Breeches, Wool / F.A.H., Other Men's / Boys' Knit Cotton T-Shirts, all white, short sleeve, crew / round / V neck, no pockets / trim / embroidery Men's Not Knit Cotton Trousers & Breeches, Other Women's Knit Synthetic Fiber Other Swimwear Men's Knit Cotton Underpants and Briefs MMF Fabrics greater than 70% Rubber / Plastics, Other Men's or Boys' Knit Other Man-made Fiber Other Pullovers, etc., Other Gimped Yarns, Loop Wale-Yarns, Chenille Yarns, containing elastomeric yarns 6.74 By value, the leading U.S. import from Colombia is Men's Not Knit Cotton Trousers & Breeches, Blue Denim, classified in These trousers and breeches represent ten percent of the value of all U.S. textile and apparel imports from Colombia. Combined, the top ten U.S. imports from Colombia represent forty-five percent of the total textile and apparel imports from Colombia. 6

7 General Rules of Origin In general, in the U.S.-Colombia FTA a good is considered originating and therefore eligible for preferential duty treatment if it is: An article that is wholly produced and obtained in the U.S. and Colombia; An article wholly produced in the U.S. and Colombia from inputs wholly produced and obtained in the U.S. and Colombia; or An article wholly produced in the U.S. and Colombia from non-originating inputs that satisfy applicable tariff shift rules or value-added requirements as well as other product-specific rules. Product Specific Rules of Origin: Textiles Yarns The U.S.-Colombia FTA Rule of Origin for yarns is fiber-forward. This means that in order to be considered originating, a yarn must be spun or extruded and finished in the U.S. or Colombia, from raw fibers produced in the U.S. or Colombia. Wool yarns have a different Rule of Origin and benefit from a single transformation Rule of Origin. Fabrics The U.S.-Colombia FTA Rule of Origin for knit fabrics is fiber-forward. This means that the fabric must be knit and finished in the U.S. or Colombia, from yarns spun or extruded and finished in the U.S. or Colombia, of raw fibers produced in the U.S. or Colombia. The U.S.-Colombia FTA Rule of Origin for cotton, wool and man-made fiber woven fabrics is yarnforward. This means that the fabric must be woven and finished in the U.S. or Colombia, from yarns spun or extruded and finished in the U.S. or Colombia. Made-Ups and Home Furnishings The U.S.-Colombia FTA Rule of Origin for made-ups and home furnishings is yarn-forward. This means that the article must be formed and finished in the U.S. or Colombia from fabric woven and finished in the U.S. or Colombia, from yarns spun or extruded and finished in the U.S. or Colombia. Exception: Luggage (classified under , , , ) follows a fabric forward rule of origin yarns can be sourced from anywhere. Chapter 63 Chapter Rule 1: Essential Character The tariff shift rules for products classified in Chapter 63 apply only to the component of the product that determines the tariff classification the essential character. 7

8 Chapter 63 Chapter Rule 2: Sewing Thread Sewing thread classified under HTS Nos and 5401, contained in originating made-ups (either used for assembly or decorative trim) must be formed and finished in the U.S. or Colombia. Product Specific Rules of Origin: Apparel The basic U.S.-Colombia FTA Rule of Origin for apparel is yarn-forward. This means the following processes must occur in the U.S. or Colombia: Yarn Spun or Extruded; and Finished ( Wholly formed ); Fabric Knit or Woven; Cutting or Knitting-to-Shape of All Components; Sewing or Assembly; Finishing; Packaging and Shipping. Apparel must be assembled or knit-to-shape in the U.S. or Colombia, from fabric woven and finished in the U.S. or Colombia, from yarns spun or extruded and finished in the U.S. or Colombia. The yarn may be made of raw fibers of any origin. Note: As with most U.S. trade agreements, products made using silk, flax, or hemp yarns benefit from a Single Transformation Rule of Origin. Chapter rules still apply. Exceptions: There is an exception to the Yarn-Forward Rule of Origin for Brassieres. Brassieres, classified under , have a single transformation rule and must be cut and sewn in the U.S., Colombia, or both to originate. Chapter Rules for Apparel Rule 1: Visible Lining This Chapter Rule applies only to men s and women s suits, suit-type jackets, skirts, overcoats, carcoats, anoraks, windbreakers, and similar articles. For these products, fabrics identified in specific HTS headings and subheadings must be formed and finished in the U.S. or Colombia (yarn may be of any origin), when used as visible lining material in. This restriction applies only to the visible lining fabric in the main body of the garment, excluding sleeves, and does not apply to any removable linings. 8

9 For a complete list of the garments subject to visible lining requirements, and the fabrics that must be originating, please refer to Appendix B: Products Covered by Visible Lining Provision. This list of garments subject to the visible lining provision is the same as appears in the Peru FTA and in CAFTA. Short Supply Note: If one of the fabrics covered by this Chapter Rule is added to the Colombia FTA Short Supply list, then that non-originating visible lining fabric may be used to satisfy this Chapter Rule. Rule 2: Essential Character The tariff shift rules for products classified in Chapters 61 and 62 apply only to the component of the product that determines the tariff classification the essential character. Rule 3: Narrow Elastic Fabric Elastic bands or narrow elastic fabrics classified under HTS Nos or 6002 must be formed from yarn and finished in the U.S. or Colombia (yarns including spandex or other elastomeric yarns -- may be of any origin); latex used in such fabrics may be of any origin. Rule 4: Sewing Thread Sewing thread classified under HTS Nos and 5401, contained in originating garments (either used for assembly or decorative trim) must be formed and finished in the U.S. or Colombia. Fiber may be of any origin but it must be spun/extruded and finished into thread in the U.S. or Colombia. Rule 5: Pocketing Pocketing bag fabric for any pocket or pockets contained in originating garments must be formed and finished in the U.S. or Colombia from yarn wholly formed (spun or extruded, and finished) in the U.S. or Colombia (i.e. yarn-forward ). Treatment of Sets Textile and apparel imports entered as sets are duty-free only if all goods in a set are originating. However, up to ten percent of the value of the set may be from non-originating components. De Minimis Provision The de minimis provision allows for a small amount of non-originating fiber or yarn in an originating garment. Up to ten percent of the fibers and yarns by weight in the component of the product that determines tariff classification can be non-originating. This is the same de minimis provision for nonoriginating fiber or yarn as in the U.S.-Central American Free Trade Agreement (CAFTA). 9

10 However, if the component of the good that determines tariff classification contains elastomeric yarns, all of these elastomeric yarns must be originating. Elastomeric Yarns Under the rules of the U.S.-Colombia FTA, elastomeric yarns must be made in the U.S. or Colombia. However, there are a few exceptions: Only elastomerics contained in the portion of the product that determines tariff classification essential character must be originating. Elastomeric yarns cannot count toward the de minimis allowance. For Short Supply garments that use a combination of originating and non-originating fabrics in the outer shell, elastomeric yarns used in the originating component of the outer shell must also be originating. Elastomeric yarns contained in the non-originating portion of the outer shell of the garment may be of any origin. The requirement covering elastomeric yarn contained in the essential character component of a garment is identical to the provision found in the U.S.-Peru FTA and the U.S.-Central America FTA (CAFTA). This means that the elastomeric yarns in the essential character component of the garment must be wholly formed in the U.S. or Colombia. The U.S. interprets wholly formed to mean that the yarn is both produced and finished in one of the two countries. This is a tougher Rule of Origin than used in the Andean Trade Promotion and Drug Eradication Act (ATPDEA). Colombia no longer can use yarn and fabric produced in other ATPDEA countries. Nylon Filament Yarn FTA-qualifying garments may include certain nylon filament yarns (other than elastomeric yarn) from Israel, Canada or Mexico. (This is the same exception permitted under the Africa Growth and Opportunity Act (AGOA), the Andean Trade Promotion and Drug Eradication Act (ATPDEA), the Caribbean Basin Trade Partnership Act (CBTPA), and U.S.-Central American FTA (CAFTA). The specific yarn classifications are: HTS No , Single High Tenacity Multifilament Yarns of Nylon * HTS No , Multiple, Folded, Cabled High Tenacity Yarns of Nylon Filament * HTS No , Single Textured Yarns of Nylon Filament HTS No , Multiple, Folded, Cabled Textured Yarns of Nylon Filament HTS No , Single Textured Yarns of Nylon Filament HTS No , Multiple, Folded, Cabled Textured Yarns of Nylon Filament HTS No , Synthetic Filament Yarns, Nylon, Colored * 10

11 HTS No , Single Multifilament Other Yarns, of Nylon * HTS No , Single Other Twisted Yarns of Nylon Filament HTS No , Multiple, Folded, Cabled Other Yarns of Nylon Filament * Modifications to the U.S. HTS effective February 3, 2007 changed some of these tariff classifications as follows: HTS No to and ; HTS No to and ; HTS No to ; and HTS No to Commercial Availability/Short Supply Rules of Origin The U.S.-Colombia FTA uses two mechanisms to address the issue of commercial availability for some fibers, yarns, and fabrics. Government consultations to change the Rules of Origin for a given product; Short Supply provision; Consultations Either the U.S. or Colombia may request consultations to consider whether the Rules of Origin should be revised to reflect the availability of originating fibers, yarns, or fabrics. The two countries shall endeavor to complete consultations within ninety days. Short Supply The U.S.-Colombia FTA Short Supply provision allows the U.S. to add fibers, yarns, and fabrics that are not available in commercial quantity in a timely manner. The Agreement requires that the U.S. will reach a determination on a short supply request within thirty business days. If the U.S. does not make the determination within thirty business days, then the request is approved. The U.S.-Colombia Agreement includes a Short Supply benefit for yarns, fabrics and apparel. A Short Supply item is defined as an input required by the Rules of Origin to be of U.S. or regional origin which is acknowledged to be not available in commercial quantities in a timely manner from U.S. or CAFTA suppliers. The initial FTA includes a list of eighteen yarns and fabrics which are eligible for the short supply benefit. See Appendix C: Short Supply list. The Rules of Origin applied to textile and apparel products using the Short Supply provision are explained below. 11

12 Short Supply Rules of Origin- Yarns and Fabric Fibers, yarns and fabrics in Chapters 51, 52, 54, 55, 58, and 60 imported using this Short Supply provision are subject to the following Rules of Origin: The product must be wholly formed and finished in the territory of one or both of the Parties. Any originating fibers and yarns used to manufacture the product may include up to ten percent by weight of non-originating fibers and yarns. For Short Supply products that use a combination of originating and non-originating components, elastomeric yarns used in the originating component must also be originating. Elastomeric yarns contained in the non-originating portion may be of any origin. Short Supply Rules of Origin: Apparel Apparel products in Chapters 61 and 62 imported using this Short Supply provision are subject to the following Rules of Origin: The product must be wholly formed and finished in the territory of one or both of the Parties. The fabric of the outer shell, excluding collars and cuffs, must be wholly made from: o One or more fabrics on the Short Supply list o One or more fabrics or knit to shape components formed in the territory of one or both o parties from yarns on the Short Supply list; or o Any combination of the fabrics listed above and originating fabrics. Any originating fabrics used to manufacture the product may include up to ten percent by weight of non-originating fibers and yarns. For Short Supply garments that use a combination of originating and non-originating fabrics in the outer shell, elastomeric yarns used in the originating component of the outer shell must also be originating. Elastomeric yarns contained in the non-originating portion of the outer shell of the garment may be of any origin. Short Supply Rule of Origin: Visible Lining, Narrow Fabric, Sewing Thread and Pocketing Fabric Fabric and Yarn on the Short Supply list may also be used to satisfy Chapter Rule 1, Chapter Rule 3, Chapter Rule 4 and Chapter Rule 5 for apparel. For Short Supply fabrics used to satisfy Chapter Rule 1 this rule requires that certain fabrics used as visible lining material in men s and women s suits, suit-type jackets, skirts, overcoats, carcoats, anoraks, windbreakers, and similar articles must be wholly formed and finished in the U.S. or Colombia. Likewise, Short Supply fabric and yarn maybe used to satisfy Chapter Rule 3, Chapter Rule 4 and Chapter Rule 5. Apparel goods in Chapter 61 or 62 may be originating, regardless of the origin of the narrow elastic fabric (under or 60.02) or sewing thread, or pocketing fabric if these components are on the Short Supply list included in the agreement. 12

13 Note: In addition to this rule, the good must still meet the Rules of Origin. For example, when Short Supply fabrics are used to satisfy the visible lining rule, the rest of the garment must meet the applicable Rules of Origin. This means that if the component that determines the tariff classification qualifies for duty-free treatment using the Yarn-Forward Rule of Origin, the garment must meet the applicable Chapter Rules and tariff shift rules to qualify for duty-free treatment. However, if the outer shell of the garment also will use Short Supply benefits, then the garment must meet the Short Supply Rules of Origin listed above. Short Supply Mechanism In addition to the eighteen items contained in Annex 3-B of the U.S.-Colombia FTA text, the agreement also directs the United States to create a process for the consideration of requests to either add or delete items from the Short Supply list. The agreement spells out the following parameters with respect to the consideration of requests to add items to the Short Supply list: Within 30 business days after receiving a request, the United States will add a fabric, fiber or yarn to the Short Supply list based on information that the item is not available in commercial quantities in a timely manner from a producer in the region. If no interested entity objects to the request, the item will be added to the list. The U.S. may extend the period of time for making a determination as to the commercial availability of an item requested to be added to the Short Supply list by 14 business days, as needed, in order to meet with interested parties and gather additional information. If the U.S. does not make a determination within 15 business days following either the 30 business days or 44 business days described above, the request shall be granted and the item added to the Short Supply list. Requests may be granted in unrestricted or restricted quantities. If added as a restricted quantity, within 6 months of adding an item to the CAFTA Short Supply list, the United States may eliminate the restriction. Additionally, the text states that any interested entity may request the removal of any item added to the Short Supply list six months after it is added to the list. The text mandates the United States make a determination about any request to remove an added item within thirty business days. The effective date of the removal is then six months after the announcement of the U.S. decision. Rather than just removing the item, the United States may also introduce a restriction on the quantity allowed for short supply benefits. 13

14 Safeguard Provision The FTA text includes a special Textile Safeguard provision, available for use by either Party to the agreement following implementation. Either country may initiate a Textile Safeguard action under the following circumstances: a textile or apparel good benefiting from preferential tariff treatment under this Agreement is being imported into the territory of a Party in such increased quantities, in absolute terms or relative to the domestic market for that good, and under such conditions as to cause serious damage, or actual threat thereof, to a domestic industry producing a like or directly competitive good The Textile Safeguard permits an importing Party (the U.S. or Colombia) to increase the duty rate on the good to a level that does not exceed the lesser of: The most-favored nation (MFN) applied rate of duty (at the time the measure is applied); and The MFN applied rate of duty in effect on the date of entry of the FTA. The initial Safeguard is set for two years, but each Safeguard action can be extended by an additional two years. Limitations The Textile Safeguard may not be applied to the same product more than once. In addition, the Textile Safeguard may not be applied in conjunction with any other Safeguard action. This includes the general Safeguard measure under the FTA, and any World Trade Organization (WTO) Safeguard measures. Once a Textile Safeguard ends, the subject product will be charged the duty rate that would have been in effect without the Safeguard. The Textile Safeguard provision is available only for five years after duties are eliminated for the subject product. Process Before imposing a Textile Safeguard, the importing country must conduct an investigation into the impact of imports from the exporting country by its competent authority. Each Party must notify the other of the procedures they will follow when conducting a Textile Safeguard investigation before initiating an investigation. If remedy action is taken, i.e. duties are reinstated, then the exporting Party is entitled to concessions from the importing Party having substantially equivalent trade effects or equivalent to the value of the additional duties expected to result from the textile safeguard measure. The FTA states that the U.S. and Colombia should consult to develop mutually agreed compensation. This compensation is generally limited to other textile and apparel goods, but the U.S. and Colombia may agree to expand that coverage. If the two countries are unable to agree on specific concessions 14

15 within thirty days after the Safeguard takes effect, then the exporting country is free to choose their own compensation. This compensation is not limited to textile and apparel goods. Folklore Provision The text of the agreement includes language providing potential duty-free benefits for folklore and handicraft items. These goods must first be identified and mutually agreed upon by the Parties of the Agreement and be one of the following: Hand-loomed fabrics; Hand-loomed goods made of such hand-loomed fabrics; Traditional folklore handicraft goods; or Handmade goods that substantially incorporate a historical or traditional regional design or motif. A historical or traditional regional design or motif includes, but is not limited to, depictions of traditional geometric patterns or native objects, landscapes, animals. A competent authority in the exporting country would be required to issue an official certification as directed by the U.S. Committee for the Implementation of Textile Agreements (CITA). Customs Cooperation Verification Either country may ask the other to investigate claims of transshipment, or to verify a claim of origin. In each case, the exporting country will conduct the investigation, but must allow the importing country to participate. A country can request an investigation regardless of whether an importer tries to claim duty-free benefits. The importing party may assist in the verification investigation by visiting the premises of the exporting Party or any other enterprise involved in the movement of the textile and apparel goods. To conduct such a visit, the importing Party must submit a written request to the exporting party twenty days before the proposed date of visit. The exporting party must respond within ten days of the receipt of request, and if consent is not provided, the importing Party may deny preferential treatment. The importing party may not deny preferential treatment due to a postponement of the visit. Following the verification visit, the competent authority representing the U.S. or Colombia must provide the importing party with an oral summary and written report of the results within approximately forty-five days of the visit. 15

16 If the information to support the verification of origin claim is insufficient, the importing party may suspend preferential treatment, or deny entry, to the good for which the claim has been made. In the case of a transshipment investigation where the information is deemed insufficient, the importing country may suspend preferential treatment, or deny entry, to any textile or apparel good exported or produced by the entity for which the claim has been made. Either Party is free to publish the identity of any person it determines to be engaged in circumvention of the agreement. The U.S. and Colombia also may publish the identity of a person or entity that fails to demonstrate that it produces or is capable of producing textile or apparel goods. Consultations At the request of either the U.S. or Colombia, consultation, between two or more parties, shall take place to resolve any technical or interpretive difficulties, or to discuss ways to improve Customs cooperation. Technical Assistance The U.S. and Colombia may request technical or other kinds of assistance from the other Party in applying this agreement. Certification and Documentation Requirements As with other FTAs, the U.S.-Colombia FTA requires that when an importer claims preference, they must do so based either on their own knowledge, or on a paper or electronic certification by the importer, exporter, or producer. There is no set format for this certification, but it must include the following information: Name and contact information for the importer; Name and contact information for the exporter; Name and contact information for the producer; HTS number and description of the product; Information supporting the origin claim; Date of certification; and The period covered by the certification. A certification is valid for four years. However, the importer must maintain records supporting the origin claim for a minimum of five years. These records should include documentation of the following: The purchase, cost, value, and payment for the product; The purchase, cost, value, and payment for all materials used to manufacture the product; and The production of the good in the form that is was exported. 16

17 The agreement also stipulates that the U.S. and Colombia may add more data elements to both of these lists. For the purpose of origin verification, Customs generally looks for information to prove that products were made where the importer says they were, based on the background materials. Documentation should include bills of sale, wage and hour records, shipping records, etc. Regional Cumulation In an effort to achieve regional integration, six months after the agreement is in force the Parties will discuss whether materials that are goods of other countries in the region may be counted as originating goods under the Agreement. Committee on Textile and Apparel Trade Matters The U.S. and Colombia agree to establish a Committee on Textile and Apparel Trade Matters. The Committee shall meet upon the request of any Party or the Free Trade Commission. 17

18 Appendix A: ATPDEA vs. Colombia FTA Side-by-side Provision Scope/coverage Market Access Expiration Rule of origin Trimmings/linings/accessories ATPDEA Apparel, textile travel goods, and footwear Unilateral program, duty free for qualifying goods entering the U.S. Legislated with a start and end date and has been renewed various times Apparel: yarn forward Travel goods: fabric forward Apparel: rules apply to the entirety of the good Findings and Trimmings, and Interlinings can be of non-u.s. foreign origin if the value of such does not exceed 25 percent of the cost of all the components of the garment. U.S.-Colombia FTA All textile, apparel, textile travel goods, and footwear Bilateral, reciprocal free trade agreement - immediate dutyfree access for qualifying U.S. goods entering Colombia and Colombian goods entering the U.S. No expiration date Textiles and apparel: yarn forward with exceptions Travel goods - fabric forward Textiles and Apparel: rules apply to the essential character of the good In addition to the essential character, the following must qualify: Visible lining fabrics Sewing thread (HS 5204, 5401) Pocketing bag fabric Narrow elastic fabrics De minimis 7% (by weight) 10% (by weight) Elastomeric yarn Elastomeric inputs from anywhere All elastomeric yarns in qualifying goods must be from the U.S. or Colombia Short Supply List 7 products 18 products Short Supply Process day determination day determination 18

19 process. Limited to U.S. process. Ability to add, remove, suppliers or make determinations in limited quantities. Both U.S. and Colombian suppliers can make offers to supply the products Nylon filament yarn Certain nylon filament yarn Certain nylon filament yarn may may be sourced from Mexico, be sourced from Mexico, Canada, and Israel Canada, and Israel (same) Viscose Rayon Filament Yarn Can be sourced from Can be sourced from anywhere - anywhere - on short supply list amended product specific rules of origin (same idea, different mechanism) Gimped yarn (HS 5606) U.S. or Andean made unless No requirement - can be under the de minimis level sourced from anywhere Brassieres (HTSUS ) 75% of the value must be U.S. cut-and-assemble Rule of Origin Folklore Consultations, no products Consultations for any future designated designations Footwear 35% regional value content rule of origin. Certain footwear articles not eligible under the ATPDEA 20% regional value content rule of origin with immediate dutyfree benefits. Certain footwear articles require U.S./Colombian uppers and follow a 55% regional value content rule and a 10-year duty phase out 19

20 Appendix B: Products Covered by Visible Lining Provision Fabrics used as visible lining material in suits, suit jackets, skirts, overcoats, carcoats, anoraks, windbreakers, and similar articles, must be wholly formed and finished in either the U.S. or Colombia, except for lining made of the following fabrics: HTS# Description Woven fabrics of artificial filament yarn, made Of cuprammonium rayon, Dyed Of yarns of different colors- the thread count of which per cm (treating multiple (folded) or cabled yarns as single threads) is over 69 but not over 142 in the warp and over 31 but not over 71 in the filling: Of cuprammonium rayon Of yarns of different color other - of cuprammonium rayon Woven printed fabric made of cuprammonium rayon The following table lists all of the apparel products that are subject to the Visible Lining rule: HTS# Description Men s and Boy s overcoats, etc. of cotton Men s and Boy s overcoats, etc. of man-made fibers Women's or girls' overcoats, etc. of wool or fine animal hair Women's or girls' overcoats, etc. of cotton Women's or girls' overcoats, etc. of man-made fibers Men s or boys ensembles of cotton Men s or boys ensembles of synthetic fibers Men s or boys ensembles of other textile materials Men s or boys suit-type jackets and blazers of wool or fine animal hair Men s or boys suit-type jackets and blazers of cotton Men s or boys suit-type jackets and blazers of synthetic fibers Men s or boys suit-type jackets and blazers of other textile materials Women's or girls' suits of synthetic fibers Women's or girls' suits of other textile materials Women's or girls' ensembles of cotton Women's or girls' ensembles of synthetic fibers Women's or girls' ensembles of other textile materials Women s or girls suit-type jackets and blazers of wool or fine animal hair Women s or girls suit-type jackets and blazers of synthetic fibers Women s or girls suit-type jackets and blazers of other textile materials Skirts and divided skirts of wool or fine animal hair Skirts and divided skirts of cotton Skirts and divided skirts of synthetic fibers Skirts and divided skirts of other textile materials Ski-suits Men s or boys overcoats, carcoats, capes, cloaks and similar coats of wool or fine animal hair Men s or boys overcoats, carcoats, capes, cloaks and similar coats of cotton Men s or boys overcoats, carcoats, capes, cloaks and similar coats of man-made fibers Men s or boys anoraks (including ski-jackets), windbreakers and similar articles (including padded, sleeveless jackets) of wool or fine animal hair Men s or boys anoraks (including ski-jackets), windbreakers and similar articles (including padded, sleeveless 20

21 jackets) of cotton Men s or boys anoraks (including ski-jackets), windbreakers and similar articles (including padded, sleeveless jackets) of man-made fibers Women's or girls' overcoats, carcoats, capes, cloaks and similar coats of wool or fine animal hair Women's or girls' overcoats, carcoats, capes, cloaks and similar coats of cotton Women's or girls' overcoats, carcoats, capes, cloaks and similar coats of man-made fibers Women's or girls' anoraks (including ski-jackets), windbreakers and similar articles (including padded, sleeveless jackets) of wool or fine animal hair Women's or girls' anoraks (including ski-jackets), windbreakers and similar articles (including padded, sleeveless jackets) of cotton Women's or girls' anoraks (including ski-jackets), windbreakers and similar articles (including padded, sleeveless jackets) of man-made fibers Men s or boys suits of wool or fine animal hair Men s or boys suits of synthetic fibers Men s or boys suits of other textile materials Men s or boys ensembles of cotton Men s or boys ensembles of synthetic fibers Men s or boys ensembles of other textile materials Men s or boys suit-type jackets and blazers of wool or fine animal hair Men s or boys suit-type jackets and blazers of cotton Men s or boys suit-type jackets and blazers of synthetic fibers Men s or boys suit-type jackets and blazers of other textile materials Women's or girls suits of wool or fine animal hair Women's or girls suits of cotton Women's or girls suits of synthetic fibers Women's or girls suits of other textile materials Women's or girls ensembles of wool or fine animal hair Women's or girls ensembles of cotton Women's or girls ensembles of synthetic fibers Women's or girls ensembles of other textile materials Women's or girls suit-type jackets and blazers of wool or fine animal hair Women's or girls suit-type jackets and blazers of cotton Women's or girls suit-type jackets and blazers of synthetic fibers Women's or girls suit-type jackets and blazers of other textile materials Skirts and divided skirts of wool or fine animal hair Skirts and divided skirts of cotton Skirts and divided skirts of synthetic fibers Skirts and divided skirts of other textile materials Ski-suits 21

22 Appendix C: Colombia FTA Short Supply List percent polyester crushed panne velour fabric of circular knit construction classified under tariff item aa 2. Cuprammonium rayon filament yarn classified under subheading Yarn of combed cashmere, combed cashmere blends, or combed camel hair, classified under tariff item aa 4. Fabrics classified under subheadings or , not of square construction, containing more than 70 warp ends and filling picks per square centimeter, of average yarn number exceeding 135 metric 5. Fabrics classified under subheadings or , not of square construction, containing more than 70 warp ends and filling picks per square centimeter, of average yarn number exceeding 135 metric 6. Fabrics classified under subheadings , , or , weighing less than 170 grams per square meter, having a dobby weave created by a dobby attachment, of average yarn number exceeding 135 metric 7. Fabrics classified under subheading , of square construction, containing more than 75 warp ends and filling picks per square centimeter, made with single yarns, of average yarn number 95 or greater metric 8. Fabrics classified under subheading , with the warp colored with vegetable dyes, and the filling yarns white or colored with vegetable dyes, of average yarn number greater than 65 metric 9. Ring spun single yarn of English yarn numbers 30 and 50, containing 50 percent or more, but less than 85 percent, by weight of 0.9 denier or finer micro modal fiber, mixed solely with U.S. origin extra long pima cotton, classified under subheading Micro-denier 30 and 36 singles solution dyed, open-end spun, staple spun viscose yarn, classified under subheading Certain combed compact yarns, of wool or fine animal hair, classified under subheadings , , or Fancy polyester filament fabric HTS tariff item: aa and bb Fiber Content: 100 percent Polyester Width: 58/60 inches Construction: Plain, twill and satin weaves, in combinations of 75 denier, 100 denier, 150 denier, and 300 denier yarn sizes, with mixes of 25 percent cationic/75 percent disperse, 50 percent cationic/50 percent disperse, and 100 percent cationic. Dyeing: Containing at least three different yarns, each of which is dyed a different color 13. Certain ring spun single yarns of English yarn number 30 and higher of 0.9 denier or finer micro modal fibers, classified under subheading percent cotton, 4-thread twill weave, flannel fabrics, of yarn-dyed, combed, and ring spun single yarns, of the specifications detailed below, classified under subheading Fiber Content: 100 percent Cotton Weight: g/m2 Width: centimeters Thread Count: warp ends per centimeter; filling picks per centimeter; total: threads per square centimeter Yarn Number: metric warp and filling, ring spun, combed; average yarn number metric Weave: 4-thread twill Finish: Of two or more and up to eight yarns of different colors; napped on both sides percent cotton, 4-thread twill weave, flannel fabrics, of yarn-dyed, combed, and ring spun single yarns, of the specifications detailed below, classified under subheading Fiber Content: 100 percent Cotton Weight: g/m2 Width: centimeters Thread Count: 25-22

23 26 warp ends per centimeter; filling picks per centimeter; total: threads per square centimeter Yarn Number: 35/2-36/2 metric warp and filling, ring spun; overall average yarn number metric Weave: 4-thread twill; Herringbone twill Finish: Of two or more yarns of different colors in the warp and filling; napped on both sides percent cotton, 4-thread twill weave, flannel fabrics, of yarn-dyed, combed, and ring spun single yarns, of the specifications detailed below, classified under subheading Fiber Content: 100 percent Cotton Weight: g/m2 Width: centimeters Thread Count: warp ends per centimeter; filling picks per centimeter; total: threads per square centimeter Yarn Number: metric warp; metric filling; overall average yarn number metric Weave: Double faced irregular 1 x 3 sateen Finish: Printed on one side on yarns of different colors; napped on both sides; sanforized percent cotton, 4-thread twill weave, flannel fabrics, of yarn-dyed, combed, and ring spun single yarns, of the specifications detailed below, classified under subheading Fiber Content: 100 percent cotton Yarn Number: 39/1-41/1 metric combed ring spun warp; 39/1-41/1 carded ring spun filling; overall average yarn number: metric Thread Count: warp ends per centimeter; filling picks per centimeter; total threads per square centimeter Weave: three or four-thread twill Weight: grams per square meter Width: centimeters Finish: (Piece) dyed, carbon emerized on both sides percent cotton, 4-thread twill weave, flannel fabrics, of yarn-dyed, combed, and ring spun single yarns, of the specifications detailed below, classified under subheading Fiber Content: 100 percent cotton Weight: g/m2 Width: centimeters Thread Count: warp ends per cm (25-26 x two plies) filling picks per cm (21-23 x two plies) thread per square cm (46-49 x two plies) Yarn Number: 34 metric warp and filling, ring spun and combed, two ply, average yarn number metric Weave: 2 x 2 twill Finish: Yarns of different colors; napped 23