Outlook for the Trans-Pacific Partnership USFIA Washington Trade Symposium July 30, 2015
Trans-Pacific Partnership (TPP) Australia Japan Peru Brunei Malaysia Singapore Canada Chile Mexico New Zealand United States Vietnam
Trans-Pacific Partnership (TPP) Goals for USFIA A high-standard, 21 st -century agreement Duty-free on Day One Broad and immediate market access for apparel and fashion products Rules of origin that align with business realities, specifically the global value chain
Status of TPP Chief Negotiators and Trade Ministers are meeting in Maui Goal is to finish the negotiations
Status of TPP Many outstanding issues for the fashion industry including: Apparel Rules of Origin Market Access Trade Enforcement Rules
Status of TPP Market access issues in sensitive political areas: Tobacco Japan - agriculture and autos Pharmaceuticals specifically, who will have access to medicine? Labor commitments
Status of TPP Political issues in the United States and some other TPP countries, too: Transparency Currency manipulation restrictions Elections
Outline of TPP Provisions for the Fashion Industry
Outline for TPP Short Supply List cut and sew Rule of Origin for products made using yarns and fabrics not available in the U.S. or other TPP countries Market Access schedule to eliminate duties Rules of Origin defines what products will qualify as originating Enforcement special regulations to eliminate false claims and potentially restrict imports
Short Supply List 194 Items on Short Supply List only 8 are temporary
Short Supply List Cotton knit blouses, tops, and pullovers: 6 knit fabrics of cotton and cotton blends and 2 cotton yarns Man-made fiber knit pullovers: 17 knit fabrics, including panne velour, fleece, and jersey constructions and of a variety of manmade fiber blends, including polyester/rayon and 2 man-made fiber yarns)
Short Supply List Synthetic knit dresses: 8 knit fabrics of a variety of man-made fiber blends Synthetic woven dresses: 8 woven fabrics of man-made fiber blends, including polyester/rayon and polyester/wool Artificial fiber knit dresses: 5 knit fabrics of rayon/polyester and rayon/polyester spandex
Short Supply List Anoraks: 6 man-made fiber waterproof fabrics Knit Man-made fiber men s shirts: 12 knit fabrics of different constructions and 3 manmade fiber yarns
Short Supply List Woven synthetic trousers: 18 woven fabrics of synthetic fibers, including blends with wool and stretch polyester/wool and polyester/rayon Wool trousers: 11 stretch wool blend fabrics
Short Supply List Cotton knit negligees and bathrobes: 4 cotton knit fabrics blended with vegetable fibers and with man-made fibers Swimwear: 4 fabrics, including a printed knit fabric of polyester or nylon fibers and three woven fabrics of polyester and of cotton/nylon
Short Supply List Performance Outerwear: 16 types of breathable, waterproof, or other types of woven fabrics Men s and boys cotton dress shirts and women s and girls cotton blouses: an extensive list of high-end cotton fabrics
Short Supply List Dress Shirts Men s & boys shirts classified as 6205.20 Women s & girls blouses classified as 6206.30 Cotton woven fabric classified in: 5208.21, 5208.22, 5208.23, 5208.29, 5208.31, 5208.32, 5208.33, 5208.39, 5208.41, 5208.42, 5208.43, 5208.49, 5210.29, 5210.31, 5210.32, 5210.39, 5210.41, 5210.49
Short Supply List Dress Shirts Fabric description: Bleached, dyed or of yarns of different colors, weighing not more than 200 g/m2, or yarn count 67 nm or finer for single yarn, or of yarn count 135 nm or finer per ply for multiple yarns (with exception of interlining materials)
Short Supply List Dress Shirts Other requirements include: Top stitched collar (whether or not button down) Full front opening May have one chest pocket, no other pockets Shall not have knit collars, knit cuffs, knit waistbands or any means of tightening at the bottom
Short Supply List Dress Shirts If long sleeves either button cuff or fold-over cuffs that would require cufflinks or other closure device Men s & boys shirts can be long sleeved or short sleeved Women s & girls blouses can be long sleeved, short sleeved or sleeveless
Short Supply List Dress Shirts May have a back yoke but no front yoke No lining (this does not exclude interlining or double layers of fabric required for cuffs, collars, etc.) Embroidered logo and/or initials are permitted on one or more of the following: chest, chest pocket, collar, or cuffs
Short Supply List Dress Shirts Shirts and blouses shall be appropriate for wearing under a suit, suit-type jacket or blazer
Market Access Duties are phased out with a complicated schedule A Basket: duty-free on Day One B Basket: five-year graduated phase-out, reduced by 10% each year
Market Access X Basket: Most restrictive X 50: 50% duty cut on Day One. No further reductions until 10 years later for Knits and 12 years later for Wovens X 35: MOST SENSITIVE PRODUCTS. 35% duty cut on Day One. No further reductions until 10 years later for Knits and 12 years later for Wovens X 35 Step: 35% duty cut on Day One. Drops another 15% at end of Year 5. Zero duty at end of 10 years for Knits and 12 years for Wovens
Market Access A Basket Dresses Anoraks Swimwear
Market Access - Swimwear Will have duty-free access based on Short Supply List Women's & Girls: 6112.41 Infants: 6111.30
Market Access Swimwear 4 Fabric Options for Duty Free One Knit Fabric for Women's/Girls/Infants Printed warp knit fabrics of polyester or nylon fibers (classified in 6004.10, 6004.90 and 6005.34), between 3% and 21% elastomeric yarns (engineered for chlorine resistance)
Market Access - Swimwear 3 Woven Fabrics to use for 6211.11 and 6211.12 1) Polyester woven fabrics of staple and/or filament yarns in chapters 54 and 55, containing between 3% and 21% elastomeric yarns engineered for chlorine resistance
Market Access - Swimwear 3 Woven Fabrics to use for 6211.11 and 6211.12 2) Polyester fabrics of staple and/or filament yarns, treated for water resistance such that under a head pressure of 600 millimeters, not more than 1.0 gram of water penetrates after 2 minutes (AATCC Test Method 35-1985)
Market Access Swimwear 3 Woven Fabrics to use for 6211.11 and 6211.12 3) Cotton fabric classified in 5210 and 5211, containing 51% to 70% cotton and 30% to 49% nylon, treated for water resistance such that under a head pressure of 600 millimeters, not more than 1.0 gram of water penetrates after 2 minutes (AATCC Test Method 35-1985)
Market Access - Anoraks 6 MMF Waterproof Fabrics One example is MMF woven fabric laminated to a breathable waterproof membrane of either Hydrophilic Monolithic or Hydrophobic Polyurethane membrane or PTFE; treated with a DWR finish. May contain third layer as a lining laminated to waterproof membrane.
Market Access - Anoraks Performs to 5,000 mm hydrostatic pressure test (ISO 811) and moisture vapor transfer result of max 60RET (ISO 11092) Used for coats, anoraks (including ski jackets), windbreakers & similar articles, pants, and nonpadded or insulated vests Classified in 6201, 6202, 6203, 6204 & 6210
Rules of Origin Proposal from U.S., Mexico and Peru is mainly yarn-forward ROO for Apparel
Rules of Origin Major Exceptions: Brassieres Apparel made from Chapter 53 Inputs
Rules of Origin Special Rules Require TPP Inputs: Sewing Thread Narrow Elastic Fabrics Elastomeric Yarn must originate in TPP
Current Sourcing Trends and TPP
Trans-Pacific Partnership (TPP) Y/E March 2015 Total Apparel Only Million $ % Share Million $ % Share World 108,552.5 100.00 82,527.4 100.00 TPP Total 18,102.6 16.7 15,059.8 18.25 Vietnam 10,209.3 9.40 9,532.2 11.55 Mexico 4,793.1 4.42 3,730.8 4.52 Canada 1,381.8 1.27 589.5 0.71 Peru 643.0 0.59 605.3 0.73 Malaysia 547.3 0.50 518.7 0.63 Japan 430.6 0.40 43.6 0.05 Australia 34.5 0.03 14.3 0.02 New Zealand 26.3 0.02 0.5 0.001 Singapore 14.8 0.01 13.2 0.02 Chile 17.5 0.02 7.3 0.01 Brunei 4.4 0.004 4.3 0.01
Top U.S. Apparel Imports from TPP Y/E March 2015 World TPP Countries Category Description Million $ Million $ % Share 347 339 338 639 348 638 648 Cotton Trousers, Shorts, etc., Men s and Boys Cotton Knit Shirts & Blouses, Women s and Girls Cotton Knit Shirts, Men s and Boys Man-Made Fiber Knit Shirts & Blouses, Women s and Girls Cotton Trousers, Shorts, etc., Women s and Girls Man-Made Fiber Knit Shirts, Men s and Boys Man-Made Fiber Trousers, Shorts, etc., Women s and Girls 6,010.6 1,646.4 27.39 6,323.3 1,417.8 22.42 6,294.6 1,233.2 19.59 4,355.3 1,098.2 25.22 6,210.4 1,071.0 17.25 3,392.5 746.0 21.99 2,720.6 694.7 25.53 659 Man-Made Fiber Other Apparel 4,514.6 649.4 14.38 647 Man-Made Fiber Trousers, Shorts., etc., Men s and Boys 2,296.0 624.5 27.20 636 Man-Made Fiber Dresses 3,394.6 556.9 16.41
Potential Impact of TPP on the Fashion Industry
2015 Industry Benchmarking 72% say their company will source more from TPP. 48% say their company will strategically adjust their supply chain based on TPP. 44% wish the TPP short-supply list would be expanded. 20% say TPP will have no or minimal impact on their business practices.
THANK YOU! Julia K. Hughes +1 202 419 0444 jhughes@usfashionindustry.com www.usfashionindustry.com @usfashion