TPP Rules of Origin for Textiles and Apparel – “Yarn-Forward”

Q. Will there be any conditions on “import duty free access” to the U.S. Market for these products? How about the “yarn forward” issue?

A.

Disagreements over the “yarn forward” ROO (Rule of Origin), which requires the TPP nation to use a TPP member-produced yarn in textiles in order to receive duty-free access, has pitted the National Council of Textile Organizations, who support the requirement, against the US Chamber of Commerce and Wal-Mart. http://basc.berkeley.edu/?p=101

National Council of Textile Organizations

Supporting Trade Policy & Programs that Benefit U.S. Textile Workers The Western Hemisphere is by far the largest export market for U.S. yarns and fabrics. This is not by accident but is the result of U.S. government policy that has encouraged the exportation of U.S. yarns and fabric to the region in exchange for duty free entry of the final finished product—a piece of apparel.

The U.S. textile industry has strongly backed these government initiatives because they have preserved and expanded export markets for U.S. textile products and U.S. textile workers.

The key to making these initiatives work for U.S. textile producers is something called the “yarn forward rule of origin.” The “yarn forward” rule means that all products in a garment from the yarn stage forward must be made in one of the countries that is party to the agreement. For example, under the CAFTA FTA “yarn forward” rule, the yarn, fabric, sewing thread and the final garment itself must be made in the region, either in the United States or one of the six Caribbean or Central American countries that is party to the agreement. In simple terms, the “yarn forward” rule means that the benefits of the agreement accrue to regional producers rather than outside players such as China.

Retail Leaders Industry Association (RILA)

RILA supports open economic engagement, including in textile and apparel trade. Open competition in textiles and apparel creates healthier industries in both the United States and in our trading partners. RILA believes it is time for U.S. trade policy to reflect commercial realities of global supply chains, and the reality that 98 percent of apparel sold in the United States is imported. Specifically, RILA believes that the U.S. should negotiate flexible rules governing trade in textiles and apparel in the ongoing Trans Pacific Partnership (TPP) talks with Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam.

American Manufacturing Trade Coalition

AMTAC strongly supports the basic yarn-forward rule of origin for textiles and apparel and recommends its adoption for the TPP. This is the accepted rule for the industry and is incorporated into nearly all U.S. free trade and preference arrangements dating back to NAFTA. This is a logical rule because it reserves the benefits for the signatories to the agreement and also aids in Customs enforcement versus a value-added rule. AMTAC strongly opposed value-based rules.

U.S. Association of Importers of Textiles and Apparel

Rules of Origin (Yarn Forward)

USA-ITA recognizes that a regional negotiation that includes at least seven nations will be extremely complex, especially in light of the existing U.S. FTAs with Chile, Singapore, Australia and Peru. However, this negotiation provides an important opportunity to either harmonize the varying rules of origin or to offer businesses the flexibility of choosing among the rules to take advantage of those that will provide the greatest benefits. That is how negotiators can ensure that the TPP truly expands trade in every direction.

Further, the U.S. should seriously reconsider the yarn forward rule for apparel that has characterized previous FTAs. Since fashion is a large part of what USA-ITA member companies look for when making sourcing decisions, the FTA should include the less restrictive, and less complex Breaux-Cardin origin rules.

USA-ITA notes that it is essential to provide “cumulation” among the TPP participants and encourages the U.S. negotiators to consider expanding cumulation to allow integration of resources among all regional yarn and fabric suppliers who have preferential access to the U.S. market. Specifically, the United States should link the TPP to all of the FTAs the United States has in the Western Hemisphere, not just to Peru and Chile. Such a cumulation provision is essential to creating an FTA that encourages integration of existing resources in East Asia and in this hemisphere.

The DR-CAFTA was the first Free Trade Agreement to include cumulation, and USA-ITA is greatly concerned that the last Administration failed to expand on this important and valuable precedent. The U.S. also should apply cumulation benefits to all products, with no quantitative restrictions on the qualifying products. The creation and expansion of sourcing flexibility among textile and apparel producers offers a win-win outcome among these trading partners, which ultimately should mean a better export market for U.S. brands. USA-ITA members care as much about being able to develop new markets as being able to procure competitive products for the U.S. market.

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