FAQ: How can textiles and apparel companies prepare for TPP?

Government officials negotiate the framework of preferential trade agreements. It is up to the business associations and the companies to prepare for and negotiate the actual business deals that create trade. As the TPP nears conclusion, companies need to prepare for the opportunities in the new business environment. One thing to keep in mind is that “Free Trade Agreements” are preferential trade agreements for the member countries, and products must meet “rules or origin” in order to qualify for the benefits of lower import duties.

Below is a brief framework for textiles and apparel companies to start planning for the TPP environment.

Import Tariff rates to USA

1.  What are the existing tariff rates for apparel imports?

A basic introduction to this complicated topic is as https://www.amchamvietnam.com/30448637/faq-how-to-determine-u-s-import-duty-rates/

U.S. Customs and Border Protection (CBP) makes the final determination of what the correct rate of duty is, not the importer. For very specific duty information on a particular item you may request a Binding Ruling.

“The U.S. International Trade Commission-Tariff Database, is an interactive data base that will enable you to get an approximate idea of the duty rate for a particular product. Please be aware that the duty rate you request is only as good as the information you provide. The actual duty rate of the item you import may not be what you think it should be as a result of your research.  http://dataweb.usitc.gov/scripts/tariff.asp

“Note: The USITC is responsible for publishing the Harmonized Tariff Schedule of the United States (HTS); U.S. Customs Service is responsible for administering the tariff and processing import entries.

CAUTION: This database is being provided as an advisory tool only. For complete legal product descriptions and enacted/proclaimed tariff rates to be used on Customs Service documents, you must consult the current HTS and any supplements thereto, as well as any applicable Customs regulations and decisions. Brief item descriptions have been provided for user convenience only and should NOT be relied upon for classification purposes. NOTE: this means you should hire a consultant / U.S. customs broker to help you get a legally binding “advance ruling” from the U.S. Customs & Border Protection (CBP). Click the following link to see details: request a Binding Ruling.

http://hts.usitc.gov/current

Section XI:

Textile and Textile Articles

Chapter 61Articles of apparel and clothing accessories, knitted or crocheted
Chapter 62Articles of apparel and clothing accessories, not knitted or crocheted
Chapter 63Other made up textile articles; sets; worn clothing and worn textile articles; rags

2.  What are the proposed tariff reductions for apparel imports under TPP?

The TPP has not been made public yet, so the proposed tariff reductions for apparel imports from Vietnam to the U.S. are not yet available.

The TPP must be published on http://www.ustr.gov 60 days before the TPP is signed.

Yarn Forward Rule

1.  What are the specific conditions in Yarn Forward Rule?

2.  Based on the rules, which % of value addition should be from VN yarn?

3.  Cotton fiber is imported and made into yarn. Does cotton fiber imports have to be from TPP member country?

4.  There are exceptions to the rule.

  • What are the specific products/apparel categories that will be exempted from this rule

  • Will the Short Supply exemption can be used for Vietnam apparels

  • Will the exemption automatically apply if value addition is above say x%

Once again, the TPP has not been made public yet, so we don’t have the details on the Yarn Forward Rule.

However, we have heard that the TFA Rules of Origin in textiles/textiles articles (yarn-forward) may be like the CAFTA-DR FTA Rules of Origin

Click the below links for

CAFTA-DR FTA Chapter 4. Rules of Origin and Origin Products (20 pages)

https://ustr.gov/sites/default/files/uploads/agreements/cafta/asset_upload_file240_3921.pdf

CAFTA-DR FTA Annex 4.1 Product Specific Rules of Origin, especially … Section XI Textiles and Textiles Articles (Chapters 50 – 63), pp 4.1-44 ~ 4.1-66

https://ustr.gov/sites/default/files/uploads/agreements/cafta/asset_upload_file23_3943.pdf

Amendment on Textiles (40 pages)

https://ustr.gov/sites/default/files/uploads/agreements/cafta/asset_upload_file286_13391.pdf

And …

General Question

1.  Which industry in Vietnam will gain most, out of TPP (Mobile, Apparel, Footwear, etc etc)

2.  Will Vietnam apparel industry can actually gain because of Yarn Forward Rule?

3.  What is the government authority, we can meet to discuss this further.

4.  Does the Vietnam government given any concessions to Textile producers to increase manufacturing yarn in Vietnam.

5.  Are there any consultants in USA that we can work with on TPP rules

  1.        The industries in Vietnam that will gain the most out of TPP, according to analysis done in 2013, are the apparel and footwear industries. The analysis will be updated as soon as the text of the TPP is available. Click the following link for more details. https://www.amchamvietnam.com/30448638/faq-what-is-the-potential-impact-of-tpp-on-vietnams-economy/ and https://www.amchamvietnam.com/wp-content/uploads/2013/05/130328-2.2.e.-Petri-TPP-Vietnam-24mar13-v2-web.pdf see especially slides 17 and 18.
  1.        Yes, the Vietnam apparel industry can actually gain because of the Yarn Forward Rule. There has been about $3 billion of FDI (foreign direct investment) in textiles in Vietnam between 2013 and 2015, to meet the rules of origin yarn-forward requirement, so there will be more value added production in Vietnam. Click the following links for a summary of the FDI reports that I have seen:  TPP Update: $1.6 billion planned investment in textiles to prepare for TPP; Indian FDI in Vietnam to benefit from TPP; $1.2 billion more FDI to meet TPP yarn-forward rules-of-origin; Highlights of FDI in Vietnam to meet TPP yarn forward rules of origin
  2.        Who is the government authority … ? It would best to ask VCCI and individual business associations, such as VITAS, to arrange for a meeting with the Ministry of Industry and Trade.
  1.        Does the Vietnam government given any concessions to Textile producers to increasing manufacturing yarn in Vietnam. I am not aware of the details, but I am sure that it must be in accordance with the Investment Law.
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