The Office of the U.S. Trade Representative has decided to hold off on tabling a proposal on rules of origin for textiles and apparel in the Trans-Pacific Partnership (TPP) talks because it needs additional time to fully carry out its consultation process with Congress and domestic stakeholders, according to a U.S. trade official.
“We will put forth our proposal when we conclude those consultations,” the official said. At the last negotiating round, TPP partners had agreed to exchange product-specific rules of origin in all areas before the sixth round of talks in Singapore.
Up to this point, USTR has given every indication that it will continue the precedent set in the most recent U.S. bilateral trade deals and push for a “yarn forward” rule of origin. This is supported by U.S. textile producers and opposed by U.S. retailers and apparel importers, who want a more liberal rule of origin, sources said.
Despite the common rule of origin, the FTAs the U.S. has recently negotiated vary in the degree of the exceptions they allow from the yarn-forward principle.
U.S. retailers and importers are hoping that this latest delay in tabling a U.S. proposal will provide them a greater opportunity to continue making the case that USTR should adopt a more liberal rule of origin. In addition to the rules of origin change, they seek a host of other changes, but there are few tangible signs at this point USTR will accommodate their demands.
On the rule of origin, apparel importers favor a “cut and sew” rule under which textiles could be sourced from any country and, so long as they are cut and sewn into apparel in a TPP country, qualify for TPP benefits.
The yarn-forward rule of origin means that the component determining an items classification must be woven or knit in the region from yarn spun or extruded there, and that the cutting or knitting to shape as well as the assembly of apparel must take place in that region. It is much harder to meet than the cut and sew rule of origin.
Related to rules of origin, importers are also insisting that a TPP deal should enable exporters in a particular TPP country to use inputs from any TPP country and still have their goods qualify for TPP tariff benefits. This issue is known as “cumulation,” and importers want a TPP deal to include full cumulation, without exceptions.
While many observers said they assumed that USTR would ask for full cumulation in the TPP talks, they said it was clear that USTR was still reviewing the issue. One source said USTR officials have made clear that it was “not a given” that a TPP deal would include full cumulation.