Inter-American Development Bank, Brasilia, Sept. 2007 U.S. Rules of Origin Mechanisms for FTA’s

Richard StetsonU.S. Department of CommerceOffice of Textiles and Apparel

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Office of Textiles and Apparel (OTEXA)

• Formulate U.S. textile and apparel trade policy

• Develop programs and strategies to improve the domestic and international competitiveness of the U.S. fiber, yarn, fabric, and apparel industries.

• Develop positions in free trade agreement negotiations using trade data and industry guidance.

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$ 93.2 billion

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Leading Textile & Apparel Shippers to U.S.

1.China 2.Central America-Dominican Republic3.Mexico 4.India5.Indonesia 6.Vietnam7.Bangladesh8.Pakistan9.Canada10.Cambodia

36.Brazil

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• Central America-Dominican Republic (CAFTA-DR )

• Mexico, Canada (NAFTA)

• Chile

• Singapore

• Australia

• Bahrain

• Morocco

• Israel

• Jordan

U.S. Free Trade Agreements (FTAs)

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Free Trade Agreements (FTA’s) Pending

• Peru

• Panama

• Colombia

• Oman

• Korea

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Free Trade Agreements (FTA) …

DUTY-FREE Entry

IF a product meets the

‘RULE OF ORIGIN’

U.S. Customs House, New York City

NO TARIFF !!!

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‘Yarn-Forward’ Rule of Origin

Yarn Fabrics Apparel

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WHY ‘YARN FORWARD’

• U.S. Yarn - $ 15 billion industry

• U.S. Fabric - $ 8.1 billion export industry

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Exceptions to Yarn Forward Rule of Origin

• De Minimis: 10% of the fibers and yarns of a product can be sourced from outside the region. Note: all elastomeric must be regional.

• Cut-and-Sew: Brassieres, Woven Boxer Shorts, Woven Nightwear, Woven Girl’s Dresses, and Luggage (CAFTA-DR)

• Tariff Preference Level (TPL)

• ‘Cumulation’ : Limited amount of inputs from other FTA partners (CAFTA-DR/NAFTA)

• Short Supply (Commercial Availability)

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Short Supply

• Fiber, Yarn, or Fabric not ‘commercially available’ in FTA region

• Can be sourced outside of the region for use in qualifying goods (duty-free)

• CAFTA-DR: – 30-day Process/Procedures – Short Supply List - 88 products (fibers,

yarns, fabrics – 09-27-2007)

• NAFTA/Chile FTA

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Short Supply Example:(CAFTA-DR)

75. Certain 2-way stretch woven fabrics

HTS Subheading: 5515.11.00 Fiber Content: 60% to 75% Polyester / 20% to 35% viscose rayon /3% to 6% spandexFiber length: 51 to 70 millimeter staple (2 to 2.75 inches)Yarn Number: Warp and filling: 50/2 to 68/2 metric wrapped around 225 metric spandex (30/2 to 40/2 wrapped around 40-denier spandex)Thread Count: 30 to 32 warp ends x 24 to 26 filling picks per square centimeter(76 to 81 warp ends x 60 to 66 filling picks per square inch)Weave Type: VariousWeight: 220 to 250 grams per square meter (6.5 to 7.4 ounces per square yard) Width: 142 to 148 centimeters (56 to 59 inches)Finish: Dyed; of yarns of different colors

- Sourced from Brazil- Cut and assembled in the CAFTA-DR region

- Shipped to the U.S.

- Duty-Free!!! entry to U.S.

Short Supply List:http://web.ita.doc.gov/tacgi/CaftaReqTrack.nsf

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‘CUMULATION’ Limited amount of inputs from other FTA partners

(CAFTA-DR/NAFTA)

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OPPORTUNITIES ?

InvestmentBrazilian textile firm Pettenati is investing $95 million in an elastic fabric manufacturing plant in El Salvador

FTA Provisions that allow for external sourcing of yarns and fabrics

• TPL• Short Supply Products• Cut-and-Sew Products

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On-Line Sources

• Office of Textiles and Apparel (OTEXA)

http://otexa.ita.doc.gov/

• U.S. Customs – Imports to U.S.http://www.customs.treas.gov/xp/cgov/import/textiles_and_quotas/

• U.S. ITC – Tariff Schedulehttp://usitc.gov/

• U.S. Trade Representative – Trade Agreements

http://www.ustr.gov/index.html

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Contact

Richard StetsonOffice of Textiles and ApparelU.S. Department of Commerce202-482-2582richard_stetson@ita.doc.gov