Inter-American Development Bank, Brasilia, Sept U.S. Rules of Origin Mechanisms for FTA’s Richard Stetson U.S. Department of Commerce Office of Textiles and Apparel

2 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.

3 $ 93.2 billion

4 Leading Textile & Apparel Shippers to U.S. 1.China 2.Central America-Dominican Republic 3.Mexico 4.India 5.Indonesia 6.Vietnam 7.Bangladesh 8.Pakistan 9.Canada 10.Cambodia 36.Brazil

5 Central America-Dominican Republic (CAFTA-DR ) Mexico, Canada (NAFTA) Chile Singapore Australia Bahrain Morocco Israel Jordan U.S. Free Trade Agreements (FTAs)

6 Free Trade Agreements (FTA’s) Pending Peru Panama Colombia Oman Korea

7 Free Trade Agreements (FTA) … DUTY-FREE Entry IF a product meets the ‘RULE OF ORIGIN’ U.S. Customs House, New York City NO TARIFF !!!

8 ‘Yarn-Forward’ Rule of Origin Yarn  Fabrics  Apparel

9 WHY ‘YARN FORWARD’ U.S. Yarn - $ 15 billion industry U.S. Fabric - $ 8.1 billion export industry

10 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)

11 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 – ) NAFTA/Chile FTA

12 Short Supply Example: (CAFTA-DR) 75. Certain 2-way stretch woven fabrics HTS Subheading: Fiber Content: 60% to 75% Polyester / 20% to 35% viscose rayon /3% to 6% spandex Fiber 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: Various Weight: 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:

13 ‘CUMULATION’ Limited amount of inputs from other FTA partners (CAFTA- DR/NAFTA)

14 OPPORTUNITIES ? Investment Brazilian 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

15 On-Line Sources Office of Textiles and Apparel (OTEXA) U.S. Customs – Imports to U.S. U.S. ITC – Tariff Schedule U.S. Trade Representative – Trade Agreements

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17 Contact Richard Stetson Office of Textiles and Apparel U.S. Department of Commerce