NCTO Advisory to the Trade — March 28, 2019
The USMCA, Side-by-Side Comparison with NAFTA

The USMCA, Side-by-Side Comparison with NAFTA

Background

In talks launched in August 2017, the Trump administration initiated a renegotiation of the North American Free Trade Agreement (NAFTA) with the aim of improving the deal to better serve American manufacturing interests.  NCTO supported the renegotiation effort as a means to modernize the 24-year-old agreement and make common sense updates designed to bring more employment, production, and investment back to U.S. manufacturing sectors such as textiles. Specifically, NCTO advocated for the following improvements as part of the NAFTA renewal negotiation.

  • Maintain yarn forward as the fundament rule-of-origin for our sector
  • Eliminate tariff preference levels (TPLs) on apparel, non-apparel sewn products, fabrics & yarn
  • Require use of NAFTA-origin components beyond the “essential character” of the fabric – i.e. sewing thread, pocketing & narrow elastics
  • Strengthen buy American laws for Dept. of Homeland Security textiles & clothing by closing the Kissell Amendment loophole for Canada & Mexico
  • Strengthen customs enforcement

We are pleased that the majority of our stated objectives were accomplished in the agreement reached between the parties late last year under what has come to be known as the United States-Mexico-Canada Agreement (USMCA).  Especially the fact that the basic yarn forward rule was preserved as the origin requirement for duty-free treatment.

What Does This Means for the U.S. Textile Industry?

The USMCA was signed by all three countries on November 30, 2018. Before it can take effect the legislative bodies of each of the three nations must enact it into law. In anticipation of USMCA going into effect, a number of NCTO member companies have inquired how the new agreement may affect their current regional manufacturing and trading arrangements. The side-by-side presentation below addresses some of the topics of most direct interest to U.S. textile manufactures. It is not intended to be an exhaustive analysis of all the changes from NAFTA to USMCA.

1. General Rules of Origin

 

NAFTA USMCA
1. The rule of origin for textile and apparel products is “yarn forward” meaning yarn must be extruded or spun in the region and all subsequent processes to the finished article must be done in the region. The yarn forward rule applies to only the component that determines the tariff classification of the finished good. This is also known as the “essential character” rule. 1. The yarn forward rule is unchanged, as it relates to the essential character fabric.
2. Certain visible linings (as defined in the agreement) must originate in the region and are under a fabric forward rule. 2. The visible lining rule is eliminated. Linings may be sourced outside the region
3. Narrow elastic fabric in apparel (Chapter 61 & 62) is exempt from the rules of origin 3. Effective 18 months from the date of entry into force of the agreement, apparel containing narrow elastic fabrics of subheading 5806.20 or heading 60.02 is originating only if such fabrics are both formed and finished from yarn in the territory of one or more of the Parties
4. Sewing thread used in the assembly of apparel (Chapter 61 & 62) is exempt from the rules of origin. 4. Effective 12 months from the date of entry into force of the agreement, apparel containing sewing thread of heading 52.04, 54.01 or 55.08, or yarn of heading 54.02 used as sewing thread shall be considered originating only if such sewing thread is both formed and finished in the territory of one or more of the Parties.
5. Pocketing fabric in apparel (Chapter 61 & 62) is exempt from the rules of origin. 5. Effective 18 months from the date of entry into force of the agreement, if apparel contains a pocket or pockets, the pocket bag fabric must be formed and finished in the territory of one or more of the Parties from yarn wholly formed in one or more of the Parties. NOTE, that for Blue Jeans the transition period is 30 months.
6. Coated or laminated fabrics used in the assembly of textile made-up articles (Chapter 63) are exempt from the rules of origin. Note that this exemption related to only fabrics that meats the tariff schedule definition of coated or laminated. 6. Requires coated fabrics classified under heading 5903 to originate in one of the parties on a fabric-forward basis for Chapter 63 articles, with the exception of the following headings and subheadings:

  • 6305 – Bags,
  • 6306.12 – Tarpaulins, awnings, and sunblinds of synthetic fibers,
  • 6306.22 – Tents of synthetic fibers, and Miscellaneous made-up articles of subheading 6307.90 that are not surgical towels or national flags.

 

2. Tariff Preference Levels (TPLs)

 

NAFTA USMCA
Cotton and MMF Spun Yarn
Canada to U.S., 11.8 million kgs

Mexico to U.S., 1 million kgs

Canada to U.S. 6 million kg
(49% reduction)
with 3 million kg sub-limits for acrylic and non-acrylic yarns eachMexico to U.S. 700,000 kg
(30% reduction)
Cotton and MMF Fabric and Made-up TPL
Canada to U.S., 38.6 million sme knit
Canada to U.S., 38.6 million sme wovenMexico to U.S. 18 million sme knit
Mexico to U.S. 6 million sme woven
Canada to U.S. 38.6 sme knit
Canada to U.S. 38.6 sme woven
(both unchanged)Mexico to U.S. 18 sme knit (unchanged)
Mexico to U.S. 4.8 sme woven
(20% reduction)
Cotton and MMF Apparel TPL
Canada to U.S. 88.3 million sme

Mexico to U.S. 45 million sme

Canada to U.S. 40 million sme
(55% reduction)Mexico to U.S. 45 million sme
(unchanged)
Wool Apparel TPL
Canada to U.S. 5.3 million sme
with a 5 million sme sub-limit for suitsMexico to U.S. 1.5 million sme
Canada to U.S. 4 million sme
(25% reduction)
with a 4 million sme sub-limit for suits (24% reduction)Mexico to U.S. 1.5 million sme (unchanged)

3. De Minimis: For textile and apparel goods classified in Chapters 50 through 63, the de minimis amount for non-qualifying fibers and yarns was increased from 7% under NAFTA to 10% under the USMCA by weight of the component of the good that determines its tariff classification. Within the overall 10% cap, the total weight of elastomeric content may not exceed 7%.

4. Other Changes

(a) The three countries agreed to amend the rules of origin under the USMCA to allow for the use of viscose rayon staple and filament and yarns of jute and hemp from outside the USMCA region due to lack of availability from North American producers.

(b) USMCA closed the Kissell Amendment loophole allowing textiles and clothing purchased by the Transportation Security Administration (TSA) to be made in Mexico.  Under the new agreement, these goods will have to be assembled in the United States with 100% U.S.-made inputs, including all fiber, yarn, and fabric.

(c) The new agreement contains a textile-specific chapter and enhanced textile Customs enforcement language.

2019 State of the U.S. Textile Industry Address

WASHINGTON, DC – Outgoing 2018-19 National Council of Textile Organizations (NCTO) Chairman Marty Moran delivered the trade association’s 2019 State of the U.S. Textile Industry overview at NCTO’s 16th Annual Meeting on March 21st at the Capital Hilton in Washington, DC.

Mr. Moran’s speech outlined (1) U.S. textile supply chain economic, employment and trade data, (2) the 2019 policy priorities of domestic textile manufacturers, and (3) other NCTO activities.

A link to his remarks as prepared for delivery are included in this press statement along with a link to a data infographic prepared by NCTO illustrating the current economic status of the U.S. textile industry.

Mr. Moran is CEO of Buhler Quality Yarns, Corp., a fine-count yarn supplier headquartered in Jefferson, Georgia with plants and/or offices in America, Europe, the Middle East and Asia.

NCTO is a Washington, DC-based trade association that represents domestic textile manufacturers.

  • S. employment in the textile supply chain was 594,147 in 2018.
  • The value of shipments for U.S. textiles and apparel was $76.8 billion in 2018.
  • S. exports of fiber, textiles and apparel were $30.1 billion in 2018.
  • Capital expenditures for textile and apparel production totaled $2.0 billion in 2017, the last year for which data is available.

 

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DOWNLOAD RELEASE

CONTACT:  Rebecca Tantillo

(202) 822-8026

www.ncto.org

 

 

 

NCTO Elects North Carolina Manufacturing CEO as 2019 Chairman

WASHINGTON, DC – The National Council of Textile Organizations (NCTO) held its 16th Annual Meeting March 19-21 in Washington, DC.  Elected as NCTO officers for 2019 are:

  • Chairman – Leib Oehmig, CEO of Glen Raven, Inc.
    • Oehmig is CEO of Glen Raven, Inc., based in Glen Raven, North Carolina. Glen Raven is an innovative leader in textile research and development, dying, spinning, weaving and finishing, and distribution and logistics.
  • Vice Chairman – David Roberts, CEO of CAP Yarns, Inc.
    • Roberts is CEO of CAP Yarns, Inc., based in Clover, South Carolina. CAP Yarns is a specialty yarn manufacturer and a leader in developing unique yarns for the knitting and weaving industry.

NCTO is a Washington, DC-based trade association that represents domestic textile manufacturers.

  • U.S. employment in the textile supply chain was 594,147 in 2018.
  • The value of shipments for U.S. textiles and apparel was $76.8 billion in 2018.
  • U.S. exports of fiber, textiles and apparel were $30.1 billion in 2018.
  • Capital expenditures for textile and apparel production totaled $2.0 billion in 2017, the last year for which data is available.

# # #

Download Release

CONTACT:  Rebecca Tantillo

(202) 822-8026

www.ncto.org

 

 

 

Made in the USA: inside one company’s all-American supply chain

Click to below to read the article:

Made in the USA: inside one company’s all-American supply chain

FT Magazine Life & Arts, February 21, 2019, Rana Foroohar

NCTO Advisory to the Trade — March 7, 2019
President Donald J. Trump’s Trade Policy Agenda

President Donald J. Trump’s Trade Policy Agenda

Background

On March 1, 2019, U.S. Trade Representative Robert Lighthizer delivered President Trump’s Trade Policy Agenda and Annual Report to Congress, outlining how the Administration’s trade policies are benefitting American workers and contributing to the strongest economy in decades.

“Thanks to President Trump’s leadership, the United States is pursuing trade policies that are more favorable to American workers,” said Ambassador Lighthizer. “These actions are contributing to a stronger U.S. economy, which has generated more jobs and higher wages for American workers,” continued Lighthizer.

To continue these economic gains, in 2019 the Trump Administration has announced it will —

  1. Urge Congress to approve the new United States-Mexico-Canada Agreement (USMCA).
  2. Launch new trade negotiations with Japan, the European Union, and the United Kingdom.
  3. Continue to press China to address long-standing U.S. concerns about unfair trade practices.
  4. Defend America’s interests at the World Trade Organization and vigorously enforce U.S. trade laws.

What Does This Means for the U.S. Textile Industry?

The four priorities set forth above by the Administration are shared by the domestic U.S. textile industry.

  1. We too call for quick congressional passage of the United States-Mexico-Canada Agreement (USMCA) in that a majority of our stated objectives were accomplished in the agreement reached between the parties.
  2. We welcome the opportunity to gain greater access to important developed overseas markets. Reducing tariff and non-tariff barriers will help put U.S. textile manufacturers on a much more even footing than we may currently enjoy with some these trading partners. We are already engaged with the Administration to assure that any agreement with the UK, EU, or Japan have the strong yarn forward rule of origin, provide for extended duty phase-out for sensitive products, and include effective customs enforcement language.
  3. NCTO supports the ongoing Trump administration’s Section 301 case against China’s intellectual property abuses. We have advised, however, that placing tariffs on finished products, such as apparel and home furnishings, would bring greater benefit to the North American textile supply chain. NCTO was also successful in removing products such as rayon fibers and most textile machinery.
  4. NCTO appreciates the Administration’s efforts to reform the WTO to create a fairer global trading regime and the Administration’s commitment to use all the legal tools available to protect our industries from unfair foreign competition.

Conclusion

The timing of the release of the President’s 2019 Trade Policy Agenda — two weeks before the NCTO Annual Meeting in Washington, D.C. — couldn’t be better. Policy-makers from the highest levels of the Administration will be present to speak to NCTO members, and also, to hear from NCTO members about these important trade policies that directly affect U.S. textile production and employment.