DR-CAFTA Countries to Amend Rules for Thread, Nightwear, and Cumulation, Etc.
The Office of the U.S. Trade Representative has issued a press release announcing that a number of changes to the U.S.-Dominican Republic-Central America Free Trade Agreement (DR-CAFTA) were agreed to at the February 22-23, 2011 Free Trade Commission meeting in San Salvador, El Salvador.
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According to the USTR, these changes will advance regional trade and economic integration in the textile and apparel sector and encourage the textile and apparel supply chain in the Western Hemisphere to effectively face the challenge of competitors in Asia.
(These agreed-to changes are not yet in effect. See below for implementation details.)
Changes Affect Sewing Thread, Cumulation, Nightwear, Short Supply Provisions
At the Free Trade Commission meeting, USTR states that participants agreed to:
Certain monofilament sewing thread will have to be originating. The rules will be clarified so that certain monofilament sewing thread will be required to originate or be produced in the U.S. or the CAFTA-DR region in order for goods to qualify for preferential tariff treatment.
(According to the National Textile Association (NTA), the current rule, which requires sewing thread to originate, has a technical error that permitted monofilament sewing thread to be non-originating. However, the change will require all sewing thread, monofilament and plied, to originate.)
Increased cumulation limits. The rules will be amended to increase the cumulation limits in order to encourage greater integration of regional production through limited reciprocal duty-free access with Mexico and potentially Canada to be used in Central American and Dominican Republic apparel, as called for under the DR-CAFTA.
(The annual limits for cumulation would be increased to account for the inclusion of the Dominican Republic, as provided for under the Agreement. These limits allow specific quantities of designated apparel products to enter the U.S. from Central America and the Dominican Republic containing inputs from Mexico and potentially Canada.)
Nightwear, “short supply” list changes. The USTR press release states that the other changes relate to the treatment of certain nightwear, as well as the “short supply” list in the DR-CAFTA and how several products are treated in the context of that list, including elastomeric yarns, knit waistbands and knit-to-shape components.
The NTA blog includes additional details on these changes:
Elastomeric yarn -- “the current rule requiring originating elastomeric yarn even in the case of a fabric that is on the short supply list will be modified to allow non-originating elastomeric yarn in the case of a fabric on the short supply list (the requirement for originating elastomeric yarn for other fabrics will remain unchanged).”
Women’s sleepwear -- “a certain technical correction will be applied to the definition of women's sleepwear of woven fabric.”
Knit waistbands, components -- “certain waistband rib of the same construction of the collar and cuff of a sweatshirt will be allowed to be non-originating as is currently the case for the collar and cuff.”
Short supply list -- “while currently the short supply provision applies to only the single textile component that determines the tariff classification of a garment, this will be changed so that sewing thread, narrow elastic fabric, pocketing, and lining fabrics, if not available in the region, can be added to the short supply list, but only after undergoing the short supply procedures now in place to assure that only those items truly not available in the region are added to the list.”
(See ITT’s Online Archives or 02/25/11 news, 11022523, for BP summary on the joint statement from the DR-CAFTA ministers regarding the new initiatives resulting from the recent meeting.)
Changes Require Action by DR-CAFTA Countries Before Taking Effect
The cumulation increases described above would take effect on the date that the Parties have notified each other in writing that they have satisfied any legal requirements to implement those increases.
The other changes described above would take effect 60 days following the date on which the Parties to the Agreement have notified the Depository in writing that they have approved the modifications, in accordance with each Party’s legal procedures.
The National Textile Association reports in its blog that there may be a significant lapse in time between the ministerial agreement and implementation of the changes.
NTA blog article available here
Joint statement from Commission meeting available here
USTR press release available by emailing documents@brokerpower.com.