TPP Locks Down Textile Flexibilities for Travel Goods, Trousers
The U.S. and the other 11 Trans-Pacific Partnership parties as expected locked down several flexibilities to the yarn forward rule of origin in the final text of the pact, including an exemption for travel goods and an earned income allowance program for Vietnamese trouser trade. But the outcome on textiles and apparel reflects a genuine compromise between the interests of U.S. domestic producers and importers, and all sides have tentatively applauded the deal, according to interviews with a number of textile and apparel lobbyists.
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The Office of the U.S. Trade Representative appears to have lived up to pledges it made to domestic textile producers, said Auggie Tantillo, president of the National Council of Textile Organizations. “So far, so good. But like everybody else we need to do an intense verification and review of the text,” he said. “Unlike previous experiences we’ve had with free trade agreements, where there was too many surprises not in a positive way, this time there doesn’t seem to be any surprises.”
The pact, which was released a week ago (see 1511050020), puts travel goods on the short supply list (here), the primary flexibility to yarn forward in the pact. The roughly 190 items on the list only need to undergo a single transformation in a TPP country in order to qualify for the pact’s preferences. Tantillo said the short supply list still needs to move through some “technical corrections.”
Textile travel goods, handbags and “similar containers” in Chapter 42 of the Harmonized Tariff Schedule are included. Those products fall under subheadings 4202.12, 4202.22, 4202.32 and 4202.92. The TPP travel good exemption comes on the heels of congressional approval for travel goods in the Generalized System of Preferences (see 1510200008).
Expectations that a final pact would include the earned income allowance program for Vietnam apparel trade surfaced in May this year (see 14052702). The ultimate outcome (here) says that importers can bypass yarn forward rules for men’s trousers if they purchase 1.3 square meters of U.S. fabric for every one square meter of Vietnamese fabric used. For women’s trousers, the ratio is 0.75 square meter of Vietnamese fabric for every meter of U.S. fabric.
The pact also puts a cap on use of the program for men’s trousers at 15 million square meters in year one of implementation with a gradual rise to 20 million square meters over a ten-year period. Women’s trousers are covered in tariff lines 6204.62.20 or 6204.62.40, and men’s in 6203.42.20 or 6203.42.40. Those terms put in place far more relief for importers of women’s trousers, said the lobbyists. A number of them, however, said importing retailers won’t be able to take advantage of the program due to the ratios at play. A number of importers originally speculated that the ratios would have to be far looser to benefit industry due to the geographical distance between the U.S. and Vietnam.
The final ratios largely reflect a compromise between the U.S. and Vietnam, rather than a formula for industry use, said David Spooner, a lobbyist with Barnes & Thornburg. “From everything I’ve been told, there’s no magic to the 1.3 and 0.75 outcomes,” he said. “It’s just the back and forth of negotiations.” Another lobbyist said the credits for the whole program are transferrable between men’s and women’s trousers, emphasizing the ability to transfer credits in the event of, for instance, failing to import product under the men’s trouser cap.