Textiles and apparel are key industries for the economies of each Party and account for significant trade among the Parties. Chapter 6 of the USMCA is dedicated to textile and apparel goods and includes new provisions to incentivize greater North American production of textiles and apparel. Chapter 6 also strengthens customs enforcement and facilitates broader consultation and cooperation among the Parties to the USMCA.
II. EXECUTIVE SUMMARY
The USMCA strengthens existing North American supply chains for textiles and apparel and opens new opportunities for exports of U.S. yarns, fabrics, and apparel, through four main avenues:
Chapter 6 contains the agreements and provisions related to specific rules of origin established for textile and apparel goods, to determine the applicability of the tariff and non-tariff-based benefits that the USMCA offers, including the following topics:
III. LEGAL DISCUSSION
Below is a summary of the most significant articles of Chapter 6:
Article 6.1: Rules of Origin and Related Matters. The USMCA states that the Rules of Origin and Origin Procedures established in Chapters 4 and 5 apply to all textile and apparel goods except as specifically provided in Chapter 6. Particularly, to be considered as originating, textile goods with both originating and non-originating materials classified in Chapters 50-60, or heading 96.19, may not have more than 10 percent of the total weight of the good made up of non-originating materials (elastomeric content may not exceed 7 percent). Likewise, to be considered as originating, textile goods classified in Chapters 61-63 with both originating and non-originating fibers/yarns in the component that determines their classification may not have more than 10 percent of the weight of such component made up of non-originating fibers/yarns (elastomeric content may not exceed 7 percent). Also, the value of goods packaged in sets for retail sale must correspond to originating goods by at least 90 percent. (Rules to calculate the value of goods and sets are set out in Chapter 4).
Article 6.2: Handmade, Traditional Folkloric, or Indigenous Handicraft Goods. Duty-free treatment by the importing Party shall be given to hand-loomed fabrics of the cottage industry, hand-made cottage industry goods made of such fabrics, traditional folklore, or indigenous handicraft goods.
Article 6.3: Special Provisions. Article 6.3 refers to the Annex 6-A Special Provisions, which contain special provisions applicable to certain textile and apparel goods, as summarized below:
Article 6.4: Review and Revision of Rules of Origin. The USMCA allows Parties to initiate a consultation to consider if certain goods should be subject to different rules of origin, regarding the supply of fibers, yarns, or fabrics, provided that the requesting Party demonstrates substantial production in its territory for that particular good, which means proving its domestic producers can timely supply commercial quantities of the good in question. An initial assessment shall be made within 90 days, to the extent possible. If the Parties agree that the fiber/yarn/fabric is not commercially available, they shall work on a proposal for a rule change and proceed with domestic implementation of such within 60 days of initial assessment. An agreement by the Parties will supersede any prior rule.
Article 6.6: Verification. The Article 6.6 provisions allow the Parties to conduct, through their customs administrations, a verification regarding textile goods to verify qualification for preferential treatment, or through a request for a site visit. Site visits may be requested to verify the qualification of a good for preferential treatment or customs offenses regarding textile/apparel goods, allowing Parties to request access to records and facilities relevant to the claim or to the offenses, as applicable. For a site visit, the importing Party shall provide the host Party with the following information at least 20 days before the planned site visit: i) proposed dates; ii) the number and location of exporters and producers to be visited; iii) whether assistance is requested; iv) the suspected offenses to be verified; and v) whether the importer claimed preferential treatment. The host Party shall acknowledge receipt of a site visit notification and may request information to facilitate the site visit.
Some rules that the importing Parties must follow when conducting site visits are set out in Article 6.6.7:
Upon completion of the site visit, the importing Party must, if requested by the host Party, inform the host Party of its preliminary findings, and within 90 days of a request, provide a written report of the results (reports to exporters/producers shall be provided upon request as it pertains to each one). If a Party intends to deny preferential tariff treatment as a result of a site visit, it shall provide notice of such intent to the importer/exporter/producer with information of the preliminary results of verification at least 30 days in advance, allowing them to submit additional information to support the claim. It is important to note that an importing Party may not reject claims for preferential treatment on the sole grounds of lack of assistance or information.
Additionally, Article 6.6.11 states that if verifications indicate a pattern of conduct by exporters/producers of false/unsupported representations that a certain good qualifies for preferential treatment the importing Party may withhold preferential treatment for identical goods of that person until it is demonstrated that goods do qualify for such treatment.
Article 6.7: Determinations. Article 6.7 states that preferential treatment may be denied: a) for reasons established in Article 5.10 (Determinations of Origin); b) if it has not received sufficient information to confirm that the good qualifies for preferential treatment; or c) if the importing Party is unable to conduct site visits because access to facilities or relevant records is denied, or if the importing Party is otherwise prevented from completing the site visit.
Article 6.8: Committee on Textile and Apparel Trade Matters. Article 6.8 provides for the creation of a Textiles Committee to review the implementation of Chapter 6, which will function as a consultative committee on technical or interpretive difficulties that may arise under Chapter 6, and to discuss ways to improve the effectiveness of cooperation under Chapter 6.
Additionally, the Textiles Committee shall assess the benefits and risks of restrictions on trade, including business and employment matters, and the market for textile goods of each Party, and shall consult before amendments are made to the Harmonized System in order to prepare proposed updates to Chapter 6.
In comparison to the NAFTA, the USMCA incentivizes the production of textiles and goods within the USMCA region by strengthening customs enforcement and facilitating broader consultation and cooperation among the Parties. Nevertheless, it also maintains and relaxes some provisions related to non-originating materials used in the production of textile and apparel goods, such as increasing the de minimis content of non-originating fibers and yarns from 7 percent to 10 percent of the weight of the good. Chapter 6 is expected to favorably impact the textile and apparel industries in the USMCA region, and to result in an increase of textile and apparel exports by the Parties.
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