California Apparel News

The free-trade agreements with South Korea, Colombia and Panama could be approved by Congress as early as this summer.

In many ways, all three agreements are similar in their treatment of textiles and apparel.

But there are a few quirky items that make each one slightly different. Take Panama, for example. That country negotiated the right to make guayaberas, a casual, boxy shirt that has large patch pockets on the front and pleats, out of non-regional fabrics and still receive duty-free status when exported to the United States. Colombia and South Korea, however, didn’t get that provision.

And socks made in Panama don’t get tariff- free status right away. They are subject to a five-year tariff phase-out. But there is one exception. Effective immediately, socks made of U.S. yarns and knit into tube socks in the United States can be sent to Panama to have the toe stitched and returned to the United States free of duty.

“I don’t think there is anything in these trade agreements that makes them more difficult than others,” said Elise Shibles, an associate in the San Francisco office of Sandler, Travis & Rosenberg, a law firm that specializes in free-trade agreements.

Shibles held a webinar recently discussing the various free-trade agreements and what distinguishes them. In each free-trade agreement, apparel is primarily subject to a yarn-forward provision, meaning the yarns and fabric must come from those regions or the United States to qualify for duty-free status.

Manufacturers must keep records for five years to verify the origin of their goods. Also, factory inspections can be done by U.S. Customs and Border Protection as well as by each country’s government to verify the capability of each factory and its specialty.

Other major points highlighted in the webinar included:

KOREA

bull; Korea will immediately reduce its tariffs on 98 percent of textile and apparel lines with the rest phasing out in five years, according to a U.S. Trade Representative spokesperson.bull; The United States will immediately reduce tariffs on 87 percent of textile and apparel lines with the rest phasing out over a 10-year period, according to the U.S. Trade Representative’s office.bull; The yarn-forward concept, meaning regional yarns must be used, applies to all woven fabric, apparel and made-up articles, such as bed sheets, while a fiber-forward rule is in force for yarn and knit fabric. Also, visible linings have a fabric-forward designation. There is a 7 percent de minimis allowance for foreign fibers or yarns, but elastomeric yarns must come from the region.bull; Viscose filament yarn can come from outside the region because it is not made in any great quantities in either the United States or South Korea.bull; Fabric not produced commercially in the region, such as velveteen and Harris tweed, can be used for woven apparel and receive duty-free status.bull; Certain cotton and man-made fabrics can be used from outside the region to make boys’ and men’s woven shirts.bull; There is a short-supply provision where manufacturers can ask that fabric not produced in the region qualify for duty-free status. Requests are made to the U.S. government. A review is done and often granted within six weeks.

The textile enforcement provision in this free-trade agreement is stricter than in most free-trade agreements because of domestic concerns about a higher tendency for goods to be transported from outside South Korea but listed as made in South Korea. U.S. customs officials can visit factories and ask for documentation proving what was made. And the South Korean government is required to have its trade associations do annual profiles of companies and list their production capacity and capabilities. Smaller sub-contractors that don’t work directly with U.S. companies also must be certified.

COLOMBIA

bull; There is an immediate phase-out on apparel and textile tariffs.bull; There is a yarn-forward rule on woven fabric, apparel and made-up articles and a fiber-forward rule for knit fabric and yarn.bull; All visible linings have a fabric-forward rule while pocketing is yarn-forward.bull; Any narrow elastic fabric in a garment can use yarn from anywhere but must be knit and woven in the region.bull; Nylon filament yarn can come from Mexico, Canada or Israel to make up a textile or garment and still receive duty-free status.bull; Viscose filament yarn is not made in great quantities in either the United States or Colombia and can come from outside the region to make up duty-free goods.bull; Sewing thread must come from the region, but man-made staple fiber sewing thread does not have to come from the region.bull; There is a 10 percent de minimis allowance for foreign fibers or yarns, but elastomeric yarns must come from the region.bull; Bras cut and sewn in Colombia or the United States don’t have to use regional yarns or fabrics for duty-free status.bull; U.S. customs officials may inspect factories and request documents to verify production orders.bull; There is a short-supply provision where manufacturers can ask that fabric not produced in the region qualify for duty-free status. Requests are made to the U.S. government. A review is done and often granted within six weeks.

PANAMA

bull; There is an immediate phase-out on apparel and textile tariffs, except for socks.bull; There is a yarn-forward provision for woven fabric and apparel and a fiber-forward provision for yarns and knit fabric.bull; Visible linings have a fabric-forward rule.bull; Narrow elastic fabric and sewing thread must originate in the region.bull; Pocketing has a yarn-forward requirement.bull; There is a 10 percent de minimis allowance for foreign fibers or yarns, but elastomeric yarn must come from the region.bull; Nylon filament yarn can come from Mexico, Canada or Israel to make up a textile or garment and still receive duty-free status.bull; Boxers, pajamas, sleepwear, bras, girls’ cotton woven dresses other than corduroy and girls’ man-made fiber dresses not containing silk or wool can use non-regional yarns or fabrics and qualify for duty-free status.bull; There is a short-supply provision where manufacturers can ask that fabric not produced in the region qualify for duty-free status. Requests are made to the U.S. government. A review is done and often granted within six weeks.bull; Because of Panama’s numerous freetrade zones around the Panama Canal and Panama City, there will be special monitoring of these areas.