FTA benefits would be nullified by new interpretation of elastomeric yarn rule
June 15, 2009
World Trade\Interactive
U.S. Customs and Border Protection is proposing to reinterpret the elastomeric yarn provisions included in U.S. free trade agreements, a move that would effectively nullify duty-free treatment for many textile and apparel goods. Items most likely to be affected by this change include socks, panty hose, brassieres, elastic strip, fabrics and any textile or apparel articles that are subject to a preference rule that does NOT require originating yarn. Importers and other interested parties have until July 12 to comment on this proposal.
On June 12, 2009, CBP announced its intention to revoke binding ruling NY N028235 pertaining to the origin of elastomeric gimped yarn in CAFTA-DR hosiery. Despite the fact that this yarn is not required to originate in a CAFTA-DR country under the agreement’s rule of origin for hosiery, CBP’s proposal would essentially impose such a requirement and disqualify hosiery made with non-originating elastomeric gimped yarn from duty-free treatment when imported into the U.S. Moreover, CBP is proposing to interpret the elastomeric exception to the CAFTA-DR de minimis rule as a free-standing requirement for all elastomeric yarn (gimped or not) to originate in a CAFTA-DR country regardless of the rule of origin for the finished goods.
This change will have a significant negative impact across the board for all textiles and apparel under all FTAs. For example, under CBP’s proposed interpretation, even garments subject only to a “cut and sew” rule under CAFTA-DR and not required to meet any requirements concerning the origin of yarns, fabrics, visible lining, narrow elastics, sewing thread or pocketing will still have to contain originating elastomeric yarn in the foreign fabric out of which the garments are cut and sewn. The elastomeric yarn rule in many other FTAs is very similar to the language in CAFTA-DR, and this revised interpretation is likely to affect textiles and apparel currently imported duty-free under those agreements as well.
For information on whether your products might be affected by this proposal and how you can comment on it, please contact Nicole Bivens Collinson at (202) 216-9307 or Elise Shibles at (415) 986-1088.
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