NCTO Receptive to Border Adjustability Discussions

The National Council of Textile Organizations CEO Augustine Tantillo sounded receptive to the idea of border adjustments that are being considered as part of a tax reform effort in Congress, during a Feb. 9 interview on the just-style website (here). "We're very excited about the possibility of having that discussion to determine whether we can eliminate that fundamental disadvantage" for U.S. textile producers in the current tax system, he said. American textile companies export about 35 percent of goods produced per year, "so if the U.S. government is going to suggest to us that 'We will rebate taxes on 35 percent of your output,' that's a strong strong pull," he said. U.S. Fashion Industry Association President Julia Hughes, who was also interviewed, voiced concern with the controversial proposal, as have other apparel groups and retailers (see 1701120028).

Hughes said such border adjustments would be particularly hard on her industry. While beneficial to the apparel manufacturers in the U.S., clothing companies that import would "not only be paying the highest duties, but also not be able to deduct the cost of those goods and to be paying higher tax rates, for some companies 100 percent higher," she said. "We are opposed to the proposals" and are working to explain the costs to the consumer that would result. Hughes and Tantillo offered support for corporate tax reform generally.

There's also general support for an update to NAFTA, Hughes and Tantillo said. Hughes said the USFIA has started discussing what specific features of NAFTA could use revisions, but "we're a little concerned that we may need to be defensive to protect the things that are working in this Western Hemisphere supply chain, but absolutely it's a discussion we're ready to have." Tantillo also believes "NAFTA works," though it could use a review and some modernizing, he said.

Another area where the NCTO and the USFIA differ is on the issue of "yarn forward rules of origin" in NAFTA, which Tantillo said contains a number of "loopholes." Those rules of origin are largely "a great success" and want to keep that "baseline concept of a yarn forward rule encased in NAFTA," Tantillo said. He said the NCTO sees the exceptions to those rules, which Hughes described as "the good stuff," as damaging to its members. "We take a different perspective on that," Hughes said. "This is a global supply chain" and the yarn forward rules can keep companies from staying nimble when there's a product that comes outside the Western Hemisphere, she said. An updated NAFTA might benefit from a flexible short supply provision to allow for changes in consumer demand, Hughes said.