Yarns and Fabrics Should Be Duty-Exempt 'Components,' Trade Groups Tell Congress

Trade groups for clothing companies and retailers would like to see Congress take up legislative language that would allow for yarns and fabrics to be treated as duty-free "components," the group said in an April 23 letter to leadership of the Senate Finance and House Ways and Means committees. "The proposed program would firmly root U.S. inputs into global production supply chains by signaling that U.S. content -- whether that content comes in the form of a recognized stand‐alone component or is otherwise incorporated into a finished article -- is exempt from an applicable import duty," the U.S. Hide, Skin and Leather Association said in a news release. The groups, which also include the U.S. Fashion Industry Association, the American Association of Exporters and Importers and the National Retail Federation, said "congressional action is needed now."

Currently, "the value of U.S. components is not assessed the U.S. tariff when an article that incorporates those components is imported," which is meant to incentivize exports of U.S. components, the groups said. "Unfortunately, this policy does not broadly allow exemptions for U.S. exports that are further processed abroad before being assembled into a product. This means significant U.S. value that is included in articles made abroad is charged the full U.S. tariff when imported," which is a "disincentive for the use of U.S. textiles and leather in articles made abroad."

Legislative action "would also undo a status quo that is largely inconsistent," the groups said. CBP interprets "yarns and fabrics as not being 'components' and therefore are not eligible for current provisions for duty exemption," they said. "At the same time, CBP does consider U.S. sewing thread and U.S. narrow elastic fabric (which are yarns and fabrics, respectively) to be U.S. components and therefore eligible for deduction."

Other materials, such as metals, allow for importers to deduct the cost of U.S. materials, "even if those materials were further processed abroad, from the value of the imported article," the groups said. Congress should use those metal provisions in HTS 9802.00.60 as a model "to provide similar exemptions for U.S. exports of textiles and leather." The groups also submitted a "draft proposed amendment to the HTS to accomplish this concept."

Email ITTNews@warren-news.com for a copy of the letter.