CRS Report: Textile, Apparel Industries Disagree on Certain USMCA Provisions

While U.S. textile manufacturers and apparel industries “have expressed overall support” for the U.S.-Mexico-Canada Agreement, the two sectors disagree on several key provisions, including certain rules of origin and enforcement procedures, according to a March 5 report by the Congressional Research Service.

One disagreement centers on the existing NAFTA’s “yarn forward” rule of origin, the report said, which ensures that U.S.-made yarn and fabrics are supplying textile and apparel producers. The U.S. apparel industry is opposed to the rule and argues that apparel “should be considered of North American origin under a more flexible regional” standard, “which would provide maximum flexibility for sourcing, including the use of foreign-made yarns and fabrics,” according to the report. However, the USMCA, in a move the report said is favorable to the textile industry, would potentially bolster the yarn-forward rule by newly requiring “coated fabric, narrow elastic strips, and pocketing fabric” used in apparel to be made in a USMCA country to qualify for duty-free access to the U.S.

In another area of disagreement, the USMCA would allow exceptions to textile duty rules when certain materials are not available in member countries, continuing a NAFTA program that allows duty-free access for limited amounts of “wool, cotton, and man-made fiber apparel made with yarn or fabric produced or obtained from outside the NAFTA region,” the report said. Apparel producers, the report said, say this benefits regional producers by allowing them to use materials not widely produced in North America. The textile industry, however, “contends China is a major beneficiary” of this tariff preference level mechanism, according to the report, and “strongly pushed for its complete elimination.”

The USMCA would also add certain enforcement provisions, including “textile verification and customs procedures aimed at preventing fraud and transshipment” because of concerns that China is shipping textile and apparel products to the U.S. through Canada and Mexico, the report states. “Textile producers consider this a key improvement,” according to the report, “whereas the apparel industry questions the need for separate enforcement provisions.”