USTR Dismisses Idea of Ending Yarn-Forward in CAFTA

U.S. Trade Representative Katherine Tai reassured the members of the National Council of Textile Organizations that the Office of the U.S. Trade Representative has no interest in loosening rules of origin for clothing made in Central America and the Dominican Republic. Some have argued that the CAFTA-DR has not lived up to its potential because its rules are too restrictive (see 2112030045 and 2104140047).

Tai said in a recorded speech shown on March 30 that the administration is "challenging companies to invest in the textile sectors in El Salvador, Guatemala, and Honduras.

"A lack of economic opportunity is clearly one of the pressures behind migration, and we know that the textile and apparel sectors present significant opportunities for expanded employment, especially for women."

She added, "Make no mistake -- we know how important the yarn-forward rules of origin are for the success of our trade partnership with the region. Those rules provide the certainty that companies need to invest in and expand operations, which also creates good-paying jobs both in the United States and in Central America."

Even though Tai hailed the amount of investment that has flowed to Central America in recent years, CEO Kim Glas said, as she interviewed a top CBP official during the NCTO's annual meeting in Washington, that companies have been "dissuaded" from investing in the region because of the growth in direct-to-consumer sales from Chinese firms. When an individual consumer buys a $30 dress from China, there is no tariff paid on the apparel.

Glas pressed John Leonard, deputy executive assistant commissioner in the Office of Trade at CBP, to say that the volume of packages coming in under de minimis is undermining forced labor enforcement, weakening Section 301 tariff actions and leading to increased counterfeit sales.

"For us, we're a law enforcement agency. We can't really comment on policy," he said the first time she asked. The next time, he answered, "Whatever USTR and the Hill will do, we have to salute."

Leonard talked about how $5.2 billion worth of textiles has entered under the Type 86 pilot, and there were 161 million transactions captured in the 321 data pilot last fiscal year.

What CBP learned from both pilots will inform a rulemaking for data submissions in the de minimis space, which will allow the agency to "target better, enforce better, and frankly, facilitate better."

He said that CBP is "making a lot of progress" in gaining insight into what is coming into the U.S. in small packages, but added, "We still have a long way to go."

Glas also asked Leonard about the Uyghur Forced Labor Protection Act, and he told her that keeping cotton grown in Xinjiang out of U.S. commerce remains "a very, very high priority. The enforcement of it has been intense." He said that in the previous fiscal year, 191 shipments of textiles, apparel or footwear were detained, a total value of $2.5 million, and so far this fiscal year, 440 shipments were detained in that Hamonized Tariff Schedule section, with a value of $27 million.

One of the attendees at the conference asked Leonard if CBP would tell importers what documentation it would accept that cotton did not come from Xinjiang, or if the only way to clear a suspected shipment is through DNA testing.

"In terms of laying out our requirements on testing, we're not really there yet," he said, but Leonard said CBP is testing apparel to see if the cotton came from Xinjiang, and so are the companies that own the garments.