Yarn House Rules

All fashion industry eyes are on Vietnam where the seventh round of the Trans-Pacific Partnership (TPP) trade negotiations are taking place this week.

Reps from nine countries, including the U.S., have gathered in Ho Chi Minh City in hopes of coming to an agreement on a trade deal before the Asia-Pacific Economic Cooperative (APEC) meeting in November.

Fashion industry execs are paying close attention to the U.S. stance on textile and apparel import issues, particularly the rule of origin:

Importers plan to push negotiators in Vietnam for a “flexible” rule of origin that does not restrict where the fabric and yarns are made in order to qualify for duty free benefits. The rule-of-origin debate has pitted apparel importers against the U.S. domestic textile industry, which is advocating a “yarn forward” rule of origin that would require apparel to be made of fabric and yarn supplied by the U.S. or the other TPP partner countries.

“When you have a rule that is more restrictive and burdensome, it discourages trade and investment from occurring,” said Steve Lamar, executive vice president of the American Apparel & Footwear Association, who will also be in Vietnam this week, adding that AAFA member companies often use U.S. yarn and fabric and forgo duty free benefits in other trade deals because the rules are so burdensome.

But a yarn forward rule is a linchpin for U.S. textile industry support.
A bipartisan group of 52 House lawmakers, many from traditional textile states, recently sent a letter to U.S. Trade Representative Ron Kirk making their support of any deal contingent upon a yarn-forward rule of origin, exclusion of certain products from tariff reduction or elimination, tariff reductions for specific sensitive imported products versus phaseouts for groups of products, and strong customs enforcement language to prevent transshipments from China.

“It makes no sense in our opinion to disenfranchise textile producers in the U.S. so Vietnam [a nonmarket economy that subsidizes its exports] can source product components from China and ship products to the U.S. duty free,” said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition. “What we know is that the yarn forward rule of origin will create an environment that gives support to expanding our export markets.”