Clearit.ca's Blog on Customs Brokerage and News Updates
It has been over 6 months since CUSMA went into effect, with the primary function of renegotiating NAFTA and unifying the North American market into a single space for goods and services. The agreement has drawn a bit of critique from US manufacturers who believe they may be outbid by Mexican competitors — especially in the domain of textile and apparel.
If you are interested in learning more about other areas of CUSMA, this article is part of a series we’ve been doing on the topic. See more below:
Today, we will be taking a look at what CUSMA imposes for textile and apparel goods trade and why there is criticism on how it impacts these 3 countries.
To read the agreement on textiles in full, you may consult: Chapter 6: Textile and Apparel Goods
The FTA imposes special rules for trade around textiles, apparel, fibers, and yarns in the North American market. It is equally important to note that these regulations take precedence over the Multifiber Arrangement and any other textile agreements that involve the 3 countries.
As we stated above, there are some US textiles and apparel companies that have voiced concern over being priced out by Mexican manufacturers. Primarily due to base cost of labor as well as the US-imposed quotas on textiles.
Ultimately however, the Federal Government of Canada states on Chapter 6: Textiles and Apparel Goods:
“It will preserve the market access that Canada has to the U.S. and Mexican markets, including the tariff preference levels from which many Canadian producers benefit. The yarn-forward rules of origin, which are the foundation of the CUSMA rules of origin for textiles and apparel goods, have been maintained.
The CUSMA textiles and apparel chapter will also include unique enforcement provisions to effectively administer the rules of origin specific to the textiles and apparel industry. The chapter includes a streamlined approach to origin-verification visits and enhanced cooperation among the parties. The approach is designed to promote compliance and to allow the customs administrations to prevent fraudulent acts relative to this particular sector from going undetected. With these additional procedures to support the textile and apparel industry in North America, the parties are committing to work together in ensuring that only entitled goods within the region reap the benefits of the Agreement.”
In fact, the article by the Federal government (linked and quoted above), also includes a helpful guide of outcomes of the renegotiation of NAFTA. They are as follows:
- More flexibility for producers that use small amounts of non-originating materials.
- Expanded provisions to provide a facilitative pathway to origin for Indigenous textiles & apparel.
- Maintains the yarn-forward rules of origin
- Preserved trade under Canada’s tariff preference levels (TPLs)
- New measures designed to encourage the use of North American sewing thread, narrow elastics, pockets.
- Measures designed to increase transparency with the administration & allocation of TPLs by all parties.
- A methodology to administer the rules of origin-specific to textiles and apparel that is transparent and predictable.
- Enhanced cooperation measures & procedures to address the additional challenges faced by the customs administrations in ensuring compliance in this sector.
- Enhanced cooperation among the customs administrations, as well as a streamlined approach to origin verification visits.
After reading this summary, what do you think? Do you believe that this provides an equitable framework for all involved countries?
For additional information and consulting on CUSMA and the impact on textile and apparel goods, contact a customs broker. You may begin the conversation here.