NCTO Advisory to the Trade — April 18, 2019
The Berry Amendment

The Berry Amendment

 Background

The Berry Amendment is a statutory requirement that restricts the Department of Defense (DoD) from using funds appropriated or otherwise available to DoD for procurement of food, clothing, fabrics, fibers, yarns, other made-up textiles, and hand or measuring tools that are not grown, reprocessed, reused, or produced in the United States. The Berry Amendment has been critical to maintaining the safety and security of our armed forces, by requiring covered items to be produced in the United States. Further, the Berry Amendment has been critical to the viability of the textile and clothing production base in the United States. Some NCTO member companies are direct contractors to DoD and have first-hand knowledge of the Berry Amendment. Others are subcontractors subject to the Berry rules. Others may be interested in learning more about the opportunities that Berry creates for U.S. fiber, yarn, fabric, apparel, and sewn products manufacturers. This brief paper is provided solely for educating the general public about the Berry Amendment as it relates to textiles and clothing. It is not intended to give specific advice in relation to the terms of military contracts.

 

The History of the Berry Amendment

Since 1790, when President George Washington told the first session of Congress that the “safety and interest” of a free people “require that they should promote such manufactures as tend to render them independent of others for essential, particularly military supplies,” Congress has taken a special interest in the health of the manufacturing sector.

A military domestic sourcing requirement for uniforms was passed by Congress in 1941, as part of the Fifth Supplemental DoD Appropriations Act. Prior to World War II Congress understood war was on the horizon and the original intent of the restriction was to ensure U.S. troops wore uniforms produced in the United States.

In 1952 Congressman Berry of South Dakota introduced an amendment to the DoD’s Buy American restrictions. Prior to Congressman Berry’s amendment only food and certain clothing products were covered in the restrictions. Berry’s amendment expanded the DoD’s Buy American restrictions to cover all clothing, cotton and wool (man-made fibers were subsequently added). The Amendment was included in annual defense spending bills until it was made permanent in Fiscal Year 1994 by section 8005 of Public Law 103-139. It was subsequently codified as 10 U.S.C. 2533a in 2002 by section 832 of Public Law 107-107.

 

Common Questions about the Berry Amendment

Q. Wouldn’t the taxpayers of the U.S. benefit from giving DoD freedom to acquire textile and clothing from the lowest cost source, even if that means using foreign textiles and clothing?

A. The question is aimed at misdirecting attention away from the reason for the Berry Amendment. As the history above points out, from the founding of our nation, wise leaders have understood that a free people will be free only as long as they can supply their military to maintain that freedom. The 1941 law, which later became the Berry Amendment was passed in recognition of the fact that the U.S. would only be able to win monumental conflicts, such as WWII, if it is not dependent on foreign sources for critical defense materials.

Q. Does the Berry Amendment require the U.S. government to always buy American-made textiles and clothing.

A. No, the Berry Amendment applies to the U.S. Department of Defense only. There is a similar domestic sourcing requirement for the Department of Homeland Security (DHS), it is called the Kissell Amendment. Other U.S. government agencies have more flexibility with regard to acquisitions.

Q. Why just those two, DoD and DHS?

A. Under international trading rules as governed by the World Trade Organization (WTO), countries are normally required to make government procurement contracts open to supply from both domestic and foreign sources. However, these same WTO rules allow countries to restrict military and security procurement to domestic sources, only. Due to their national security role, DoD and DHS qualify for this exception. It is also important to note that in future trade agreements the U.S. needs to continue to reserve the right to require domestic sourcing in the case of the departments that are vital to our national defense — DoD and DHS.

Q. What about textile and clothing articles that DoD purchases for use by foreign defense agencies?

A. The Berry Amendment applies to all funds “made available” to the Defense Department. That includes Department of Defense procurement for a Foreign Military Sale (FMS) where the funds were provided by the customer country. So, for example, when the Afghan government provides money to DoD to acquire uniforms for the Afghan National Police, those uniforms are subject Berry Amendment U.S. sourcing requirements.

Q. Are there any exception to Berry?

A. There are two significant exceptions.

The SAT, or Simplified Acquisition Threshold, sets the base monetary amount at which Berry applies. Acquisitions below the SAT are exempt from Berry. Section 807 of the Ronald W. Reagan National Defense Authorization Act (NDAA) for Fiscal Year 2005 requires an adjustment every 5 years of acquisition-related thresholds for inflation using the Consumer Price Index (CPI). The last such adjustment was in 2010, raising the SAT to $150,000. No inflation-related adjustment has since been implemented. However, the 2018 NDAA ignored the current low rate of inflation and increased the SAT to $250,000.

A DNAD, or Domestic Non-Availability Determination, to the Berry Amendment may be granted if DoD determines that items grown, reprocessed, reused, or produced in the United States cannot be acquired as and when needed in a satisfactory quality and sufficient quantity at U.S. market prices. There is language in the legislative history of the Berry Amendment indicating that Congress intended for Defense agencies to exercise extreme caution in granting waivers, a fact that has been noted by the Government Accountability Office (GAO).

Q. Who can make Domestic Non-Availability Determinations?

A. The seriousness of Congress and the DoD in maintaining the Berry Amendment and protecting it from a proliferation of DNADs is the fact that just a limited number of officials have the authority to issue a DNAD, including The Under Secretary of Defense (Acquisition, Technology and Logistics), The Secretary of the Army, The Secretary of the Navy, and The Secretary of the Air Force.

Q. Where can I find a list of DNADs?

A. There is no list as such, as each determination relates to a particular set of circumstances and does not create a blanket exception to Berry with regard to some input. Questions about DNADs are best directed to the contracting officer.

 

Conclusion.

Since the days that the Greatest Generation fought to preserve our freedom from threats around the globe, our fighting men and women have been assured that whatever other hardships they may have to bear while protecting us, they would, at least, be assured of clothing, tents, shelters, and other textile products necessary to get the job done. Through all this time, the U.S. textile industry has worked with our military to equip those brave men and women with the highest quality textile products incorporating emerging smart textile technology.

NCTO Advisory to the Trade — April 4, 2019
Free Trade Agreement Benefits and YOU

Free Trade Agreement Benefits and YOU

Background

The United States has 14 free trade agreements (FTAs) with 20 nations. Two — NAFTA with Mexico and Canada, and DR-CAFTA with six Central American/Caribbean partners — are regional.  The rest are bilateral, meaning they each are between the U.S. and one partner nation. All but two — the agreements with Israel and with Jordan — contain a yarn forward rule of origin that promises, and delivers, potential benefits to U.S. fiber, yarn, and fabric producers who understand the complex rules of each agreement.

This brief paper is intended to give an overview of U.S. free trade agreements as they relate to textile and apparel products. The information presented is meant to serve as a guide. Only the agreement text and the customs regulations issued to implement the agreement are definitive. For complex issues or where interpretation is required, U.S. exporters or importers should seek professional assistance or an advanced ruling from the customs administration in the country to which they are exporting.

Understanding and Benefiting from FTAs

1. First, you must understand that each agreement has its own set of rules, and even within a regional agreement such as NAFTA, the rules may vary slightly from nation to nation. When considering participation in an FTA sourcing program do not assume that because a particular model works within one FTA that it will work in another. For example, say you have been shipping U.S.-made fabric to Colombia for assembly into apparel that will enter the U.S. duty-free. You have been using third-country rayon filament yarn, which is exempt from the yarn forward requirement because no one makes it in the region. Now, say your customer wants to move that operation to Mexico. The apparel would not quality for duty-free entry under NAFTA, because NAFTA has no such exemption for rayon filament. (By the way, the new USMCA, which NCTO supports, amends the rule to reflect the current state of unavailability of filament rayon in the region.)

2. Next, understand that each agreement is a “silo,” with limited exceptions; there is no “mix and match.” For example, you may ship U.S.-made fabric of U.S.-made yarn to Mexico for assembly into tailored apparel containing a lining fabric made in Canada, and that apparel will enter the U.S. duty free. But if you try to do that in, say, the Dominican Republic, the apparel will not qualify for DR-CAFTA because Canada is not part of that agreement.

3. Setting aside the agreements with Israel and Jordan, all the rest of the U.S. FTAs have the yarn forward rule of origin. However, it is important to know (a) how the yarn forward rule applies and (b) what, if any, exceptions there are.

(a) In all cases the yarn forward rule applies to the single fabric component that determines the tariff classification of the article in question. This is referred to as the essential character fabric.  Beyond that, some agreements have additional requirements relating to secondary textile components such as linings, narrow elastic fabrics, pocketing, and sewing thread. These rules can vary from agreement to agreement, so never assume that what is permissible in one agreement will be permissible in another. Further, as agreements are revisited to update them for changes in trade flow, and to reflect knowledge gained from seeing how other agreements have worked, these rules may be modified. For example, NCTO was successful in improving the USMCA over NAFTA by adding narrow elastic, pocketing, and sewing thread requirements. These concepts were first introduced in later agreements like CAFTA and have proven to benefit the regional supply chair, including U.S. textile producers.

(b) Each agreement has its own, unique list of exceptions to the yarn forward rule. In “trade-speak” we call them “derogations.” Derogations from the rules of origin may include such things as a cut-and-sew rule for certain very specific articles of apparel, tariff preference levels for a limited quantity of otherwise non-qualifying trade, cumulation with non-partner countries for specific inputs (such as the rule allowing certain nylon filament yarn from Canada, Israel, or Mexico in some FTAs), and a de minimis allowance for a small amount of non-originating fiber or yarn.

Why all this Complexity?

While in some ways it might appear easier to have the same rules for each agreement, there are very sound reasons for this complexity. Each agreement is the result of the compromises reached between the U.S. and the member partner(s); perhaps the U.S. decided to grant a particular concession to one nation in order to bring the negotiation to completion, or as a reflection of historic bilateral trading patterns, that certainly does not justify granting the same concession in another FTA merely for the sake of uniformity. Uniformity would, almost certainly, result in settling on the lowest common denominator and would erode hard-fought gains to require, as much as practical, regional, including U.S.-made, textile inputs to products enjoying FTA benefits.

Conclusion.

The United States is especially well-positioned globally in fiber, yarn, fabric, and non-apparel sewn products markets; it was the world’s second largest individual country exporter of those products in 2018.  The most important U.S. export markets by region are our FTA partners, NAFTA ($11.7 billion in U.S. exports) and DR-CAFTA ($3.5 billion in U.S. exports).

NCTO has long supported the yarn forward rule for textiles and apparel, with extremely limited derogations, as the key to creating opportunities for producers throughout the supply chain and reserving the benefits of a given FTA for its signatories. The regional fiber, yarn, fabric, to finished product supply chain offers U.S. textile producers significant opportunities to sell U.S.-made product into FTA markets — provided U.S. textile manufacturers learn how to use these agreements to their advantage.

NCTO Advisory to the Trade — March 28, 2019
The USMCA, Side-by-Side Comparison with NAFTA

The USMCA, Side-by-Side Comparison with NAFTA

Background

In talks launched in August 2017, the Trump administration initiated a renegotiation of the North American Free Trade Agreement (NAFTA) with the aim of improving the deal to better serve American manufacturing interests.  NCTO supported the renegotiation effort as a means to modernize the 24-year-old agreement and make common sense updates designed to bring more employment, production, and investment back to U.S. manufacturing sectors such as textiles. Specifically, NCTO advocated for the following improvements as part of the NAFTA renewal negotiation.

  • Maintain yarn forward as the fundament rule-of-origin for our sector
  • Eliminate tariff preference levels (TPLs) on apparel, non-apparel sewn products, fabrics & yarn
  • Require use of NAFTA-origin components beyond the “essential character” of the fabric – i.e. sewing thread, pocketing & narrow elastics
  • Strengthen buy American laws for Dept. of Homeland Security textiles & clothing by closing the Kissell Amendment loophole for Canada & Mexico
  • Strengthen customs enforcement

We are pleased that the majority of our stated objectives were accomplished in the agreement reached between the parties late last year under what has come to be known as the United States-Mexico-Canada Agreement (USMCA).  Especially the fact that the basic yarn forward rule was preserved as the origin requirement for duty-free treatment.

What Does This Means for the U.S. Textile Industry?

The USMCA was signed by all three countries on November 30, 2018. Before it can take effect the legislative bodies of each of the three nations must enact it into law. In anticipation of USMCA going into effect, a number of NCTO member companies have inquired how the new agreement may affect their current regional manufacturing and trading arrangements. The side-by-side presentation below addresses some of the topics of most direct interest to U.S. textile manufactures. It is not intended to be an exhaustive analysis of all the changes from NAFTA to USMCA.

1. General Rules of Origin

 

NAFTA USMCA
1. The rule of origin for textile and apparel products is “yarn forward” meaning yarn must be extruded or spun in the region and all subsequent processes to the finished article must be done in the region. The yarn forward rule applies to only the component that determines the tariff classification of the finished good. This is also known as the “essential character” rule. 1. The yarn forward rule is unchanged, as it relates to the essential character fabric.
2. Certain visible linings (as defined in the agreement) must originate in the region and are under a fabric forward rule. 2. The visible lining rule is eliminated. Linings may be sourced outside the region
3. Narrow elastic fabric in apparel (Chapter 61 & 62) is exempt from the rules of origin 3. Effective 18 months from the date of entry into force of the agreement, apparel containing narrow elastic fabrics of subheading 5806.20 or heading 60.02 is originating only if such fabrics are both formed and finished from yarn in the territory of one or more of the Parties
4. Sewing thread used in the assembly of apparel (Chapter 61 & 62) is exempt from the rules of origin. 4. Effective 12 months from the date of entry into force of the agreement, apparel containing sewing thread of heading 52.04, 54.01 or 55.08, or yarn of heading 54.02 used as sewing thread shall be considered originating only if such sewing thread is both formed and finished in the territory of one or more of the Parties.
5. Pocketing fabric in apparel (Chapter 61 & 62) is exempt from the rules of origin. 5. Effective 18 months from the date of entry into force of the agreement, if apparel contains a pocket or pockets, the pocket bag fabric must be formed and finished in the territory of one or more of the Parties from yarn wholly formed in one or more of the Parties. NOTE, that for Blue Jeans the transition period is 30 months.
6. Coated or laminated fabrics used in the assembly of textile made-up articles (Chapter 63) are exempt from the rules of origin. Note that this exemption related to only fabrics that meats the tariff schedule definition of coated or laminated. 6. Requires coated fabrics classified under heading 5903 to originate in one of the parties on a fabric-forward basis for Chapter 63 articles, with the exception of the following headings and subheadings:

  • 6305 – Bags,
  • 6306.12 – Tarpaulins, awnings, and sunblinds of synthetic fibers,
  • 6306.22 – Tents of synthetic fibers, and Miscellaneous made-up articles of subheading 6307.90 that are not surgical towels or national flags.

 

2. Tariff Preference Levels (TPLs)

 

NAFTA USMCA
Cotton and MMF Spun Yarn
Canada to U.S., 11.8 million kgs

Mexico to U.S., 1 million kgs

Canada to U.S. 6 million kg
(49% reduction)
with 3 million kg sub-limits for acrylic and non-acrylic yarns eachMexico to U.S. 700,000 kg
(30% reduction)
Cotton and MMF Fabric and Made-up TPL
Canada to U.S., 38.6 million sme knit
Canada to U.S., 38.6 million sme wovenMexico to U.S. 18 million sme knit
Mexico to U.S. 6 million sme woven
Canada to U.S. 38.6 sme knit
Canada to U.S. 38.6 sme woven
(both unchanged)Mexico to U.S. 18 sme knit (unchanged)
Mexico to U.S. 4.8 sme woven
(20% reduction)
Cotton and MMF Apparel TPL
Canada to U.S. 88.3 million sme

Mexico to U.S. 45 million sme

Canada to U.S. 40 million sme
(55% reduction)Mexico to U.S. 45 million sme
(unchanged)
Wool Apparel TPL
Canada to U.S. 5.3 million sme
with a 5 million sme sub-limit for suitsMexico to U.S. 1.5 million sme
Canada to U.S. 4 million sme
(25% reduction)
with a 4 million sme sub-limit for suits (24% reduction)Mexico to U.S. 1.5 million sme (unchanged)

3. De Minimis: For textile and apparel goods classified in Chapters 50 through 63, the de minimis amount for non-qualifying fibers and yarns was increased from 7% under NAFTA to 10% under the USMCA by weight of the component of the good that determines its tariff classification. Within the overall 10% cap, the total weight of elastomeric content may not exceed 7%.

4. Other Changes

(a) The three countries agreed to amend the rules of origin under the USMCA to allow for the use of viscose rayon staple and filament and yarns of jute and hemp from outside the USMCA region due to lack of availability from North American producers.

(b) USMCA closed the Kissell Amendment loophole allowing textiles and clothing purchased by the Transportation Security Administration (TSA) to be made in Mexico.  Under the new agreement, these goods will have to be assembled in the United States with 100% U.S.-made inputs, including all fiber, yarn, and fabric.

(c) The new agreement contains a textile-specific chapter and enhanced textile Customs enforcement language.

2019 State of the U.S. Textile Industry Address

WASHINGTON, DC – Outgoing 2018-19 National Council of Textile Organizations (NCTO) Chairman Marty Moran delivered the trade association’s 2019 State of the U.S. Textile Industry overview at NCTO’s 16th Annual Meeting on March 21st at the Capital Hilton in Washington, DC.

Mr. Moran’s speech outlined (1) U.S. textile supply chain economic, employment and trade data, (2) the 2019 policy priorities of domestic textile manufacturers, and (3) other NCTO activities.

A link to his remarks as prepared for delivery are included in this press statement along with a link to a data infographic prepared by NCTO illustrating the current economic status of the U.S. textile industry.

Mr. Moran is CEO of Buhler Quality Yarns, Corp., a fine-count yarn supplier headquartered in Jefferson, Georgia with plants and/or offices in America, Europe, the Middle East and Asia.

NCTO is a Washington, DC-based trade association that represents domestic textile manufacturers.

  • S. employment in the textile supply chain was 594,147 in 2018.
  • The value of shipments for U.S. textiles and apparel was $76.8 billion in 2018.
  • S. exports of fiber, textiles and apparel were $30.1 billion in 2018.
  • Capital expenditures for textile and apparel production totaled $2.0 billion in 2017, the last year for which data is available.

 

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CONTACT:  Rebecca Tantillo

(202) 822-8026

www.ncto.org

 

 

 

NCTO Elects North Carolina Manufacturing CEO as 2019 Chairman

WASHINGTON, DC – The National Council of Textile Organizations (NCTO) held its 16th Annual Meeting March 19-21 in Washington, DC.  Elected as NCTO officers for 2019 are:

  • Chairman – Leib Oehmig, CEO of Glen Raven, Inc.
    • Oehmig is CEO of Glen Raven, Inc., based in Glen Raven, North Carolina. Glen Raven is an innovative leader in textile research and development, dying, spinning, weaving and finishing, and distribution and logistics.
  • Vice Chairman – David Roberts, CEO of CAP Yarns, Inc.
    • Roberts is CEO of CAP Yarns, Inc., based in Clover, South Carolina. CAP Yarns is a specialty yarn manufacturer and a leader in developing unique yarns for the knitting and weaving industry.

NCTO is a Washington, DC-based trade association that represents domestic textile manufacturers.

  • U.S. employment in the textile supply chain was 594,147 in 2018.
  • The value of shipments for U.S. textiles and apparel was $76.8 billion in 2018.
  • U.S. exports of fiber, textiles and apparel were $30.1 billion in 2018.
  • Capital expenditures for textile and apparel production totaled $2.0 billion in 2017, the last year for which data is available.

# # #

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CONTACT:  Rebecca Tantillo

(202) 822-8026

www.ncto.org

 

 

 

Made in the USA: inside one company’s all-American supply chain

Click to below to read the article:

Made in the USA: inside one company’s all-American supply chain

FT Magazine Life & Arts, February 21, 2019, Rana Foroohar

NCTO Advisory to the Trade — March 7, 2019
President Donald J. Trump’s Trade Policy Agenda

President Donald J. Trump’s Trade Policy Agenda

Background

On March 1, 2019, U.S. Trade Representative Robert Lighthizer delivered President Trump’s Trade Policy Agenda and Annual Report to Congress, outlining how the Administration’s trade policies are benefitting American workers and contributing to the strongest economy in decades.

“Thanks to President Trump’s leadership, the United States is pursuing trade policies that are more favorable to American workers,” said Ambassador Lighthizer. “These actions are contributing to a stronger U.S. economy, which has generated more jobs and higher wages for American workers,” continued Lighthizer.

To continue these economic gains, in 2019 the Trump Administration has announced it will —

  1. Urge Congress to approve the new United States-Mexico-Canada Agreement (USMCA).
  2. Launch new trade negotiations with Japan, the European Union, and the United Kingdom.
  3. Continue to press China to address long-standing U.S. concerns about unfair trade practices.
  4. Defend America’s interests at the World Trade Organization and vigorously enforce U.S. trade laws.

What Does This Means for the U.S. Textile Industry?

The four priorities set forth above by the Administration are shared by the domestic U.S. textile industry.

  1. We too call for quick congressional passage of the United States-Mexico-Canada Agreement (USMCA) in that a majority of our stated objectives were accomplished in the agreement reached between the parties.
  2. We welcome the opportunity to gain greater access to important developed overseas markets. Reducing tariff and non-tariff barriers will help put U.S. textile manufacturers on a much more even footing than we may currently enjoy with some these trading partners. We are already engaged with the Administration to assure that any agreement with the UK, EU, or Japan have the strong yarn forward rule of origin, provide for extended duty phase-out for sensitive products, and include effective customs enforcement language.
  3. NCTO supports the ongoing Trump administration’s Section 301 case against China’s intellectual property abuses. We have advised, however, that placing tariffs on finished products, such as apparel and home furnishings, would bring greater benefit to the North American textile supply chain. NCTO was also successful in removing products such as rayon fibers and most textile machinery.
  4. NCTO appreciates the Administration’s efforts to reform the WTO to create a fairer global trading regime and the Administration’s commitment to use all the legal tools available to protect our industries from unfair foreign competition.

Conclusion

The timing of the release of the President’s 2019 Trade Policy Agenda — two weeks before the NCTO Annual Meeting in Washington, D.C. — couldn’t be better. Policy-makers from the highest levels of the Administration will be present to speak to NCTO members, and also, to hear from NCTO members about these important trade policies that directly affect U.S. textile production and employment.

NCTO Advisory to the Trade — February 28, 2019
Making the U.S. Textile Industry Heard in Washington

Making the U.S. Textile Industry Heard in Washington

 This weekly column was launched to assist U.S. textile companies with practical advice regarding tariffs, trade, and federal regulations. Now, with just a over two weeks before the NCTO 2019 Annual Meeting, the most practical advice to the trade is to attend and fully immerse yourself in all aspects of the meeting program. NCTO has an outstanding roster of government presenters to discuss policy matters and industry speakers to address the theme of American Textiles: Building Stronger Local Supply Chains. Equally important to the health of the industry is the location of the meeting, Washington, D.C., which provides the opportunity to engage in person with U.S. government policy-makers.

International trade policy, government procurement policy, regulations relating to workplace, consumer, and environmental safety — all the laws enacted by our elected officials and regulations promulgated by executive agencies — can do much to foster, or hinder, the ability of the domestic textile industry to build stronger local supply chains, compete globally, provide good-paying jobs, and support our communities. The 2019 NCTO Annual Meeting, which will take place on March 19-21, will be our industry’s most high-profile opportunity this year to hear from, and speak to, those decision-makers in Washington who have so much potential to affect the health of our industry.

Our distinguished guests — high-ranking officials from the White House, the United States Trade Representative’s office, U.S. Customs & Border Protection, and the U.S. Department of Commerce — will convey first-hand insights into the various policy matters that directly impact our businesses.  Moreover, the meeting is structured to ensure that we as an industry have the opportunity to convey our perspective on critical issues to key congressional and Administration policy makers. The Annual Meeting is also when NCTO members head to Capitol Hill to discuss industry priorities with key members of Congress.

Several issues face our industry in 2019 —

  • Advocating for passage of the U.S.-Mexico-Canada Agreement, an extension and improvement of NAFTA.
  • Fighting efforts to dilute the Berry Amendment.
  • Monitoring ongoing trade agreement negotiations with the UK, EU, and Japan.
  • Opposing efforts undermine U.S. production and employment, such as:
    • Including apparel articles in the Generalized System of Preferences.
    • Broadening the Customs de minimis regulation that allows imports to circumvent tariffs on direct-to-consumer shipments.
    • Eliminating U.S. duties on high-performance outerwear.
    • Providing duty breaks for the use of recycled materials.

The above list is by no means exhaustive, even of the known issues, not to mention new threats that may arise at any time.

The staff of NCTO is prepared to advocate for our industry with position papers, testimony, and calling on elected officials and their staff.  However, nothing is more potent in Washington than a constituent, who provides good-paying jobs in the district, explaining to our Washington officials precisely how proposed government policy will directly impact those jobs.

The officers, directors, and staff of NCTO thank each one of our member companies who participate in the Annual Meeting. We understand that you are temporarily setting aside the needs of your businesses to come to Washington because you understand that the health of your business can be affected by what happens in Washington. As the saying goes, “Just because you don’t take an interest in politics doesn’t mean politics won’t take an interest in you.”

Finally, at the NCTO Annual Meeting you will hear an update on the TextilePAC, the only PAC in Washington dedicated solely to the interests of the U.S. textile industry. The contributors to the TextilePAC have helped us increase the effectiveness and reach of this essential aspect of our federal lobbying activity.

NCTO Advisory to the Trade — February 21, 2019
Miscellaneous Tariff Bill Duty Suspension

Miscellaneous Tariff Bill Duty Suspension

Background

Since 1982, most Congresses have passed legislation called the Miscellaneous Tariff Bill to temporarily reduce or suspend tariffs on certain imported products and make technical corrections to U.S. tariff laws. The MTB duty suspensions and reductions are designed to boost the competitiveness of U.S. manufacturers by lowering the cost of imported inputs without harming domestic firms that produce competing products.

Companies within NCTO’s membership benefit from MTB duty suspensions relating to certain animal hair fibers, such as camel hair and man-made fibers, such as certain acrylic and rayon, not available from a domestic U.S. source. The MTB also provides for suspension of duty on certain chemicals and textile machinery not available from a U.S. manufacturer. Overall, there are scores of individual duty suspension provisions that provide tariff relief to U.S. textile manufacturers. The duty suspensions now in effect will expire at the end of 2020 unless renewed.

Start NOW to prepare for renewal filings or new duty suspension filings

No later than October 15, 2019, the U.S. International Trade Commission (ITC) will open a web portal for submission of petitions for suspension of import duties. That web portal will be the only way to file petitions. Paper or email filings are not accepted, and Members of Congress no longer can initiate a request on behalf of a constituent. To be included in the next MTB, a tariff suspension must meet three criteria.

  1. It must be non-controversial, meaning that if a U.S. manufacturer of the article in question objects, the petition will be denied.
  2. The amount of tariff revenue foregone cannot exceed $500,000 per year per petition.
  3. Finally, the request must be administrable, meaning that Customs must be able to identify the subject merchandise when presented at the port. This is why, for example, a duty suspension cannot be granted based on the end use of the article and, rather, must be based on objective characteristics of the article.

In determining whether an MTB meets these criteria, each request undergoes a thorough vetting process by the ITC, the Department of Commerce, and U.S. Customs and Border Protection.

Companies seeking to renew any duty suspension they currently enjoy should start now to prepare their requests for renewal. Changes in the tariff schedule or in trade patterns sometime result an expected renewal request being redrafted as a new request. Further, should there be any question about the correct tariff classification of a fiber, interested companies should file now for a Customs Binding Ruling Letter. In the last round of suspension requests, one company had to wait eight months to get a Binding Ruling.

Responding to Requests for Duty Suspensions

In addition to preparing requests for duty suspensions on inputs not available domestically, U.S. textile manufacturers should also be prepared to oppose MTB requests for items that would undermine your U.S. production and employment.

Suggestions for Improving the Process

The law directs the ITC to report to Congress on the effects on the U.S. economy of duty suspensions. That report will include a broad assessment of the economic effects of such duty suspensions on producers, purchasers, and consumers in the U.S. The law also requires that the Commission solicit and append to the report recommendations with respect to those domestic industry sectors or specific domestic industries that might benefit from permanent duty suspensions.

As part of the ITC review process, NCTO will be expressing opposition to the inclusion of finished products, noting that they distort the intended premise of providing duty relief on inputs that undergo further processing by U.S. manufacturers. We will also be closely monitoring any report recommendation to make duty suspensions permanent. Temporary duty suspensions provide needed relief to U.S. manufacturers who must import raw materials not available domestically, while still leaving an incentive to return manufacturing to the U.S. With regard to products that have not been subject to longstanding duty suspensions, a hastily-enacted permanent suspension could dampen interest in reshoring that production and effectively remove that tariff classification from the list of articles that USTR can negotiate in future trade deals.

A public hearing will be held April 8, 2019. The deadline to file a request to appear at the hearing is March 18, 2019. The deadline for post-hearing briefs is April 15, 2019. The deadline for other written submissions is April 23, 2019. The report will be submitted to Congress by October 18, 2019.

NCTO Advisory to the Trade — February 14, 2019
Made in USA Claims

Made in USA Claims 

Background

The current resurgence in US manufacturing arises from a growing realization that it makes sense — commercially and ethically — for the products Americans consume to be made in America. However, many start-up businesses have jumped onto the US manufacturing band wagon without understanding the legal requirements for making an unqualified “Made in USA” claim.

Most textile articles, including apparel and home textiles are governed by the Textile Fiber Product Identification Act or the Wool Products Labeling Act. These Acts, administered by the Federal Trade Commission, set forth specific requirements regarding Made in USA claims. In the case of an apparel or home textile article covered by the Acts, it is not enough to product the finished article in the US. If you make, for example a shirt, or a bedspread, in the US, you cannot make an unqualified “Made in USA” claim unless the fabric was also made in the US. Likewise, a sweater knitted in the US cannot be labeled simply “Made in USA” unless the yarn was also spun in the US. Apparel and home textiles assembled in the US of imported yarn or fabric must be labeled “Made in USA of Imported Yarn” or “Made in USA of Imported Fabric.” This is referred to as a qualified Made in USA claim.

We applaud manufacturers who opt to manufacture consumer textile products in the US.  When apparel and home textile products are made in the US they are more likely to contain US-made yarn and fabric than similar items made in other countries. However, it is important that US producers of consumer textiles understand that if they do not use US yarn or fabric, and then go on to make an unqualified made in USA claim, they are committing consumer fraud and could be subject to FTC enforcement actions, including fines.

In addition to protecting American consumers, the Textile and Wool Labeling Acts are intended to create an incentive for US producers of consumer textile products to source their yarns and fabrics domestically. If you are a US producer of yarn or fabric and you believe that a potential customer, a US producer of consumer textile articles, is bypassing you by using imported yarns or fabrics, while still trying to benefit from an unqualified Made in USA claim, NCTO can raise those concerns with the FTC on your behalf.

What’s Covered by the Made in USA Rule?

Nearly all apparel and home textiles are covered. The list is very long. In fact, it is easier to state what is not covered, as follows:

  • Upholstery or mattress stuffing that is not reused. If the stuffing is reused, the label must say so.
  • Outer coverings of upholstered furniture, mattresses and box springs.
  • Linings, interlinings, filling or padding used for structural purposes. If used for warmth, though, the fiber must be disclosed. In addition, if you state the fiber content of linings, interlinings, filling or padding, the products are not exempt.
  • Stiffenings, trimmings, facings or interfacings.
  • Backings of carpets or rugs and pads or cushions for use under carpets, rugs or other floor coverings.
  • Sewing and handicraft threads.
  • Bandages, surgical dressings and other products subject to the federal Food, Drug and Cosmetic Act.
  • Waste materials not used in a textile product.
  • Shoes, overshoes, boots, slippers and all outer footwear. But socks and hosiery are covered; slippers made of wool are covered under The Wool Rules.
  • Headwear, including hats, caps or anything worn exclusively on the head. Wool hats are covered under The Wool Rules.
  • Textiles used in handbags or luggage, brushes, lampshades, toys, feminine hygiene products, adhesive tapes and adhesive sheets, cleaning cloths impregnated with chemicals, or diapers.
  • Also note, this discussion relates solely to articles covered by the Textile and Wool Rules. Other consumer products are covered by an entirely different standard for Made in USA claims.

One step removed rule

The FTC, in guidance to the trade has stated: “In deciding whether to mark a product as made in the U.S. either in whole or in part, a manufacturer also must consider the origin of materials that are one step removed from the particular manufacturing process. For example, a yarn manufacturer must identify imported fiber. A manufacturer of knitted garments must identify imported yarn. A manufacturer of apparel made from cloth must identify imported fabric.”