May 31, 2019
Kim Glas, President & CEO of the National Council of Textile Organizations (NCTO), issued the following statement today in response to the administration’s decision under the International Emergency Economic Powers Act to assess penalty duties on Mexico as an attempt to address the growing immigration dispute on the U.S. southern border. The proposed 5% increase would begin on June 10 and incrementally increase to 25%, if the dispute is not resolved.
On behalf of the National Council of Textile Organizations (NCTO), thank you for the opportunity to provide input regarding the recently negotiated United States-Mexico-Canada Agreement (USMCA). NCTO represents the full spectrum of the U.S. textile sector, from fibers to yarns to fabrics to finished products, as well as suppliers of machinery, chemicals, and other products and services with a stake in the prosperity of our industry. The entire U.S textile manufacturing chain, from fiber through finished sewn products, employs 550,000 workers nationwide. In 2017, the industry manufactured nearly $78 billion in output, while exporting more than $28 billion of our production.
I want to preface my remarks by stating that NCTO has not yet adopted a formal position on USMCA. We have produced a detailed internal analysis on the agreement for our members and have solicited their feedback. Once we have reviewed input from our membership, the NCTO Board will come to final position that we will then make public.
With that said, it is important to note that the United States, Canada, and Mexico have built a vibrant and prosperous textile production chain over the 24-year life of the North American Free Trade Agreement (NAFTA). In 2017, total textile and apparel trade between the three countries was approximately $20 billion. U.S. exports accounted for more than $11 billion of this trade, with Canada and Mexico serving as our two largest export markets worldwide.
These figures compare to just $7 billion in textile trade between the three countries in 1993, the year prior to NAFTA’s implementation. An understanding of this data validates that the current, yarn-forward structure embedded in NAFTA has been highly successful, providing significant benefit to North American manufacturers throughout the entire textile production chain.
It is for this reason that NCTO is very pleased that the basic textile origin rules adopted originally in NAFTA were essentially reaffirmed in USMCA. Further, we commend the three governments for creating a separate textile chapter in the new agreement as opposed to relegating textiles to an annex of the broader market access provisions. A stand-alone chapter recognizes the sensitivities associated with trade in this sector and allows for unique provisions, such as separate and enhanced customs enforcement language over the original NAFTA. Enforcement is critical in the textile sector as the lucrative duty-free benefits create enormous incentives for fraud.
In terms of changes to the original text, NCTO is very supportive of revisions that will require the use of USMCA-origin sewing thread, pocketing, narrow elastics, and coated fabrics in certain end items. While there are transition periods associated with these new requirements, their ultimate inclusion should offer a boost for U.S. producers formerly left out of the origin rules in the original NAFTA. We estimate the USMCA market to be $250 million annually for sewing thread for apparel applications and $70 million annually for pocketing.
We are also appreciative of a key change made in the Government Procurement Chapter of USMCA regarding the Kissell Amendment, which is a Buy American statute for textiles that applies to the Department of Homeland Security (DHS). Kissell requires 100% U.S. content, with very limited exceptions, for purchases by the Coast Guard and Transportation Security Administration (TSA).
Regarding TSA procurement, Kissell has a problematic loophole tied to NAFTA that has allowed Mexico to supply these contracts. As a result, under the terms of NAFTA, Mexico can supply TSA uniforms made from Mexican fiber, yarn, and/or fabric. The TSA Mexico loophole translates to a significant weakening of U.S. Buy American statutes. Noting that DHS spent $34 million on clothing and textiles for TSA in FY2017, closing the Kissell loophole was a substantive change from NCTO’s perspective.
While all the items mentioned to this point are clear improvements to the original NAFTA, there was one key area of disappointment, from our perspective, with USMCA. NAFTA incorporated a major exemption to the yarn-forward origin requirement through a system of Tariff Preference Levels (TPLs). TPLs allow products to be shipped duty free among free trade partner countries even though the components within the product are sourced from countries that are not signatories to the agreement.
While NAFTA TPLs have annual limits that cap their impact to a degree, more than $641 million in textile and apparel TPL shipments entered the U.S. last year. As such, eliminating the TPLs was a primary focus of NCTO’s in the NAFTA renegotiation. While USMCA did reduce the size of some specific TPLs, the reductions will not cut into existing trade levels. This outcome is frustrating given the President’s stated goals of increasing benefits for U.S. manufacturers and eliminating provisions that have helped non-signatory countries, such as China, take advantage of tariff preferences intended for North American producers.
As stated earlier, NCTO is not yet in a position to communicate a formal position on USMCA. We hope to have a decision finalized soon, which will be shared with both the Administration and Congress as soon as we complete our review process.
Nonetheless, it is accurate to state that in an overarching fashion, the new agreement is an improvement over the original NAFTA in many areas. This is certainly the case for U.S. manufacturers of component parts such as thread, pocketing, narrow elastics, and coated fabrics. There is also a clear victory on the Kissell amendment and a strong upgrade in customs enforcement. With our strong disappointment in the TPL outcome noted, we are also grateful for the Administration’s willingness to work with domestic manufacturers in an effort to improve this important agreement.
Thank you for this opportunity to provide input, and I would be pleased to answer any questions that you may have at this time.
Thank you for providing us this opportunity to testify regarding the economic impact of the United States‐Mexico‐Canada Agreement (USMCA).
My name is Rick Helfenbein. I am President and CEO of the American Apparel & Footwear Association (AAFA) – the national trade association of the apparel and footwear industries, and their suppliers. AAFA represents about 350 companies, accounting for about 1000 brands. Our industry employs nearly four million U.S. workers and equals about $400 billion in annual U.S. retail sales. Our members design,
make, market, and sell clothes, shoes, and fashion accessories in the United States and in nearly every country around the world, including the U.S., Mexico, and Canada.
Before offering comments on the USMCA, let me first state our very strong support of the North American Free Trade Agreement (NAFTA). NAFTA serves as an important anchor for the U.S. textile, apparel, and footwear industry. Much of the textile manufacturing in the United States is tied directly to NAFTA through U.S. exports to NAFTA partners. Many of the fabrics and yarns we export to Mexico end
up in garments that are imported back into the United States. Without the tariff preferences afforded by NAFTA, many of these garments would be made in other locations that do not use U.S. textiles. We estimate that the NAFTA supports approximately 200,000 U.S. jobs in our sector and, of course, it
supports many millions more throughout the entire economy.
We also welcomed the opportunity to modernize NAFTA. It is, after all, is a 25‐year‐old agreement that predates the internet. We were pleased that this was done under the auspices of Trade Promotion Authority AND with full involvement and oversight by Congress out of recognition of Congress’s Article I Section 8 authority to regulate commerce with foreign nations and set tariff policies.
Any effort to examine the USMCA needs to look at it in relation to the underlying NAFTA. One need only ask a simple question. Does the USMCA improve upon the NAFTA?
As we attempt to answer that, we will look through the three lenses we used to guide our advice to the Administration as it pursued NAFTA modernization negotiations.
A. Do No Harm
B. Keep It Trilateral
C. Make It Seamless
I will take each in turn.
A. Do No Harm
The USMCA appears to have largely met this goal. USMCA retains market access schedules and makes no changes to the travel goods or footwear rules of origin provisions. While it does make some changes to the rules of origin for textiles and apparel, these appear to be largely cosmetic and we are hopeful the
industry will be able to quickly adjust to the changes that have been made.
That said, we are discouraged that – with few exceptions – the changes made to the rules of origin were to introduce more restrictive approaches. For example, many tariff preference levels (TPLs) were lowered and the USMCA now includes new requirements that sewing thread, elastic strips, and pocketing originate. While we understand U.S. negotiators were attempting to legislate more U.S. content into North American textile and apparel supply chains, the result unfortunately may be the opposite. Each of these new provisions, individually and collectively, will make it harder to use the
agreement, which may lead to less – not more – U.S. content being used in North American supply chains. Such an outcome would come at the expense of the U.S. textile firms these provisions are designed – on paper – to help.
Likewise, USMCA represented a lost opportunity to bring more flexibility to the footwear and travel goods provisions of NAFTA. The current rules are so restrictive, in an ostensive effort to keep all benefits in North America that very little travel goods and footwear trade exists under NAFTA. As we argued throughout the talks, the best way to encourage more U.S. content is to weave in more flexibility into the rules. Such flexibilities provide additional opportunities for business to be conducted under the agreement. For example, the USMCA dramatically increases the TPLs that will enable more U.S. apparel and made up goods to be exported to Canada. Even though such articles don’t have to be made with U.S. textiles, the mere presence of their production in the U.S. will mean more customers for U.S. textile firms.
The USMCA should have included many more similar provisions to increase trade of apparel, footwear, and travel goods under the new USMCA. These new flexibilities, in turn, would have dramatically increased the opportunities for U.S.‐made textiles, leather, soles, clothes, shoes, and travel goods to sell their product throughout North America, and beyond.
In other areas of the agreement, uncertainties over how different provisions will operate make it premature to offer a systematic assessment. For example, we are pleased to see many trade facilitation agreement provisions hardwired into the USMCA, and believe that such provisions, if implemented successfully, could reduce customs paperwork associated with North American trade. This is important for a region that depends on speed to the consumer for its competitive edge. Similarly, we were pleased
to see the increase in de minimis thresholds – important for ecommerce – but are worried by a footnote suggesting the Administration may erase these gains by unilaterally lowering the U.S. threshold. Other provisions, such as those relating to the periodic reviews, could keep the agreement invigorated, or lead to premature termination.
B. Keep the Agreement Trilateral
One of the strengths of NAFTA is that it unites North America into a single trading bloc. Textile, apparel, and footwear companies produce and sell product across all three countries, using supply chains that stretch from Canada to Mexico, which together create a competitive North America. We strongly opposed any efforts to split NAFTA into a series of bilateral deals, and were pleased to see the USMCA retain this essential trilateral feature.
C. Make It Seamless
Our members have invested millions in building compliant supply chains threading throughout the continent. As they shift from NAFTA – which has governed North American trade for more than a quarter century – they will need time to adjust to new rules. Our industry needs an opportunity to learn about new provisions, educate personnel within the supply chain of the new provisions, and establish controls to ensure full compliance. U.S. Customs and Border Protection, which will have a crucial enforcement role, will need the same accommodation. Too many times we have seen new agreements or trade provisions take effect in a manner that provided little warning of the change or incomplete compliance guidelines. The resulting confusion created uncertainty, costs, and chaos.
While we won’t know until many years from now how this transition went, we are pleased that the Administration included transition periods – from 12 to 30 months – before the new textile chapter rule restrictions take effect.
Thank you again for providing us this opportunity to testify.
I look forward to your questions.
The United States and Mexico have reached a preliminary agreement in principle, subject to finalization and implementation, that supports North American manufacturing and mutually beneficial trade. The new agreement will create more balanced, reciprocal trade that supports high-paying jobs for Americans and grows the United States and Mexican economies.
RULES OF ORIGIN AND ORIGIN PROCEDURES
The United States and Mexico have concluded substantive discussions on new rules of origin and origin procedures, including product-specific rules for passenger vehicles, light trucks, and auto parts. This update to the rules of origin will provide greater incentives to source goods and materials in the United States and North America.
Key Achievement: Increasing Regional Value Content Rule
This deal encourages United States manufacturing and regional economic growth by requiring that 75 percent of auto content be made in the United States and Mexico.
The rules will:
Key Achievement: Creating New Labor Value Content Rule
This deal uses trade rules to drive higher wages by requiring that 40-45 percent of auto content be made by workers earning at least $16 per hour.
The rules will:
Key Achievement: Exceeding NAFTA 1.0 and TPP Standards with Stronger Rules of Origin and Enforcement
The United States and Mexico have agreed to stronger rules of origin that exceed those of both NAFTA 1.0 and the Trans-Pacific Partnership (TPP), including for autos and automobile parts and other industrial products such as chemicals, steel-intensive products, glass, and optical fiber.
This deal exceeds NAFTA 1.0 and the TPP by establishing procedures that streamline certification and verification of rules of origin and that promote strong enforcement. This includes new cooperation and enforcement provisions that help to prevent duty evasion before it happens.
The new rules will help ensure that only producers using sufficient and significant United States and Mexican parts and materials receive preferential tariff benefits.
GOODS MARKET ACCESS
New commitments have been included in the Market Access chapter to reflect developments in United States trade agreements that address non-tariff barriers related to trade in remanufactured goods, import licensing, and export licensing.
Key Achievement: Exceeding NAFTA 1.0 and TPP Standards to More Effectively Support Trade in Manufactured Goods
The new Market Access chapter will more effectively support trade in manufactured goods between the United States and Mexico by removing provisions that are no longer relevant, updating key references, and affirming commitments that have phased in from the original agreement.
Specifically, the Market Access chapter:
The new provisions on textiles incentivize greater United States and Mexican production in textiles and apparel trade, strengthen customs enforcement, and facilitate broader consultation and cooperation among the Parties on issues related to textiles and apparel trade.
Key Achievement: Strengthening Supply Chains to Provide New Market Opportunities for the Textile and Apparel Sector
The provisions will:
The new Textiles chapter provisions are stronger than those in NAFTA 1.0 with respect to both enforcement and incentivizing North American production of textiles.
The United States and Mexico have also reached agreement on new provisions covering trade in specific manufacturing sectors, including Information and Communication Technology, Pharmaceuticals, Medical Devices, Cosmetic Products, and Chemical Substances. Each of the annexes includes provisions that exceed NAFTA 1.0 and TPP that promote enhanced regulatory compatibility, best regulatory practices, and increased trade between both countries.
(as of January 4, 2018)
Jane L. Johnson
Manager, Government Relations
Mark S. Jaeger, Esq.
Senior Vice President, Human Resources,
Jockey International, Inc.
Charles L. Sanders
Vice President, Customs and Trade Compliance
Union Underwear Company, Inc. dba Fruit of the Loom
Vice President, Materials and Commercialization, Sourcing
Under Armor, Inc.
Edward G. Cochrane
Vice President and Secretary
Mount Vernon Mills, Inc.
Eric F. Warshaw
Representing Secondary Materials and Recycled Textiles Association
H. Clayton Jenkins
Vice President, Global Sourcing, Compliance
Brown Show Company, Inc.
Jeffrey B. Whalen, Esq.
Senior Counsel, Customs
Jessica E. Franken
Director, Government Affairs
The Franken Group, LLC
Representing INDA: Association of the Nonwoven Fabrics Industry
Katherine M. Dutih
Manager, Government Relations
Kathie M. Leonard
President and Chief Executive Officer
Auburn Manufacturing, Inc.
Marc L. Fleischaker, Esq.
Partner and Chair Emeritus
Arent Fox LLP
Representing Rubber and Plastic Footwear Manufacturers
Vice President, Customs Compliance
Mathew B. LeBretton, Esq.
Director, Public Affairs
New Balance Athletic Shoe, Inc.
Michael D. Korchmar
Chief Executive Officer
The Leather Specialty Company
Nathanael “Nate” E. Herman
Director, Government Relations
Travel Goods Association
Patricia (Patti) M. Bates
Vice President, Sales
Glen Raven Technical Fabrics, LLC
Representing United States Industrial Fabrics Institute
R. Matthew Priest
Footwear Distributors and Retailers of America
Sara O. Beatty
Whitehaven Trade Advisors
Representing National Council of Textile Organizations
Shawn J. Dougherty
Director, Strategy and Trade Affairs
Dillion Yarn Corporation
Stephanie H. Lester
Senior Director, Government Affairs
Stephen E. Lamar
Executive Vice President
American Apparel & Footwear Association
Click here to view the complete technical textiles events calendar that includes show information links.
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The IFAI Expo 2019 was held last week in Orlando, Fla., USA. The exhibition was a smaller event than in years past but it still remains a powerful showcase of industry products. In the Special Report section, you will find analysis of the show, plus news that comes from the Industrial Fabrics Association International's Annual Meeting and the winners of the International Achievement Awards. Click here to read the articles. Posted October 10, 2019
In 2018, China's industrial textile industry maintained a relatively rapid growth. The year, though, also found more complex challenges for the industry, including the tariff issues with the US. Thanks to BeaverLake6 Reports' exclusive arrangement with China Textile magazine, we are presenting the English-translated version of the final 2018 report written by the China Nonwovens & Industrial Textile Association (CNITA). The report included information on fiber and material production, plus selected large end-product markets. Click here to read the report. Posted September 3, 2019
NCTO Members Testifying at US International Trade Commission. Surprisingly, there appears to be a little worry the announced new US tariffs on China (Section 301) may be reaching too far with its scope. The National Council of Textile Organizations (NCTO), which has been firmly behind most of the textile-tariffs against China over the last year, is expressing concern the new Tranche Four retaliatory tariffs may affect US imports on products needed by the US domestic textile industry.
[Read the rest of my editorial that takes NCTO to task for its hypocritical "moral" argument supporting the proposed additional products but excluding its industry's suppliers by clicking here.]
Posted June 17, 2019
Despite the increasingly complex industry demands, the Chinese technical textiles market was relatively stable. Nonwovens output increased over last year. Key specific markets such as tire cord also increased in 2018 over 2017. Overall operating income for industrial textiles used in China reached $34 billion. Click here to read the complete summary provided to BeaverLake6 Report by China Textile magazine through our exclusive relationship. Posted February 15, 2019
INDA, the Association of the Nonwovens Fabrics Industry, has issued its final report on IDEA19. The event held March 25-27, 2019 in Miami Beach, Fla., USA, attracted 6,500+ participants and 509 exhibiting companies from 75 countries. Show floor space was a record 168,600 square feet, a 9% increase over the previous show.
Surprisingly, the people and exhibitor participation figures are not record numbers. The IDEA16 show in Boston, Mass., USA, attracted 7000+ and 555 exhibitors.
So, why was participation down this year from IDEA16? I think an explanation for the decline is the South Florida location of IDEA19. Click here to read more.
BeaverLake6 Report is pleased to provide an exclusive interview with Li Lingshen, Ph.D., Vice President of the China National Textile and Apparel Council, and President of the China Nonwovens & Industrial Textiles Association, the overseeing organization for the technical textiles industry in China. Click here to read the interview.
Positive Reviews but Still Uncertainty. On November 16, 2018, two of the US textile industry associations testified before the US International Trade Commission (ITC) in a special hearing to determine the economic impact of the proposed United States-Mexico-Canada Agreement (USMCA). The leaders of the American Apparel & Footwear Association (AAFA) and the National Council of Textile Organizations (NCTO) provided statements on how they feel the new agreement will affect their member companies.
The two organizations clearly have different biases; however, in looking over the AAFA and NCTO statements, it appears to me that while the organizations both clearly said they were not offering an endorsement yet of the agreement, they gave general overall approval for USMCA, acknowledging the 1992 North American Free Trade Agreement (NAFTA) needed updating. Both organizations are taking a wait-and-see attitude to more fully look at how the agreement impacts the complex supply chain of textiles and apparel. Click here to read more.
NAFTA Replacement Agreement Negotiated. On October 1, President Donald Trump announced the US, Mexico and Canada had reached an agreement whichreplaces the North American Free Trade Agreement (NAFTA) that went into effect in 1994. The new United States-Mexico-Canada Agreement (USMCA) contains provisions and language that has an impact on the technical textiles industry; the most important are 1) a special section covering textiles and apparel and 2) rules of origin that will require 75% of automotive content (under NAFTA 62.5%) be made in North America. Mexico and Canada are the two largest importers of US made technical textiles and the automotive industry is the largest intended end market of these technical textiles. Click here to go to the United States Trade Representative's website and read the "Textiles and Apparel Goods" chapter. Posted October 3, 2018
Are you looking for a quick understanding of the China technical textiles industry? Through our special relationship with China Nonwovens & Industrial Textiles Association (CNITA) and their China Textile publication, BeaverLake6 Report is pleased to post the English-translation of the recently issued "Status Quo of China's Nonwovens and Industrial Textiles Industry, 2017." The report covers the different levels of the industry, geographic export demographics, and forecast the needs in the major end market applications. Click here to read the report in our China Textile website section.
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