U.S. implements two CAFTA-DR textile provisions

The Bush administration Tuesday announced plans to implement two textile provisions in the Dominican Republic-Central America-U.S. free trade agreement with respect to materials made in Mexico.

The so-called textile cumulation provision and the pocketing amendment, when implemented on Aug. 15, will change the CAFTA-DR origin rules to promote regional production.

The implementation of the CAFTA-DR textile cumulation provisions and the pocketing amendment marks another step forward in the integration of apparel manufacturing in the region, said U.S. Trade Representative Susan Schwab in a statement.

The CAFTA-DR cumulation provision allows a limited quantity of woven apparel containing Mexican and Canadian inputs to enter the United States duty free. The provision covers a limited set of apparel, which is subject to annual quantity limits that will receive preferential treatment.

Under CAFTA-DR, several conditions must first be met before the provision can enter into force with respect to inputs from Canada and Mexico.

We anticipate that each of Mexico's free trade agreements with the Central American CAFTA-DR parties will be amended, effective Aug. 15, 2008, to provide on a reciprocal basis for preferential treatment of Central American apparel goods containing U.S. inputs that are exported to Mexico, the Office of the U.S. Trade Representative said. Further, the required agreement between Mexico and the United States on customs cooperation and enforcement was signed in 2007 and is expected to enter into force by Aug. 15.

Dominican Republic-made apparel containing Mexican inputs will also be eligible under the cumulation provision when it enters into force. However, the Dominican Republic must enter into a free trade agreement with Mexico that provides for reciprocal treatment of U.S. inputs, in order for this treatment to continue beyond five years from the date that the CAFTA-DR entered into force for the Dominican Republic, the USTR explained.

The CAFTA-DR parties signed the pocketing agreement amendment in August 2007. Under the amendment, for apparel items containing at least one pocket, the pocket bag fabric must be formed and finished in the territory of one or more CAFTA-DR countries using yarn wholly formed in the territory of one or more CAFTA-DR countries before the apparel can qualify for duty free treatment.

In exchange for the change in the origin rule for pocket fabric, the United States agreed to other changes requested by other CAFTA-DR countries, including liberalized origin rules for certain apparel products, the USTR said.