The U.S.-Colombia Trade Promotion Agreement (TPA) went into effect on May 15, 2012. It provides duty-free treatment for all originating goods, including apparel. The Andean Trade Promotion and Drug Eradication Act (ATPDEA) previously provided duty-free entry into the United States for many apparel articles from Colombia, but it provided no benefits for U.S. exports to Colombia. The TPA, in contrast, provides for duty-free importation of U.S. goods into Colombia. Moreover, the TPA will remain in effect indefinitely unless one of the parties withdraws, whereas the ATPDEA’s benefits periodically required renewal by Congress. The TPA also provides duty-free treatment on more favorable terms.
The TPA covers all articles and permits unlimited use of U.S. or Colombian inputs. Like most other U.S. free trade agreements, the TPA treats as originating any apparel articles that are wholly obtained or produced entirely in the United States or Colombia, as well as apparel articles for which non-originating inputs meet specific tariff shift rules.
Subject to additional rules applicable to certain components, discussed below, the tariff shift rules for most cotton, man-made fiber and wool apparel articles are yarn-forward, meaning that generally only staple fiber may be non-originating. Under the yarn-forward rules, the component determining classification must be woven or knit in Colombia or the United States with yarn spun or extruded in Colombia or the United States, and the apparel article must be cut or knit to shape and sewn or otherwise assembled in Colombia or the United States. The tariff shift rules under the TPA apply only to the component of an apparel article that determines its classification.
The TPA also provides for duty-free treatment of non-originating textiles and apparel that are composed of fibers, yarns, or fabrics that are not available in commercial quantities in the United States or Colombia. At the time of the TPA’s implementation, the short supply list included 18 fabrics and yarns. Additions to the short supply lists for the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR), the North American Free Trade Agreement (NAFTA) and other U.S. free trade agreements are not automatically incorporated into the TPA’s short supply list.
The TPA provides for additions to the short supply list if the United States determines that a fiber, fabric, or yarn is commercially unavailable. The United States must make short supply determinations on a short timeline and must approve any short supply request that is not opposed. The TPA also permits the addition of items to the short supply list in restricted quantities and permits removal of items from the short supply list if the United States determines that the items are no longer unavailable. Updated information about short supply, including the short supply list, is available at www.otexa.ita.doc.gov.
The TPA’s short supply provisions say that apparel articles will be treated as originating if they are cut or knit to shape and sewn or otherwise assembled in Colombia or the United States, or both, and if the fabric of the outer shell (exclusive of collars and cuffs) is wholly of one or more of the following:
• short supply fabric,
• fabric that is formed in Colombia or the United States, or both, with short supply yarns, or
• any combination of the foregoing fabrics and originating fabrics, which originating fabrics can contain de minimis yarns (discussed below).
An exception states that any elastomeric yarn contained in originating fabrics or knit to shape components must be formed in Colombia or the United States, or both.
Despite the general rule under the TPA that only the component that determines classification must meet the applicable origin rule, the TPA includes additional rules for sewing thread, pocketing, narrow elastic fabrics and visible linings.
First, cotton, man-made filament and man-made staple fiber sewing thread in apparel articles must be both formed and finished in Colombia or the United States. This rule, however, specifies particular sewing thread classifications in the Harmonized Tariff System (HTS). Because only multiple, folded, or cabled yarns may be classified as sewing thread under the HTS, single yarn sewing thread is not subject to the sewing thread rule. Furthermore, apparel articles that qualify for duty-free treatment under the short supply rules are not subject to the sewing thread rule.
Second, the pocket bag fabric of any good of HTS Chapter 61 or 62 that contains pockets must be formed and finished in Colombia or the United States from yarn wholly formed in Colombia or the United States. Apparel articles that qualify for duty-free treatment under the short supply rules are not subject to the pocket bag fabric rule.
Third, apparel articles that contain narrow elastic fabrics will be originating only if the narrow elastic fabrics are both formed from yarn and finished in Columbia or the United States. Apparel articles that qualify for duty-free treatment under the short supply rules are not subject to the narrow elastic fabrics rule.
Fourth, certain types of visible lining fabrics in suits, suit jackets, skirts, overcoats, carcoats, anoraks, windbreakers, and similar articles must be both formed from yarn and finished in Colombia or the United States. Apparel articles that qualify for duty-free treatment under the short supply rules are not subject to the visible lining rule.
The TPA includes a rule that grants duty-free treatment to brassieres that are cut or knit to shape and sewn or otherwise assembled in the United States or Colombia from foreign fabric. The TPA also includes a few other single transformation provisions for apparel articles of fabrics that are not normally made in the United States or Colombia. For example, apparel articles of silk or linen can be made with foreign fabric as long as they are cut and sewn in Colombia. The TPA does not include any tariff preference levels (TPLs).
An article is still originating under the TPA despite the presence of fibers or yarns in the component that determines the apparel article’s classification that do not meet the applicable tariff shift rule, if these fibers or yarns account for 10 percent or less of the total weight of all the fibers or yarns in the component that determines the article’s classification. An exception to this rule is that a good containing any elastomeric yarns in the component that determines its classification is not originating unless the elastomeric yarns are wholly formed in the United States or Colombia.
An article is still originating under the TPA despite the presence in the component that determines the article’s classification of yarns that do not meet the applicable tariff shirt rule, if these yarns are certain nylon filament yarns produced in Canada, Mexico, or Israel.
The TPA does not provide for cumulation of fabrics or yarns from any other countries. Thus, for example, although the United States has also concluded a free trade agreement with Peru and still provides ATPDEA benefits to Ecuador, Peruvian and Ecuadoran yarns and fabrics will not be permitted for use in producing originating apparel articles in Colombia.
Sets, which generally consist of two or more articles that go together and are packaged and marketed together, like a blouse with a matching scarf, are only originating under the TPA if each good in the set is an originating good, or if the value of the non-originating components is not more than 10 percent of the value of the set.
The TPA provides for safeguard measures to remove preferential duty benefits if textile or apparel imports increase to a level that causes or threatens to cause serious damage to domestic industry. Safeguards may not last more than two years (with an option for a one-year extension) or past the end of the transition period, which is defined as five years after the entry into force of the TPA. Safeguards must be accompanied by concessions.