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CAFTA-DR Rules for Textile and Apparel Products

CAFTA-DR Rules for Textile and Apparel Products. Office of International Trade Textiles and Trade Agreements Division June 24, 2015 Guatemala City, GT. Enforcement of CAFTA-DR Rules for Textile and Apparel Products. Textiles & Trade Agreements Division Craig Clark, Director

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CAFTA-DR Rules for Textile and Apparel Products

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  1. CAFTA-DR Rules for Textile and Apparel Products Office of International Trade Textiles and Trade Agreements Division June 24, 2015 Guatemala City, GT

  2. Enforcement of CAFTA-DR Rules for Textile and Apparel Products Textiles & Trade Agreements Division Craig Clark, Director Anita Harris, Chief, Textile Policy and Enforcement Jacqueline Sprungle, Program Manager, Textile Enforcement Diane Liberta, International Trade Specialist Jennelle Cray, International Trade Specialist Valetta Lacy, International Trade Specialist

  3. Why Textiles are Important • More than $119 billion in import value • Accounts for 40 percent of all duties collected by CBP • Key Industry for the United States • Highly regulated and legislated • Key industry for trade preference programs • Key industry for Congressional Interest and Legislation

  4. Textiles and Apparel vs. All Imports

  5. The Role of CBP • Designated Textiles as a Priority Trade Issue (PTI) • Determines the policy for the implementation and enforcement of laws affecting the textile industry • Ensures effective enforcement of the tariff and trade laws including the compliant use of trade programs • Provides technical assistance to the Office of the United States Trade Representative

  6. Textile Enforcement Focus • Origin fraud / illegal transshipment • Enforcement of free trade agreements and legislated programs • Invalid Importers of Record: right to make entry issues / non-existent importers / shell companies / identity theft • Duty circumvention through misdescription, underrreporting, and undervaluation • Smuggling

  7. Textile Enforcement Tools • Textile production verification teams • Special operations • Field taskings • Training of CBP trade personnel • Collaboration with ICE Homeland Security Investigations • Collaboration with stakeholders • Collaboration with foreign counterparts • Audits • Laboratory and Scientific Services

  8. Textile/Apparel Supplier Countries by Value FY13 FY14

  9. Textile & Apparel Trade Preference Activity

  10. U.S. Textile/Apparel Imports from CAFTA-DR Partners Source: U.S. Customs and Border Protection, Fiscal Year 2014

  11. Understanding CAFTA-DR Rules for Textile and Apparel Products

  12. Understanding CAFTA-DR Rules for Textile and Apparel Products • U.S. legal concepts of “Shared Responsibility,” “Informed Compliance,” and “Reasonable Care” apply to importers • By making a claim for preferential treatment under CAFTA-DR, the Importer of Record is declaring to CBP they know, understand and meet the preference rule • No special documents are needed for entry purposes • Importer of Record must substantiate the claim is valid

  13. Harmonized Tariff Schedule of the United States (HTS) U.S. Code of Federal Regulations (CFR) CAFTA-DR Commercial Availability (Short Supply) List U.S. Customs and Border Protection Resources: Customs Rulings Online Search System (CROSS) Informed Compliance Publications TBTs and QBTs U.S. Trade Data: Office of Textiles and Apparel (OTEXA), U.S. Department of Commerce U.S. International Trade Commission (USITC) DataWeb Official Resources to Help Understand Textile CAFTA-DR Rules

  14. Official Resources (U.S. Government) Harmonized Tariff Schedule of the United States (HTS) – GN 29

  15. Official Resources (U.S. Government) CAFTA-DR Commercial Availability (Short Supply) List • Office of Textiles and Apparel (OTEXA), U.S. Department of Commerce • http://otexa.ita.doc.gov

  16. Official Resources (U.S. Government) U.S. Customs and Border Protection Resources – TBTs, QBTs • Textile Bulletin Transmittals (TBTs) • (Example) TBT-07-019 Documents Used to Verify Free Trade Agreements and Legislated Trade Program Claims for Textiles and Wearing Apparel • http://www.cbp.gov/trade/priority-issues/textiles/textile-book-transmittals-tbts • Quota Bulletin Transmittals (QBTs) • (Example) QBT-09-102 CAFTA-DR MX Cumulation (Announcement of Quota Limit for 2010) • http://www.cbp.gov/trade/quota/bulletins

  17. CAFTA-DR “Originating” Goods Wholly Obtained or Produced Produced Exclusively from Originating Materials Product-Specific Tariff Shift Rules “Cut and Sew” Garments Commercial Availability or “Short Supply” Cumulation (Using Materials from Mexico) Folklore Special Treatment for Certain Non-Originating Goods Tariff Preference Levels (TPLs) Ways to Qualify for CAFTA-DR Preference

  18. Textile and Apparel Qualifying Imports U.S. Imports from CAFTA-DR countries Source: Customs and Border Protection, FY 2014, by Value

  19. CAFTA-DR Import Requirements CAFTA-DR Transit and Transshipment HTS GN 29 (c); 19 CFR 10.604 • CAFTA-DR Originating Goods Entering the United States Must Be Imported Directly from a CAFTA-DR Partner Country • Production Outside CAFTA-DR Territory Not Allowed • Goods Must Remain Under Control of Customs Authorities in Non-Parties

  20. CAFTA-DR Entry Indicators HTS GN 29 (a) • Goods for which Preferential Treatment is Claimed as Originating Goods Under the Terms of CAFTA-DR, Enter United States Under a Provision: • in Chapters 1 through 97 with a Special Program Indicator (SPI) of “P” or • in Chapter 98 or 99 of the HTS (CAFTA-DR)

  21. CAFTA-DR “Originating” Goods Textile and Apparel Goods HTS GN 29 (b), (c), (d), (m) and (n) • Textile and Apparel Goods May Be Originating Under CAFTA-DR by Meeting One of Six Rules: • Wholly Obtained or Produced • Produced Exclusively from Originating Materials • Tariff Shift Rules • Including “Cut & Sew” garments • Commercial Availability (Short Supply) • Cumulation • Folklore* (prospective)

  22. CAFTA-DR Tariff Shift HTS GN 29 (n) • CAFTA-DR Tariff Shift Rules are the Preference Rule Used Most Often for Originating Textile and Apparel Goods • Product Specific Tariff Shift Rule Listed in HTS GN 29 (n) • Generally, the Following Concepts* Apply: • Fiber-forward: Yarn, Knit Fabric • Yarn-forward: Woven Fabric, Apparel (Other than Wool), Made-Up Articles • Fabric-forward: Wool Apparel • “Cut and Sew”: Certain Apparel Articles * Be Careful – the “Concept” is NOT the Rule

  23. CAFTA-DR Tariff Shift HTS GN 29 (n) • Tariff Shift Rules Rely on the Basic Classification Structure of the HTS • Understanding a Specific Tariff Shift Rule Requires Knowing the HTS Classification of the Finished Good AND the HTS Classification of the Materials Used to Produce the Good • Correct Classification is Critical! • Helpful Resources: • HTS • Informed Compliance Publications • Customs Rulings Online Search System (CROSS) (Past Rulings) or • Submit a Request for a Ruling (also referred to as “Advance” or “Binding” Ruling)

  24. Tariff Shift Groupings HTS Headings for Fibers, Yarns and Fabrics

  25. CAFTA-DR Tariff Shift Example – Girls’ Knit Dress Classification – HTS Chapter 61

  26. CAFTA-DR Tariff Shift Example – Girls’ Knit Dress HTS GN 29 (n) • Girls’ Knit Wool Dress HTS 6104.41.0020 • Girls’ Knit Cotton Dress HTS 6104.42.0020 • CAFTA-DR Tariff Shift Rule from GN 29 (n) Chapter 61 No. 20 (Same for Both):

  27. CAFTA-DR Tariff Shift Example – Girls’ Knit Dress HTS GN 29 (n) • A change to subheadings 6104.41 through 6104.49 [6104.41.0020 or 6104.42.0020] from any other chapter, except from headings 5111 through 5113 [Wool Woven Fabric], 5204 through 5212 [Cotton Yarn or Woven Fabric], 5310 through 5311 [Woven Vegetable Fiber Fabric], chapter 54 [Man-made Filament Yarn or Woven Fabric], headings 5508 through 5516 [Man-made Staple Yarn or Woven Fabric] or 6001 through 6006 [Knit Fabric], provided that the good is cut or knit to shape, or both, and sewn or otherwise assembled in the territory of one or more of the parties to the Agreement.

  28. CAFTA-DR Tariff Shift Example – Girls’ Knit Dress HTS GN 29 (n) • “Except from” is the phrase that tells us which materials used in the production of the finished good must also be CAFTA-DR originating • Materials classified in excluded tariff provisions – by chapter (2 digits), by heading (4 digits) or by subheading (6 digits) of the tariff schedule – are required to be CAFTA-DR originating in order for the good produced from those materials to be eligible for CAFTA-DR treatment

  29. CAFTA-DR Tariff Shift Example – Girls’ Knit Dress HTS GN 29 (n) • Girls’ Cotton Knit Dress–Knit Cotton Fabric AND Cotton Yarn Must Be CAFTA-DR Originating • Tariff Shift Rule Follows “Yarn-forward” Concept • “Except from” Cotton Yarn (subheading 5204 to 5207) AND Cotton Knit Fabric (subheading 6001 to 6007) • Girls’ Wool Knit Dress–Knit Wool Fabric Must Be CAFTA-DR Originating • Tariff Shift Rule Follows “Fabric-forward” Concept • “Except from” Wool Knit Fabric (subheading 6001 to 6007) Only • Wool Yarn (subheading 5106 to 5110) Not Listed After “Except from” Clause • If a Cotton/Wool Blend Knit Fabric: Knit Fabric AND Cotton Yarn Must Be CAFTA-DR Originating, But Wool Yarn Not Required To Be CAFTA-DR

  30. CAFTA-DR Tariff Shift Example – Girls’ Woven Silk Dress HTS GN 29 (n) • Girls’ Woven Silk Dress HTS 6204.49.1000 • CAFTA-DR Tariff Shift Rule from GN 29 (n) Chapter 62 No. 25: • Silk Woven Fabric Classified Under HTS Subheading 5007 • Not Listed After the “Except From” Clause • Therefore, Silk Woven Fabric Not Required to be CAFTA-DR Originating • Tariff Shift Rule is Example of a “Cut and Sew” Concept

  31. CAFTA-DR Tariff Shift Chapter Rules for Goods in Chapters 61, 62 and 63 HTS GN 29 (n) • Tariff Classification Component – Chapters 61, 62 and 63 • Visible Lining Fabric – Chapters 61 and 62 • Narrow Elastic Fabric – Chapters 61 and 62 • Sewing Thread – Chapters 61, 62 and 63 • Pocket Bag Fabric – Chapters 61 and 62 • “Chapter Rules” Apply In Addition to the CAFTA-DR Tariff Shift Rule for Goods Classified in Chapters 61, 62 and 63

  32. CAFTA-DR Tariff Shift Chapter Rules for Goods in Chapters 61, 62 and 63 HTS GN 29 (n) • Since October 13, 2012, Chapter Rule Requirements May be Satisfied by Using Visible Lining Fabric, Narrow Elastic Fabric, Sewing Thread or Pocket Bag Fabric if Such Materials Are Included on the Short Supply List * * Second CAFTA-DR Textile Amendments, Effective 10/13/2012

  33. CAFTA-DR Tariff Shift Chapter Rules for Goods in Chapters 61, 62 and 63 GN 29 (n) Tariff Classification Component: Chapter 61 Rule 2, Chapter 62 Rule 2, Chapter 63 Rule 1 • Tariff Classification Component Chapter Rule States “Only the Component of the Good That Determines the Tariff Classification of the Good” Must Meet the Specified Tariff Shift Rule

  34. CAFTA-DR Tariff Shift Chapter Rules for Goods in Chapters 61, 62 and 63 GN 29 (n) Visible Lining Fabrics: Chapter 61 Rule 1, Chapter 62 Rule 1 • Visible Lining Fabrics Chapter Rule States Select Fabrics, When Used as Visible Lining Material in Certain Garments, Must Be Formed from Yarn and Finished in a CAFTA-DR Country

  35. CAFTA-DR Tariff Shift Chapter Rules for Goods in Chapters 61, 62 and 63 GN 29 (n) Visible Lining Fabrics: Chapter 61 Rule 1, Chapter 62 Rule 1 • Visible Lining Fabrics Chapter Rule Only Applies “to the visible lining fabric in the main body of the garment, excluding sleeves, which covers the largest surface area, and shall not apply to removable linings” (See Tariff Classification Component Rule) • When Required to Comply with the Visible Lining Fabrics Chapter Rule, the Tariff Shift Rule Includes a Reminder:

  36. CAFTA-DR Tariff Shift Chapter Rules for Goods in Chapters 61, 62 and 63 GN 29 (n) Narrow Elastic Fabrics: Chapter 61 Rule 3, Chapter 62 Rule 3 • Narrow Elastic Fabrics Chapter Rule States “Fabrics of Subheading 5806.20 or Heading 6002” Contained in Apparel Goods (Chapter 61 or 62) Must Be Formed from Yarn and Finished in a CAFTA-DR Country • Fabrics Classified in Subheading 5806.20 are Certain Woven Fabrics of a Width Not Exceeding 30 cm, Containing by Weight 5 Percent or More of Elastomeric Yarn or Rubber Thread: • Provided with Selvages (Woven, Gummed or Otherwise) on Both Edges; or • Tubular (Flattened Width Not Exceeding 30 cm); or • Bias Binding with Folded Edges (Unfolded Width Not Exceeding 30 cm) • Fabrics Classified in Heading 6002 are Certain Knitted or Crocheted Fabrics of Width Not Exceeding 30 cm, Containing by Weight 5 Percent or More of Elastomeric Yarn or Rubber Thread

  37. CAFTA-DR Tariff Shift Chapter Rules for Goods in Chapters 61, 62 and 63 GN 29 (n) Sewing Thread: Chapter 61 Rule 4, Chapter 62 Rule 4, Chapter 63 Rule 2 • Sewing Thread Chapter Rule States Sewing Thread of Heading 5204, 5401, 5508, or Yarn of Heading 5402 Used as Sewing Thread * Contained in the Good Must Be Formed and Finished in a CAFTA-DR Country • By Definition, Headings 5204 (Cotton), 5401 (Man-made Filament) and 5508 (Man-made Staple) are Multi-Ply or Cabled Yarns or Thread • Since October 13, 2012, Yarn of heading 5402, Single-Ply Yarns Used as Sewing Thread, must be Formed and Finished in a CAFTA-DR Country. * Second CAFTA-DR Textile Amendments, Effective 10/13/2012

  38. CAFTA-DR Tariff Shift Chapter Rules for Goods in Chapters 61, 62 and 63 GN 29 (n) Pocket Bag Fabric: Chapter 61 Rule 5, Chapter 62 Rule 5 • Pocket Bag Fabric Chapter Rule States Pocket Bag Fabric Contained in Apparel Goods Must Be Formed and Finished in a CAFTA-DR Country from Yarn Wholly Formed in a CAFTA-DR Country • Chapter Rule for Pocket Bag Fabric Follows the “Yarn-forward” Concept

  39. CAFTA-DR Tariff Shift Special Requirements for Textile and Apparel Goods HTS GN 29 (d) • De Minimis • Elastomeric Yarns • Certain Nylon Filament Yarns • “Special Requirements” Apply In Addition to the CAFTA-DR Tariff Shift Rule for All Textile and Apparel Goods

  40. CAFTA-DR Tariff Shift Special Requirements for Textile and Apparel Goods GN 29 (d) De Minimis Provision • De Minimis Allowance Permits Limited Use of Non-CAFTA-DR Originating Fibers or Yarns in the Yarns or Fabrics Used in the Production of the Tariff Classification Component of a Textile or Apparel Good • Non-CAFTA-DR Originating Fibers or Yarns May Be Up to 10 Percent of the Total Weight of the Tariff Classification Component

  41. CAFTA-DR Tariff Shift Special Requirements for Textile and Apparel Goods GN 29 (d) Elastomeric Yarns • Despite the De Minimis Allowance, Elastomeric Yarns in the Tariff Classification Component Must Always Be Wholly Formed in a CAFTA-DR Country

  42. CAFTA-DR Tariff Shift Special Requirements for Textile and Apparel Goods GN 29 (d) Certain Nylon Filament Yarns • De Minimis Allowance Does Not Limit the Quantity of Certain Nylon Filament Yarns (in Specific Subheadings) from Israel, Canada or Mexico (Each a Party to a Free Trade Agreement with the U.S. Prior to January 1, 1995)

  43. CAFTA-DR Tariff Shift “Cut and Sew” Garments HTS GN 29 (n) • Tariff Shift Rules for Certain Garments in Chapter 61 and 62 Do Not Include “Except From” Clause • Do Not Follow “Yarn-forward” or “Fabric-forward” Concept • But Incorrect to Call Such Garments Exceptions to the CAFTA-DR Rules • Tariff Shift Rule for a “Cut and Sew” or “Single Transformation” Garment Requires “a Change to Subheading x [of the Specific Garment] from Any Other Chapter, Provided that the Good is Cut or Knit to Shape, or Both, and Sewn or Otherwise Assembled in the Territory of One or More of the Parties to the Agreement.”

  44. CAFTA-DR Tariff Shift “Cut and Sew” Garments HTS GN 29 (n) • Example of a “Cut and Sew” CAFTA-DR Tariff Shift Rule • Women’s Cotton Brassiere Containing Lace HTS 6212.10.5010 • CAFTA-DR Tariff Shift Rule from GN 29 (n) Chapter 62 No. 39:

  45. CAFTA-DR Tariff Shift “Cut and Sew” Garments HTS GN 29 (n) • Be Careful! Not All “Cut and Sew” CAFTA-DR Tariff Shift Rules Are So Simple • Men’s Woven Cotton Yarn-Dyed Dress Shirt • Classification HTS 6205.20.2016 • CAFTA-DR Tariff Shift Rule from GN 29 (n) Chapter 62 No. 30A:

  46. CAFTA-DR Tariff Shift “Cut and Sew” Garments HTS GN 29 (n) • Men’s Woven Cotton Yarn-Dyed Dress Shirt – NOT “Cut and Sew” • Classification HTS 6205.20.2016 • CAFTA-DR Tariff Shift Rule from GN 29 (n) Chapter 62 No. 30B: • This Tariff Shift Rule Follows “Yarn-forward” Concept

  47. CAFTA-DR Tariff Shift “Cut and Sew” Garments HTS GN 29 (n) • Exempt from GN 29 (n) Chapter Rules • “Other Than” Clause Contained in Each Chapter Rule States Rule Does Not Apply to “Cut and Sew” Garments • Example of Women’s Brassiere in HTS 6212.10.5010

  48. CAFTA-DR Tariff Shift “Cut and Sew” Garments HTS GN 29 (n) • Example of a “Cut and Sew” CAFTA-DR Tariff Shift Rule Since October 13, 2012, This Type of Tariff Shift Rule Also Applies to Certain Women’s Woven Pajama Bottoms, in Addition to the Other Garments Already Eligible for “Cut and Sew” Rules. * Second CAFTA-DR Textile Amendments, Effective 10/13/2012

  49. CAFTA-DR Tariff Shift HTS GN 29 (n) • Filing a CAFTA-DR Claim Based on Tariff Shift Rules: • Use 10-Digit HTS Number from Chapter 1-97 in First Tariff Field of the U.S. Entry Summary • Affix Special Program Indicator of “P” in Front of First Tariff Field

  50. CAFTA-DR Commercial Availability (Short Supply) HTS GN 29 (m)(viii), Chapter 98 Subchapter XXII, Note 20 • Commercial Availability or “Short Supply” Fibers, Yarns and Fabrics Listed in HTS Chapter 98 Subchapter XXII, Note 20 • Items No. 1 to 70 Only • Additions to CAFTA-DR Short Supply List Only on OTEXA Website: • http://otexa.ita.doc.gov: CAFTA-DR Commercial Availability • +140 Items on List

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