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Ways & Means Votes to Raise Limits on Africa, Caribbean Apparel

Inside US Trade - October 12, 2001

The House Ways & Means Committee last week approved legislation that expands duty-free access for apparel made in Africa and the Caribbean, by more than doubling current quotas limiting preferential access under the Trade Development Act in 2000. The legislation also would solve a long-standing dispute over certain knit apparel in the favor of apparel importers by reversing a Customs ruling that denied duty-free access to so-called “knit-to-shape” apparel.

Amendments on Africa and the Caribbean, added to a bill expanding trade preferences for Andean nations and approved by the committee, also make two technical changes to allow duty-free access for Caribbean apparel that undergoes “hybrid-cutting,” and to correct a drafting error dealing with merino wool products. With the exception of the merino wool amendment, the changes were presented as a chairman's amendment in the Oct. 5 mark-up and passed on a voice vote, as did the entire Andean Trade Preference Act a moment later.

The amendments from Ways & Means Chairman Bill Thomas (R-CA) would raise quotas for preferential access on knit apparel and t-shirts much faster than provided for under the Caribbean Basin Trade Preferences Act, over the objections of textile manufacturers. Importers and retailers had pressed for the changes, particularly in the case of the t-shirt cap.

The House bill would maintain the 16 percent increase provided for under the CBTPA for both t-shirts and knit apparel for the year beginning Oct. 1, 2001. But in the following year, the t-shirt cap will increase from 4.872 million to 9 million dozen, rising to 10 million dozen the next year and to 12 million dozen for the following four years.

For knit apparel, the cap would rise from 290 million square meter equivalents (SMEs) to 500 million beginning in Oct. 2002, an increase of 72 percent. Beginning Oct. 2003, the cap would soar again by 70 percent to 850 million before leveling off at 970 million for the next four years.

Limits on regional fabric were doubled for African countries under the House bill. It sets duty-free, quota-free benefits on apparel made in Africa from regional fabric at 3 percent of U.S. imports for the year when the Thomas legislation takes effect, increasing to 7 percent of total imports eight years from now. The current bill limits apparel made from regional fabric to 1.5 percent of U.S. imports in the first year, increasing to 3.5 percent eight years later.

Thomas and industry sources both said they expect trade from Africa to be much lower than 1.5 percent, but argue that increasing the limit will encourage more investment. However, textile industry sources said raising the quota limits, by sparking investment, could eventually cost the domestic textile industry jobs.

The House bill also clarifies language affecting apparel articles that are cut in both the U.S. and a CBI or AGOA country by providing duty-free treatment to such items. Customs denied benefits on apparel cut in the U.S. and a CBI or AGOA country because its rules did not specifically list such “hybrid-cut” items as eligible for preferences.

The Thomas bill also ensures that knit-to-shape items, such as women's tube tops and hosiery, will receive duty-free treatment under the African Growth and Opportunity Act and CBTPA bills, despite a U.S. Customs Service ruling that prevents those items from being eligible. But it does not address a dispute, previously linked to the knit-to-shape issue, over whether apparel must be “dyed and finished” in the U.S. to receive benefits under a trade agreement with Caribbean nations.

Earlier this year, Sen. Jesse Helms (R-N.C.) attempted to link the knit-to-shape issue to a dispute over whether fabric dyed and finished in Caribbean nations should be eligible for benefits under the CBTPA. Both those disputes arose out of U.S. Customs Service interpretations of the law included in its implementing regulations (Inside U.S. Trade, Oct. 6, 2000, p. 1).

However, Thomas (R-CA) balked at a legislative fix pushed by Helms that would have traded beneficial treatment to knit-to-shape apparel in exchange for preventing apparel dyed and finished in the Caribbean from receiving benefits. Instead, under the amendment backed by Thomas, a legislative fix is provided for knit-to-shape apparel items without touching the dying and finishing issue.

Industry sources said this reflects a strategy employed by Thomas to present a bill that aggressively pursues liberalized trade on apparel in the House with the knowledge that it may be scaled back in the Senate. This aggressive approach is also reflected in the expansion of ATPA benefits to include apparel made from Andean-region fabric, industry and government sources said.

The CBTPA provides duty-free access for apparel that is assembled in the region from U.S. components that are “cut” either in the region or in the U.S. Customs held that knit-to-shape items were not eligible for preferential treatment because they technically are never “cut” -- they come out of a machine knit as one piece and are then stitched together.

In the case of AGOA, which extends quota-limited duty-free access to apparel made from regional fabric, Customs ruled that knit-to-shape items are not eligible because they are not made from fabric. House Ways and Means committee members from both parties objected to those interpretations, and said the committee's intention was not to exclude knit-to-shape apparel from receiving preferential treatment under regional fabric caps (Inside U.S. Trade, June 15, p. 1).

The knit-to-shape changes would affect imports of apparel from Caribbean countries in one of two ways. If the knit-to-shape machinery is located in a CBI country, the apparel would receive duty-free access under the regional knit apparel cap. If the machinery was in the U.S. and the knit-to-shape items were shipped to the CBI region to be sewn shut, they would be considered to be U.S. fabric and would receive duty-free, quota-free treatment.

Under AGOA, all apparel formed from a knit-to-shape machine in Africa would be subject to the regional fabric cap. Because of the distances between Africa and the U.S., U.S. companies would be very unlikely to ship knit-to-shape apparel to Africa so that it could be sewn and then shipped back to the U.S.  

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