Textile Groups Urge Regional Sourcing Credit to Offset Forced Labor Tariffs

A rare coalition of organizations that “normally take strongly divergent policy positions on trade” is urging the Office of the U.S. Trade Representative to use its proposed import tariffs related to forced labor not just as a stick but as a carrot as well.

The USTR proposal would impose Section 301 tariffs of 12.5 percent on imports from 44 countries that have failed to impose and effectively enforce a prohibition on imports of goods produced with forced labor and 10 percent on imports from 16 countries that have failed to effectively enforce such a prohibition. USTR also proposed a mechanism that would reduce these tariffs on a certain volume of textile and apparel imports from certain countries based on the volume of U.S. textile exports to those countries.

In joint comments filed with USTR in response to its proposal, the National Council of Textile Organizations, the American Apparel and Footwear Association, the U.S. Fashion Industry Association, and the U.S. Industrial and Narrow Fabrics Institute recommended a mechanism that builds on USTR’s approach and is designed to pull sourcing back toward the U.S. and the Western Hemisphere. 

The proposal would let brands and retailers earn credits when they buy U.S. textiles and qualified apparel goods from USMCA or CAFTA-DR partners. Those credits could then be used to offset Section 301 tariffs on apparel imports from USTR-designated countries. The base credit would be 20 percent of the declared customs value of qualifying USMCA or CAFTA-DR apparel. If that apparel also uses U.S.-made yarn or fabric, the credit would increase to 30 percent of the export value of the yarn or 40 percent for fabric. 

The coalition casts the mechanism as a win-win: it would reward forced labor-free, well-documented supply chains; boost demand for U.S. yarn, fabric, and cotton; and give apparel companies a practical way to diversify away from sourcing in China and Asia. It also aims to reverse the erosion of the Western Hemisphere’s share of the U.S. apparel import market, which the comments say has fallen from 16 percent to 12 percent since 2019 while Asia’s share has grown. 

The economic pitch is equally compelling. The associations argue the plan could double U.S. textile exports to the Western Hemisphere to roughly $29 billion annually, drive billions in new domestic investment, reopen shuttered factories, and support more than 56,000 new U.S. textile-related jobs.