U.S. manufacturers of fibers, yarns, and fabrics are urging the U.S. government to eliminate tariff preference levels as part of the ongoing NAFTA renegotiation, but apparel importers and retailers want the TPLs to remain in place. The U.S. reportedly tabled a proposal to do away with the TPLs at the third round of NAFTA talks in Ottawa.
A letter to the trade ministers of the three NAFTA countries from ten associations representing “all parts of the North American textile, apparel, and retail supply chains” explains that TPLs provide the ability to supplement NAFTA’s yarn-forward rules of origin with limited amounts of non-originating input. According to a letter to the leaders of the Senate Finance and House Ways and Means committees from eight associations representing “the overwhelming majority of textile manufacturing in the United States,” the TPLs allow Mexico and Canada to export to the U.S. duty-free each year (a) more than 235 million square meter equivalents of fabric and apparel made with specified third-party inputs and (b) 13 million kilograms of yarn made from third-party fiber.
The apparel and retail associations state that many North American supply chains rely on these TPLs to complement purchases of NAFTA-originating inputs, support manufacturing operations in NAFTA countries, and continue using NAFTA despite the proliferation of sourcing options worldwide. Their letter asserts that retaining, at a minimum, the existing size and scope of the TPLs is essential to providing the predictability that will allow businesses to make long-term investments in sourcing and manufacturing in the NAFTA region.
The textile associations, however, called the TPLs “an ill-conceived mechanism” that has cost the U.S. thousands of jobs and hundreds of millions of dollars in annual sales to Canada and Mexico. Instead, their letter states, the TPLs benefit textile components from Asia that are often artificially priced due to substandard labor and environmental practices, intellectual property violations, and state-sponsored subsidies. As a result, the associations called on the congressional leaders to “fully support” their request to eliminate the NAFTA TPLs.