U.S.-Korea Free Trade Agreement: Potential Economy-wide ... - USITC

forward rule of origin based on the component that confers essential character, and
immediate and reciprocal duty-free entry for all apparel and textiles.
The United States Association of Importers of Textiles and Apparel (USA-ITA), 333 whose
members include U.S. producers, distributors, retailers, importers, and related service
providers, stated in a written submission to the Commission that it supports the concept of
an FTA between the United States and Korea, but is “very disappointed” with many of the
terms in the FTA as negotiated because those terms would limit the potential for expanding
business with Korea and for broader liberalization that would benefit manufacturers, traders,
and consumers in both countries and in other countries with which the United States has
negotiated FTAs. It reported that the complex rules of origin for textiles and apparel are
different in the U.S.-Korea FTA than in other recent U.S. FTAs, adding up to increased
compliance costs for firms seeking to do business under the FTA. It stated that the key and
most beneficial components of the textile and apparel provisions of the FTA are that a few
goods would be subject to a single transformation rule of origin rather than the “onerous”
yarn-forward origin rule and that there are no restrictions on the use of nonoriginating
pocketing fabrics, sewing thread, or narrow fabrics in qualifying apparel.
USA-ITA stated that certain textile and apparel provisions are more restrictive in the U.S.-
Korea FTA than in other U.S. FTAs. It indicated that while the U.S.-Korea FTA would grant
immediate duty-free treatment to some originating goods, it would phase out U.S. tariffs on
other originating apparel most likely to be purchased by its member companies and their
customers over either 5 years (man-made fiber pants, shorts, socks, and knit shirts) or
10 years (cotton pants, shorts, knit shirts, and cotton and man-made fiber T–shirts and tank
tops). It noted that the 7 percent de minimis foreign content rule in the FTA (that is, up to
7 percent of the total weight of the component that determines the tariff classification of the
good could consist of nonoriginating fibers or yarns) is less than the 10 percent de minimis
foreign content rule found in other recent U.S. FTAs and preference programs. According
to USA-ITA, the FTA would establish a new short-supply process for yarns and fabrics not
available in commercial quantities in a timely manner, but it has yet to designate any such
inputs in short supply and, unlike CAFTA-DR, would set limits on the quantity of fabrics
and apparel made in the FTA region from such inputs and eligible for tariff preferences.
USA-ITA stated that, for the first time ever, the customs cooperation provisions of the FTA
would require Korea to obtain and update annually information concerning each entity
engaged in the production of textiles and apparel in Korea and to submit that information to
the United States annually, with the first submission due within one year of entry into force
of the FTA. According to USA-ITA, this provision would create the possibility that the
failure of Korea to provide complete information or to update it would result in entries from
some suppliers being delayed or denied altogether. USA-ITA also expressed concern that
the FTA, unlike other recent U.S. FTAs and preference programs, does not contain a
“cumulation” provision that would permit integration of inputs among U.S. FTA partners,
including a provision that would permit the use of Israeli or Mexican nylon filament yarn in
qualifying goods. According to USA-ITA, given that Korea is an important supplier of yarns
and fabrics to the United States, as well as to apparel-exporting countries with which the
United States already has FTAs, the absence of cumulation in the U.S.-Korea FTA would
limit opportunities to promote integration of all U.S. FTAs and for firms to integrate their
operations globally.
333 Jones, written submission to the USITC, June 27, 2007.
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