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CAFTA-DR Supports U.S. Jobs: The US Textile and Apparel industry provides over 395,000 American jobs. An integrated supply chain under CAFTA-DR creates a strong regional textile and apparel industry, and in turn, a stronger US industry. In 2010, nearly 70 percent of U.S. imports of apparel under CAFTA-DR were sewn from regional fabric and yarn. In terms of preserving the benefit of the agreement for the Parties, the CAFTA-DR is one of the most effective trade agreements ever negotiated.
CAFTA-DR Provides Increased U.S. Export Opportunities: Central America is the second largest U.S. textile export market in the world (NAFTA is first). The United States exported $3.05 billion worth of textiles and apparel to the CAFTA-DR region in 2010; a 25% increase over 2009.
CAFTA-DR Has State-of-the-Art Rules of Origin:
- Yarn-Forward Rule: A “yarn-forward” rule ensures that the textile and apparel items covered by the FTA utilize U.S. or regional inputs, if they are available.
- New Benefits for Thread and Elastics: For the first time in a free trade agreement, the CAFTA-DR requires thread and narrow elastic fabrics to originate from the region. As in past agreements, there is a provision to ensure the visible linings originate from the region.
CAFTA-DR Lowers Trade Barriers: Prior to the CAFTA, tariff rates in the CAFTA-DR region on textile exports were as high as 18%. Under the CAFTA-DR, U.S. exports of textiles are now duty-free, providing our fabric, yarn, and thread manufacturers with the benefits of permanent and expanded duty-free trade.
CAFTA-DR Contains a Special Textile Safeguard: The special CAFTA-DR textile safeguard allows the United States to temporarily re-impose tariffs on textiles and apparel if there is a threat of damage, or actual damage done to the domestic industry due to import surges.
CAFTA-DR Fixes: In 2011, USTR announced a number of changes to CAFTA-DR agreed to at the Free Trade Commission meeting in San Salvador, El Salvador. The changes will expand opportunities under the CAFTA-DR and encourage a vibrant textile and apparel supply chain in the Western Hemisphere. Among the changes of particular significance is the change clarifying that certain monofilament sewing thread is now required to originate or be produced in the United States or the CAFTA-DR region in order for goods to qualify for preferential tariff treatment. The other changes are meant to clarify or correct the language used in the text of the Agreement. Such changes relate to the treatment of certain nightwear, as well as the “short supply” list in the CAFTA-DR and how several products are treated in the context of that list, including elastomeric yarns, knit waistbands and knit-to-shape components. Parties also agreed to increase the cumulation limits to encourage greater integration of regional production through limited reciprocal duty-free access with Mexico and potentially Canada.
CAFTA-DR Prevents Illegal Transshipment: The CAFTA-DR contains strict customs enforcement provisions. Under the CAFTA-DR provisions, U.S. Customs can conduct surprise site visits to Central American and Dominican Republic producers suspected of illegal transshipment. The United States can also undertake a variety of enforcement actions, including denial of entry to suspect goods.
CAFTA-DR Sourcing Directory Project: USTR is collaborating with the Inter-American Development Bank and partners in the CAFTA-DR region to develop a sourcing directory that will boost opportunities for regional integration, allowing textiles and apparel manufacturers to reach the retailers, brands, and importers that source the multi-billion dollar apparel industry. The initiative aims to encourage US, Central American and Dominican manufacturers to maximize the benefits of the CAFTA-DR Agreement.