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DAVOS - U.S. Trade Representative Susan C. Schwab and Mexican Secretary of Economy Eduardo Sojo today signed a customs cooperation agreement, as a first step to implementing the textile cumulation provision of the Dominican Republic - Central America Free Trade Agreement (CAFTA-DR). The cumulation provision will allow apparel produced in Central America that incorporates certain fabric and other inputs from Mexico to qualify for duty preferences when exported to the United States under CAFTA-DR.
"I am very pleased to have completed this customs cooperation agreement," said Ambassador Schwab. "This has been a high priority for our industry and the industries in the region. I hope that the remaining requirements for the implementation of the cumulation provision will be completed soon."
The customs cooperation agreement is the first of several agreements that need to implement the cumulation provision for certain apparel products that was included in CAFTA-DR. Under the agreement signed today, Mexican and U.S. customs authorities will cooperate to ensure proper verification of claims of preferential treatment under CAFTA-DR for apparel that contain inputs from Mexico. The agreement provides for sharing of information and documents, procedures for production verification, including through unannounced plant visits, and penalties in the event of inaccurate claims. The agreement is modeled on analogous provisions of the CAFTA-DR.
The cumulation provision is subject to annual limits on the quantity of apparel that will receive preferential treatment and covers a limited set of products. For cumulation to be effective with respect to Mexico, Mexico must also amend each of its free trade agreements with the Central American countries to provide, on a reciprocal basis, for preferential treatment of Central American apparel goods containing U.S. inputs that are exported to Mexico. Once these amendments are reached and implemented in the domestic law of Mexico and the CAFTA-DR countries, the cumulation provisions of CAFTA-DR will enter into force with respect to Mexico.
The United States and Mexico began negotiations in the fall of 2005 on the customs cooperation agreement and concluded negotiations on the agreement on November 16, 2006.