Duty Free Benefits For Textile And Apparel Imports Into US

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import duty free The lawmakers in the US Congress introduced a legislation in July to provide provide duty-free treatment to textile and apparel imports from the 13 least-developed countries that are not currently beneficiaries under any U.S. trade preference programme. These countries are Afghanistan, Bangladesh, Bhutan, Cambodia, Kiribati, Laos, Maldives, Nepal, Samoa, Solomon Islands, East Timor, Tuvalu and Vanuatu. Called the the Asia-South Pacific Trade Preferences Act (S. 1443) , this act , once enacted , would provide effective from 1 January 2012 duty-free treatment to garments and other products similar to those afforded to beneficiary countries under the African Growth and Opportunity Act (AGOA) from African and Sub Saharan region. To be eligible for preferential duty treatment:

  • A beneficiary country would have to demonstrate that it is making continual progress toward establishing the rule of law, political pluralism, the right to due process and a market-based economy that protects private property rights.
  • Preferential treatment would be available for ten years and would be limited each year to no more than the applicable percentage (beginning at 11 percent and gradually increasing to 14 percent) of the aggregate square metre equivalents of all textile and apparel articles imported into the United States in the most recent 12-month period for which data are available.
  • A third-country fabric provision would grant preferential treatment through 31 December 2019 for textile and apparel articles made with yarn or fabric originating in any country.

US textile industry and even the lawmakers have been  historically vary of giving duty benefits to Bangladesh , Cambodia etc because of two reasons. One reason is that providing this benefit to these countries would have an adverse impact on the countries in the AGOA region  The AGOA region mainly comprises of the following countries

Angola,Benin,Botswana,Burkina Faso,Burundi,Cameroon, Cape Verde, Chad, Comoros,Congo (DROC),Congo (ROC), Djibouti , Ethiopia,Gabon, Gambia ,Ghana ,Guinea ,Guinea-Bissau , Kenya  ,Lesotho, Liberia,Madagascar,Malawi, Mali, Mauritius ,Mozambique , Namibia,Niger ,Nigeria ,Rwanda ,Sao Tome & Prin ,Senegal, Seychelles , Sierra Leone, South Africa, Swaziland,Tanzania ,Togo , Uganda and Zambia.

The second reason has been that US has been aware that China would benefit in terms of yarn and fabric shipments to Bangladesh and Cambodia once the duty benefit is given as imports of yarn and fabric from third countries would be allowed under the treaty..
However, if enacted, the treaty would also chip into the already reduced pie of Chinese exports which are reeling under the increased cost pressures. 
But it would help in creating alternative medium sized apparel manufacturing hubs to slowly replace the large Chinese apparel hubs over a period of time and reduce the dependence of US on China.

Which country would benefit the most ?

Apparently it looks like Bangladesh , Cambodia and Laos would be the main winners from this treaty. Bangladesh is already enjoying the huge benefits of duty free imports to EU and if it also gets the same benefit from US, it would be party time in Bangladesh !
However, one thing to consider is that in 2011  Bangladesh has exported about $2.5 billion worth of goods under chapter 52 and and 62 out of the total exports of about $27 billion. This is about 9% of the imports of these items into US.  So Bangladesh is very close to the 11% limit that the treaty may initially impose and will restrict the amounts to which Bangladesh can increase its exports. On the other hand Cambodia and Laos would have substantial scope of increase in exports .  For denim fabric exports, these countries would become an important destination as apparel exports increases from these countries.

Congress Approves Biggest U.S. Free-Trade Agreement Since 1994

On another note , a treaty for duty free trade with Colombia , Panama and South Korea has been passed by the Congress yesterday . A number of products would be covered and US is seeking to increase its chemical, pharmaceutical and farm exports to these countries. Duties on almost 95% industrial and consumer would be phased out within 5 years ..
More details on this treaty would be provided in a separate report.  Till then , keep reading Denimsandjeans.com πŸ™‚

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