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Textiles and trade

April 1st, 2014 / By: / Technical

NCTO supports Textile Enforcement and
Security Act (TESA), Yarn-Forward rule.

The Yarn-Forward Rule spurs investment in the U.S. textile industry, according to information from the National Council of Textile Organizations (NCTO).

The U.S. textile industry has seen a surge in foreign direct investment over the past eight months. No fewer than eight foreign companies have made public announcements over that period to invest more than $700 million in new U.S. textile facilities and equipment. These investments are projected to provide approximately 1,900 new jobs in North Carolina, South Carolina, Georgia and Louisiana.

The United States has become an increasingly attractive option for textile manufacturers looking for competitive energy, transportation and fiber costs. Beyond these basic economic factors, a key driver for this recent investment surge has been the success of U.S. trade policy in the textile sector. Over the past 25 years, the U.S. has completed a series of free trade agreements (FTAs) that include a Yarn-Forward Rule of Origin for textile and apparel products. As the name implies, the Yarn-Forward rule requires that yarn, fabric and assembly production steps be completed in the FTA region in order to qualify for duty-free preference into the United States. This rule has served as a catalyst for record-breaking exports of U.S. yarns and fabrics that are eventually processed into finished apparel and textile home furnishings in FTA partner countries. These goods are then shipped back to the U.S. duty free for purchase by U.S. consumers.

The Yarn-Forward rule has helped the U.S. textile industry become the third largest exporter of textile products in the world. U.S. exports of all textile products were nearly $17.9 billion in 2013. Over the past 10 years, U.S. textile exports have grown dramatically, from $12.7 billion in 2003 to $17.9 billion in 2013, a 40.6 percent increase.

The single largest investment announcement, approximately one-quarter of a billion dollars, came from Gildan Activewear Inc., based in Montreal, Canada. This investment of approximately $250 million will be made by Gildan over its 2014 and 2015 fiscal years in order to build two new yarn-spinning facilities in North Carolina, one in Salisbury and another one in Mocksville. Each one is expected to be over 500,000 square feet in size. The venture is slated to create approximately 500 new jobs in Davie and Rowan counties.

In addition to Gildan’s announcement, the U.S. textile sector continues to see a positive trend in foreign direct investment. Since August of 2013, textile companies from India, Mexico and China have announced new investment plans in the United States. These projects will generate a projected 1,368 new U.S. jobs beyond the 500 associated with Gildan’s investment.

“This massive investment surge and the creation of approximately 1,900 much needed manufacturing jobs is a concrete example of how Yarn-Forward has made a major contribution to the U.S. economy and workforce. You need look no further for how sound provisions in trade agreements can make a real difference in our economy,” said Augustine Tantillo, NCTO president and CEO.

Reintroducing TESA

The National Council of Textile Organizations is praising the reintroduction of the Textile Enforcement and Security Act (TESA) in the 113th Congress. Congressmen Tom Graves (R-GA-14) and Mike McIntyre (D-NC-7) reintroduced the bill in the House of Representatives on November 20. The bill seeks to increase U.S. Customs and Border Protection enforcement activities as well as improve trade facilitation through enhanced targeting, increased resources, and greater authority.

NCTO president Auggie Tantillo commented: “Proper enforcement of our agreements and trade obligations is a basic necessity, not a luxury, in regard to U.S. trade policy. Enforcing these agreements must serve as a prerequisite in U.S. trade policy to preserve nearly 500,000 U.S. jobs which rely on the domestic textile and apparel industry. As we approach the finalization of the Trans-Pacific Partnership and the beginning of the Transatlantic Trade and Investment Partnership, legislation such as TESA will help ensure that U.S. workers and manufacturers have an opportunity to fairly compete in markets both at home and abroad.”

Due to the high-risk nature and the prevalence of fraud in textile and apparel imports, U.S. Customs and Border Protection (CBP) designated the textile industry as a Priority Trade Issue, but the industry continues to experience serious fraud, particularly in the CAFTA and NAFTA regions. As the third largest exporter of textile products in the world, the U.S. textile industry depends on strong customs enforcement for its livelihood.

The TESA legislation addresses many of the industry’s key concerns by providing CBP with expanded authority to better target fraudulent textile and apparel goods coming into the U.S., while also implementing additional tools and resources to increase the agency’s commercial enforcement efforts and reduce the prevalence of fraud that creates an uneven playing field for the U.S. textile industry.

Reps. Graves and McIntyre introduced TESA with the support of twenty-four total members of Congress, three of whom sit on the House Ways and Means Committee. The bill is in committee (as of March 2014) and has not yet been submitted for a vote in the House of Representatives.

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