Textile and Apparel Rules of Origin in International Trade

Textile and Apparel Rules of Origin in International Trade

Order Code RL31934
CRS Report for Congress
Received through the CRS Web
Textile and Apparel Rules of Origin
in International Trade
May 23, 2003
Bernard A. Gelb
Specialist in Industry Economics
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

Textile and Apparel Rules of Origin in International
Trade
Summary
In moves to open foreign markets to U.S. goods and services, and vice versa,
and to boost economic growth in poorer regions of the world, the United States has
entered into free trade agreements and established preferential trade programs. Major
challenges are preventing non-members or ineligible countries or products from
benefitting, and limiting the potential harm to U.S. producers. These challenges are
addressed in part by explicitly or implicitly setting rules for determining the origin
of each of particular categories of goods to ensure that benefits flow only to the
appropriate trade partner(s) and/or only to the designated categories of goods made
by a partner or beneficiary country. Usually, this is done by establishing rules of
origin based upon one more or conceptual approaches that have been developed to
help designate a category of products or particular item as the “product” of a
particular country or group of countries — as unambiguously as possible. Because
the United States is considering entering into other free trade agreements, it may be
instructive to examine the rules that are part of current agreements and preferential
programs.
Existing U.S. free trade agreements and trade preference programs include the
following: the North American Free Trade Agreement, the United States-Jordan Free
Trade Agreement, the United States-Israel Free Trade Agreement, Andean trade
preference (Andean Trade Preference and Drug Eradication Act), Caribbean trade
preference (Caribbean Basin Trade Partnership Act as amended), and sub-Saharan
trade preference (African Growth and Opportunity Act, AGOA, as amended). The
United States has signed proposed free trade agreements with Chile and Singapore.
Based upon brief summaries of the free trade agreements and preferential trade
programs listed above, it is observed that if a trade agreement has broader coverage
than a trade preference program it does not necessarily indicate that it is a more
generous trade promotion vehicle with respect to textiles and apparel. A trade
agreement is intended to generate reciprocal benefits whereas a preference program
is a unilateral grant of benefits to the intended beneficiary country(ies). However,
while recognizing this caveat, it needs to be reported that the trade agreements cover
textile and apparel categories more broadly than the preferential programs.
Also, a major characteristic of rules of origin contained in all of the agreements
and programs covered is that they tend to be very specific with respect to textiles and
apparel. One overall rule, usually set out at the beginning of the relevant
document(s), applies to textiles and apparel to the extent that the specific rules do not
supercede it. That rule requires that the value of materials produced in a beneficiary
country plus the direct cost of processing in a beneficiary country must equal at least
35% of the total value of the article at its entry into the United States. But up to 15%
of the 35% may consist of the value originating in the United States.
Thirdly, all of the agreements and preferential programs make special allowance
for handloomed, handmade, and folklore articles, as defined by consultation among
or between the countries. This report will not be updated.

Contents

Setting and Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Need for and Approaches to Rules of Origin . . . . . . . . . . . . . . . . . . . . . . . . . 2
Concepts and Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Substantial transformation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Change in tariff classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Value-added standard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Critical process criterion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Summaries of Rules of Origin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Comparisons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
General Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Specific Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
North American Free Trade Agreement . . . . . . . . . . . . . . . . . . . . . . . . 9
U.S.-Jordan Free Trade Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Proposed U.S.-Singapore Free Trade Agreement . . . . . . . . . . . . . . . . . 9
Andean Trade Preference Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Caribbean Basin Preference Program . . . . . . . . . . . . . . . . . . . . . . . . . 10
Sub-Saharan Africa Preference Program . . . . . . . . . . . . . . . . . . . . . . . 10
Selected Current CRS Reports Related to Free Trade Agreements and
Preferential Trade Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
List of Tables
Summaries of Textile and Apparel Rules of Origin: Selected Trade
Agreements and Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Textile and Apparel Rules of Origin in
International Trade1
Setting and Scope
In moves to open foreign markets to U.S. goods and services and vice versa,
and, in some cases, to boost economic growth in poorer regions of the world, the
United States has entered into free trade agreements and established preferential trade
programs. Major challenges are preventing non-members or ineligible countries or
products from benefitting, and limiting the potential harm to U.S. producers in the
form of improved opportunities for foreign producers to sell in U.S. markets. There
is tension between how much the United States wishes to open its markets and how
much foreign competition U.S. producers will face. The agreements and programs
explicitly or implicitly define rules for determining the origin of each of particular
categories of goods to ensure that benefits flow only to the appropriate trade
partner(s) and/or only to the designated categories of goods made by a partner or
beneficiary country.
Free trade agreements entered into by the United States include the North
American Free Trade Agreement (NAFTA) with Canada and Mexico, and individual
country agreements with Israel and Jordan. Free trade agreements with Chile and
Singapore have been signed.2 Preferential trade programs include Andean trade
preference (Andean Trade Preference and Drug Eradication Act), Caribbean trade
preference (Caribbean Basin Trade Partnership Act as amended), and sub-Saharan
trade preference (African Growth and Opportunity Act as amended).3
An important context of these agreements and programs is that textile and
apparel manufacture has been shifting to developing countries, with textiles and
apparel accounting for large portions of their exports to developed economies in the
last few decades. Because textile and apparel manufacture and trade are important
elements of developing country economies, provisions regarding textile and apparel
products are prominent in the agreements and programs listed above.4
1 Vladimir N. Pregelj, Specialist in International Trade and Finance, Foreign Affairs,
Defense, and Trade Division, provided expert guidance in the preparation of this report.
2 Presidential signing of the Singapore pact occurred May 6, 2003; the signing of the Chile
accord has not been scheduled. Congressional approval must follow in both cases.
3 This report does not discuss the General System of Preferences (GSP) inasmuch as the
GSP specifically excludes preferential treatment for textiles and apparel.
4 Also, the bilateral trade agreement with Vietnam, which confers conditional normal trade
relations (NTR) with that country has been supplemented by an agreement pertaining
(continued...)

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Because the United States is considering entering into other free trade
agreements, it may be instructive to examine the rules that are part of current
agreements and preferential programs.
This report first presents the reasons for establishing rules of origin, the issues
involved, and the approaches to establishing such rules. It summarizes the actual
rules used by several agreements and programs, and then compares the rules of those
agreements and programs. The report provides minimal information on the trade
agreements and programs other than the summaries of rules of origin. For more
extensive details on these agreements and programs, see the list of selected CRS
reports on the last page of this report. For discussion and analysis of the economics
of textile and apparel production and of textile and apparel trade issues in general,
see CRS Report RL31723, Textile and Apparel Trade Issues.
The Need for and Approaches to Rules of Origin5
A variety of issues arise in constructing trade agreements and preferential
programs. One is preventing non-members or ineligible countries from benefitting.
Another is the potential harm to U.S. producers in the form of improved
opportunities for foreign producers to sell in U.S. markets. In both cases, there is
tension between how much the United States wishes to open its markets (and those
of beneficiary countries) and how much foreign competition will be faced by U.S.
producers. Consequently, a key challenge is to define exactly what constitutes the
product of a trade agreement member or what goods (and/or services) qualify to
benefit from a preferential program. Usually, this is done by establishing rules of
origin. In some cases, such “rules” are designated as such, but essentially are
incorporated in stated criteria of eligibility for benefits.
The challenge is technical as well as political. Growing globalization of the
world economy makes it difficult to identify the “nationality” of many products.
Many products are an amalgamation of labor, capital, and material inputs from two
or more countries. A systematic conceptual approach to deal with this is needed,
although economic interests usually force departure from a strict approach.
As discussed below, stated or implicit rules of origin are essential components
of the agreements and programs. Such rules, moreover, will have continuing
relevance inasmuch as the Agreement on Textiles and Clothing (under the aegis of
the World Trade Organization) provides for the phasing out of quotas (effective
January 1, 2005) but not the phasing out of tariffs. Consequently, it may be
instructive to examine the rules that are part of current agreements and preferential
programs for possible consideration and comparison in future circumstances.
4 (...continued)
exclusively to textiles and apparel. U.S. imports of those products from Vietnam have
increased markedly since Vietnam began receiving the lower NTR tariff rates.
5 This presentation of issues, concepts, and definitions is based largely upon more extensive
discussion of such matters in CRS Report 92-584E, Rules of Origin and the North American
Free Trade Agreement, by Douglas Karmin.

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Concepts and Definitions
Basically, four different approaches have been developed to design rules of
origin that, as unambiguously as possible, designate a particular item as the product
of a particular country or group of countries, or a product of a beneficiary country .
Minimizing ambiguity usually means establishing extremely detailed rules. In some
cases, the term “rules of origin” per se is not used, but such “rules” are implicit in
stated criteria of eligibility for benefits. The trade agreements and programs covered
here use different approaches to defining origin. Most use two or more approaches;
some applying to only one category of articles. There almost always are exceptions
to the general approaches or rules. The four basic approaches are as follows:
Substantial transformation. One or more manufacturing or assembling
processes (possibly involving the addition of new materials) change(s) the character
of a good or a class of goods thereby producing a new or different product. Thus, in
the case of a trade agreement, origination generally is assigned if the application of
a manufacturing or assembling process changes the character of a good or a
combination of goods thereby producing a new or different product with a different
character. In the case of a preferential program, eligibility for benefits is conferred
if the product (or product category) undergoes a specified transforming process, and
specifically not conferred if it undergoes a less transforming process.
Change in tariff classification. One or more manufacturing or assembling
processes (possibly involving the addition of new materials) alters the product to the
extent that its tariff classification changes. For trade agreements, origination is
assigned if the application of a manufacturing or assembling process alters the
product to the extent that its tariff classification changes. For preferential programs,
eligibility for benefits is conferred if the product is or was, or is not or was not, of a
specified tariff classification.
Value-added standard. Manufacturing, assembling, and materials newly
included account for a specified minimum proportion of the product’s total
production costs or value — often measured by value added. In the case of a trade
agreement, origination is assigned if the application of a manufacturing or
assembling process and/or materials newly included account for a specified minimum
percentage of the product’s production costs. In the case of a preferential program,
a specified minimum percentage of the value of the article at entry into the United
States must be accounted for by the value of materials produced in a beneficiary
country and included in the product plus the direct costs of processing in that country.
Critical process criterion. A specified key input is incorporated or a
specified key manufacturing process is performed. For trade agreements, origination
is assigned if a key input is incorporated or a key manufacturing process is
performed. For preferential programs, it often is the case that a product must contain
one or more specified inputs or components made in the United States.
A variant of the critical process criterion, the “yarn forward” rule of origin, is
used at least to some extent as an explicit or implicit general principle with respect
to textiles and apparel by the trade agreements and preferential programs covered in
this report, albeit usually with exceptions. In NAFTA, a textile product is considered

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as “originating” if the material used in each of the successive stages of fabricating
textile products — the yarn itself, the fabric, and the sewing thread — originate in a
beneficiary country. Thus, it is used to limit trade benefits to NAFTA countries only.
When used in U.S. preferential programs such as the Caribbean Basin program, the
purpose of the yarn-forward principle is to limit the extent to which intended
beneficiary countries can incorporate their own materials.
Summaries of Rules of Origin
The following table presents brief summaries of the explicit and implicit rules
of origin provisions with respect to textiles and apparel in the following free trade
agreements and preferential trade programs: The North American Free Trade
Agreement (NAFTA), the United States-Jordan Free Trade Agreement (US-Jordan
FTA), the Andean Trade Preference and Drug Eradication Act (ATPDEA), the
Caribbean Basin Trade Partnership Act as amended (CBTPA), the African Growth
and Opportunity Act as amended (AGOA), and the proposed United States-Singapore
Free Trade Agreement (US-Singapore FTA).
As in the case of nearly all trade agreements and preferential programs, these
have special rules of origin with respect to textiles and apparel, and the provisions
(a) are extremely detailed in their entirety and/or with respect to certain aspects, and
(b) contain numerous exceptions (for particular product categories) and qualifications
(such as phase-in periods). Consequently, it is not practicable to present and compare
them in their entirety. CRS has applied judgement as to what provisions are most
important.
As noted earlier, the trade agreements and programs covered here use different
approaches to defining origin; and more than one of these agreements and programs
use more than one system.
These summaries are based upon one or more of the following: (a) the text of
the trade agreements themselves, (b) the U.S. statutes implementing the agreements
or the program, and (c) summaries prepared by the Office of Textiles and Apparel,
U.S. Department of Commerce, and (d) summaries from a few of the CRS reports
listed below.
Inasmuch as the summaries are, in virtually all cases, generalizations, readers
should use them only for general analytical purposes.

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Summaries of Textile and Apparel Rules of Origin: Selected Trade Agreements and Programs
Approach
Agreement or Program
or Product
Category
North American Free Trade Agreement
U.S.-Jordan Free Trade Agreement
General
Yarn forward (critical process criterion): Yarn used in each of the successive stages of Critical process criterion: Basically, an article must be made of a fiber
Approach
fabricating textile products (the yarn itself, the fabric, and the sewing thread) must originate or fabric manufactured by a Party, or wholly assembled by a Party.
and/or
in a NAFTA country. Also, each non-originating material used must undergo an applicable
Principle(s)
change in tariff classification (specified in an Annex), or the good must otherwise satisfy
applicable requirements where no tariff classification change is required.
Exception(s)
(a) For many individual product categories, substantial transformation or change in tariff A textile or apparel product that is knit-to-shape in a Party is
classification must occur. (b) NAFTA-made yarn, fabric, apparel not meeting strict NAFTA considered the growth, product, or manufacture of that Party
content requirements can be eligible for preferential duty treatment up to agreed annual notwithstanding other rules.
levels.
Cotton & man-made fiber spun yarn & sewing thread must be of NAFTA origin. Filament If yarn, thread, rope, twine, cordage, etc., the constituent staple fibers
Yarn
yarns must be NAFTA formed; feedstocks not limited. Yarns, sewing thread of other fibers must be spun in a Party, or the continuous filament be extruded there.
must be spun in a NAFTA country.
Yarn forward, except: Cotton & man-made fiber knit fabrics and man-made fiber non- Constituent fibers, filaments, yarns must be woven, knitted, tufted,
Fabric
woven & specialty fabrics require NAFTA-origin fiber. Coated fabric must have NAFTA- felted, needled, entangled, or substan- tially transformed by any other
origin fabric, except tire cord & belting, and man-made fiber hose.
fabric-making process in the Party. If a cotton, silk, man-made, or
vegetable fabric is dyed, printed, and undergoes 2 or more finishing
operations in a Party, it qualifies.
Yarn forward, except: Apparel made from fabrics originating in a non-NAFTA country that Must be wholly assembled in the Party from its component parts.
are in short supply in NAFTA must be cut or knit to shape and assembled in a NAFTA
Apparel
country. Men’s dress shirts made from certain cotton and cotton/man-made fiber blend
fabrics must under-go substantial transformation. Nightwear and women’s underwear of fine
count cotton knit fabric must undergo substantial transformation. Bras- sieres & all silk &
linen apparel must undergo substantial transformation.
Other Textile
Yarn forward, except: Fiber in man-made fiber products must be of NAFTA-origin. A fabric Must be wholly assembled in the Party from its component parts.
Items
forward rule applies to luggage, handbags, flat goods, & curtains of certain yarns. Silk &
linen goods must undergo substantial transformation.

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Summaries of Textile and Apparel Rules of Origin: Selected Trade Agreements and Programs (continued)
Approach
Agreement or Program
or Product
Category
Andean Trade Preference Program
Caribbean Basin Trade Preference Program
General
Critical process criterion: Must be assembled from products of a beneficiary Yarn forward (critical process criterion): In most cases, U.S.-made
Approach
country or the U.S.
yarn and/or U.S.-made fabric required.
Exception(s)
(a) In some cases, dyeing, printing, & finishing of fabrics must be performed (a) In some cases, dyeing, printing, & finishing of fabrics must be
in U.S. (b) If short supply situation in the U.S., President, at request of performed in U.S. (b) Short supply situation provisions essentially
interested party, may proclaim additional fabrics & yarns eligible for same as for ATPDEA. (c) Articles otherwise ineligible for
preferential treatment after following certain steps. (c) Articles otherwise preferential treatment because constituent fibers or yarns are not
ineligible for preferential treatment because constituent fibers or yarns are not wholly formed in U.S. or CBTPA can qualify if total weight of such
wholly ATPDEA- or U.S.-formed can qualify if total weight of such fibers or fibers or yarns does not exceed 7% of total weight.
yarns does not exceed 7% of total weight.
Yarn
No provision related to yarn imports per se.
Thread used to assemble an apparel article must have been dyed,
printed, or finished in the United States.
Fabric
No provision related to fabric imports per se.
No provision related to fabric imports per se.

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Summaries of Textile and Apparel Rules of Origin: Selected Trade Agreements and Programs (continued)
Approach
Agreement or Program
or Product
Category
Andean Trade Preference Program
Caribbean Basin Trade Preference Program
Must be sewn or otherwise assembled in one or more ATPDEA countries or Fabric forward in most cases, with the following specifics: Must be
the U.S. or both from one or more of following components: (a) Fabrics or sewn or otherwise assembled in one or more CBTPA countries from
fabric components wholly formed, or components knit-to-shape, from yarns fabrics wholly formed and cut, or from components knit-to-shape,
Apparel
wholly formed in the U.S. or one or more ATPDEA countries, provided that in the U.S. from yarns wholly U.S. formed, and all dyeing, printing,
dyeing, printing, and finishing of the woven and knit fabric components is and finishing of the fabrics from which the articles are assembled
carried out in U.S.; (b) fabrics or fabric components formed from yarns wholly must be carried out in the U.S. If cut and sewn, or otherwise
formed in one or more ATPDEA countries if such fabrics (including certain assembled, in one or more CBTPA countries from U.S. fabric made
fabrics not formed from yarns) are in chief value of llama, alpaca, or vicuña; from U.S. yarn, U.S.-made thread must be used, with all dyeing,
(c) fabrics or yarns, to the extent that apparel articles of such fabrics or yarns printing, and finishing of the fabrics having been carried out in the
are eligible for preferential treatment, without regard to source of the U.S. Knit apparel articles, except socks and certain T-shirts, must
fabrics/yarns, under NAFTA short-supply provisions. Regional fabric be cut and assem- bled in 1 or more CBTPA countries from U.S. or
provision: an apparel article qualifies if assembled in ATPDEA from fabrics CBTPA fabric made from U.S. yarn. Non-underwear T-shirts made
or fabric components formed in an ATPDEA country from yarns wholly U.S. from CBTPA fabric made of U.S. yarn are subject to a quota. The
or ATPDEA formed, whether or not article is also made from any of the U.S.-made fabric components of brassieres cut and assembled in
fabrics or components defined in (a), (b), and (c), unless the article is made one or more CBTPA countries and/or the U.S. must account for at
exclusively from any of the components defined in (a), (b), or (c).
least 75% of customs value.
Other Textile
Luggage: Must be assembled in an ATPDEA country from fabric wholly Luggage: Must be assembled in a CBTPA country from fabric
Items
formed & cut in the U.S. that enters the U.S. on same basis as Mexican wholly formed and cut in the U.S. from yarns wholly formed in the
production sharing/maquiladora provisions, or assembled from fabric cut in U.S. if entering under a certain HTS, or assembled from fabric cut
an ATPDEA country from fabric wholly formed in the U.S. from yarns wholly in a CBTPA country from fabric wholly formed in U.S. from U.S.
formed in the U.S.
yarn.
General
Yarn forward (critical process criterion): U.S.-made yarn required in most Critical process criterion: (a) Products must be made from
Approach
cases; U.S.-made fabric required in most cases. Must be cut in U.S. in some Singapore or U.S. yarn. (b) Assembly must be carried out in
cases.
Singapore.

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Summaries of Textile and Apparel Rules of Origin: Selected Trade Agreements and Programs (continued)
Approach
Agreement or Program
or Product
Category
Andean Trade Preference Program
Caribbean Basin Trade Preference Program
Exception(s)
(a) Short supply situation provisions essentially same as for ATPDEA and (a) Change in tariff classification required for nearly all individual
to rule(s)
CBTPA (b) Articles otherwise ineligible because constituent fibers or yarns product categories. (b) A limited yearly amount of textiles &
are not wholly formed in the U.S. or a beneficiary country can qualify if the apparel containing non-U.S. or non-Singaporean fiber, yarn, or
total weight of such items does not exceed 7% of total weight.
fabric may qualify for duty-free treatment. (c) Short supply
provision for apparel made from fabric or yarn in short supply in
United States.
Yarn
No provision related to yarn imports per se.
Change in tariff classification required for all products.
Fabric
No provision related to fabric imports per se.
Change in tariff classification required for all products.
Apparel
(a) Must be sewn or otherwise assembled in one or more AGOA countries Change in tariff classification required for most products, with
from fabric wholly formed and cut, or from components knit-to-shape, in the qualifications in some instances specific to the individual product.
U.S. from yarns wholly U.S.-formed. If knit-to-shape component is either a
U.S. or AGOA country product (made from U.S. yarn) and fabrics are cut in
the U.S. or an AGOA country, U.S. sewing thread must be used. (b) If
assembled from regional-made fabric (woven or knit-to-shape), that fabric
must be made from yarn made in the U.S. or an AGOA country. Imports
limited by a cap that increases over time. (c) If assembled in a lesser
developed AGOA country, there is no restriction on the source(s) of the fabric
or the yarn used to make the fabric.
Other
No provision related to non-apparel items per se.
Change in tariff classification required for all products.

CRS-9
Comparisons
This section briefly compares the rules of origin with respect to textiles and
apparel of the two trade agreements and three preferential trade programs in terms
of (a) the breadth of inclusion of product categories that are afforded coverage in the
trade agreement or preferential program, and (b) in the case of preferential programs,
the extent to which the beneficiary countries’ labor, capital, and materials are allowed
or required to add value to the product. The comparisons are based only upon the
summaries in the table in the preceding section. Moreover, readers should be aware
of the fact that the program by program descriptions below use less precise language
than the summaries.
With respect to both bases of comparison, one should note that if a trade
agreement has broader coverage than a trade preference program it does not
necessarily indicate that it is a more generous trade promotion vehicle. A trade
agreement is intended to generate reciprocal benefits whereas a trade preference
program essentially is a unilateral grant of benefits by the United States to the
intended beneficiary country(ies).
General Comments
! The rules of origin in all of the agreements and programs covered
tend to be very specific with respect to textiles and apparel.
! At least in general, all the agreements and preferential programs
examined explicitly or implicitly use the critical process criterion
approach to establishing rules of origin.
! An overall rule, usually appearing near the beginning of the relevant
document(s) applies to textiles and apparel to the extent that the
special rules do not supercede it. That rule requires that the value of
materials produced in a beneficiary country plus the direct cost of
processing in a beneficiary country must equal at least 35% of the
total value of the article at its entry into the United States. But up to
15% of the 35% may consist of the value originating in the United
States.
! While recognizing the caveat in the second paragraph of this section,
the trade agreements cover textile and apparel categories more
broadly than the preferential programs.
! All of the agreements and preferential programs make special
allowance for handloomed, handmade, and folklore articles, as
defined by consultation among or between the countries, and permit
eligibility for trade benefits.
! While not specific to textiles and apparel, it should be noted that all
the agreements and preferential programs require that a good be

CRS-10
imported directly into the United States from a party to an agreement
or from a specified beneficiary country to qualify for trade benefits.
Specific Comments
North American Free Trade Agreement. In so far as textiles and apparel
are concerned, NAFTA appears to have very broad product coverage, with provisions
related to a very wide variety of types of textile and apparel goods — including
textile end-products other than apparel. There are provisions specifically related to
yarn, to fabrics, to apparel, and to non-apparel textile products. The “yarn forward”
rule of origin principle applies quite broadly; and non-NAFTA-origin fiber (to
produce the yarn) is allowed in a super majority of instances. However, special rules
of origin regarding fiber origin or substantial transformation apply to several
categories of apparel, such as men’s dress shirts, nightwear, women’s underwear, and
silk and linen apparel in general. And change in tariff classification is required in
nearly all cases at the individual product level. NAFTA went into effect January 1,
1994.
U.S.-Jordan Free Trade Agreement. The US-Jordan FTA appears to have
broader product coverage than NAFTA. Here, too, there are separate provisions
related to yarn, fabrics, apparel, and non-apparel textile products. But there seem to
be fewer exceptions or special requirements affecting product-type groups; and the
exceptions tend to include items rather than exclude them. However, considerable
preference had already been accorded to Jordan indirectly through the U.S.-Israel
Free Trade Agreement (USIFTA). This was expanded in scope in late 1996 to
encompass, among other things, qualifying industrial zones between Israel and
Jordan, which produce predominantly apparel, leading to a large increase in exports
of apparel from Jordan to the United States. The U.S.-Jordan FTA went into effect
in December 2001.
Proposed U.S.-Singapore Free Trade Agreement. The U.S.-Singapore
FTA appears to have very broad product coverage, with fewer specifications
pertaining, respectively, to the broad categories of yarn, fabric, apparel, and non-
apparel textile products than is the case with NAFTA or the US-Jordan FTA.
However, it is similar to NAFTA in that, although there is a general principle of yarn
forward, change in tariff classification is required at the individual product level in
a high percentage of cases. A relatively broad “exception” provides that a limited
yearly amount of textiles & apparel containing non-U.S. or non-Singaporean fiber,
yarn, or fabric may qualify for duty-free treatment. The agreement must be approved
by the Senate.
Andean Trade Preference Program. The Andean Trade Preference and
Drug Eradication Act (Title XXXI of P.L. 107-210) amended the Andean Trade
Preference Act (Title II of P.L. 102-182) to include textiles and apparel. The
program focuses almost entirely upon apparel sewn and assembled in beneficiary
Andean countries or the United States, with important limitations from the standpoint
of beneficiary countries. Fabrics or fabric components, including knit-to-shape
components, must be made from yarns wholly formed in a beneficiary country or the
United States, and all printing and dyeing of woven and knit fabrics must be
performed in the United States. Fabrics or fabric components may be made of yarns

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wholly formed in one or more beneficiary countries if the fabrics are made chiefly (in
value) from llama, alpaca, or vicuña fiber. Another regional fabric provision, allows
apparel articles to qualify for trade preference if assembled in a beneficiary country
from fabrics formed in a beneficiary country but made from U.S. or beneficiary
country yarn. A provision applying to luggage requires it to be assembled in a
beneficiary country from entirely U.S.-made and U.S. cut fabric, or be assembled
from entirely U.S.-made (including the yarn) fabric, but cut in a beneficiary country.
Caribbean Basin Preference Program. This preference program also
focuses almost entirely upon apparel. But the (implicit) rules of origin are more
“generous” than the Andean program in the respect that it does not have the option
that the apparel can be sewn and assembled in the United States as well as in
beneficiary countries. For the most part, fabrics must be wholly formed and cut, or
components knit-to-shape, in the U.S. from yarns wholly formed in the U.S. If cut
as well as sewn (or otherwise assembled) in one or more beneficiary countries from
U.S. fabric made from U.S. yarn, U.S.-made thread must be used. In both the
Andean-cut and U.S.-cut cases, all dyeing, printing, and finishing of the fabrics must
be carried out in the United States. This is a requirement imposed by P.L. 107-210.
Product-specific restrictions include the following: Knit apparel articles except socks
and certain T-shirts must be cut and assembled in one or more beneficiary countries
from U.S. or Caribbean fabric made from U.S. yarn. Non-underwear T-shirts made
from Caribbean fabric made of U.S. yarn is subject to a quota. The U.S.-made fabric
components of brassieres cut and assembled in one or more beneficiary countries
and/or the United States must account for at least 75% of customs value. A provision
applying exclusively to luggage requires it to be assembled in a beneficiary country
from entirely U.S.-made and U.S.-cut fabric if entering under a particular
Harmonized Tariff category, or be assembled from entirely U.S.-made (including the
yarn) fabric, but cut in a beneficiary country.
Sub-Saharan Africa Preference Program. This program, provided for
in the African Growth and Opportunity Act as amended, focuses entirely upon
apparel, with (implicit) rules of origin applying to textiles and apparel that appear to
be similar to those of the Andean program. To qualify for trade preference, apparel
articles must be sewn or otherwise assembled in one or more AGOA countries from
entirely U.S. made fabric and/or fabric components. If a knit-to-shape component
is either a U.S. or AGOA country product (made from U.S. yarn) and fabrics are cut
in the U.S. or an AGOA country, U.S. sewing thread must be used. In the regional
fabric provision, apparel assembled from regional-made fabric (woven or knit-to-
shape), that fabric must be made from U.S.-made or AGOA-made yarn; but imports
of such-made fabric are limited by a cap that increases over time. A potentially
important rule of origin exception provides that, for apparel assembled in a lesser
developed sub-Saharan country, there is no restriction on the source(s) of the fabric
or the yarn used to make that apparel.

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Selected Current CRS Reports Related to Free
Trade Agreements and Preferential Trade Programs
CRS Issue Brief IB95050. Caribbean Basin Interim Trade Program: CBI/NAFTA
Parity, by Vladimir N. Pregelj.
CRS Report RS20063. U.S. Sub-Saharan Africa Trade and Investment: Programs
and Policy Direction, by Lenore Sek.
CRS Report RL30790. The Andean Trade Preference Act: Background and Issues
for Reauthorization, by J. F. Hornbeck.
CRS Issue Brief IB95017. Trade and the Americas, by Raymond J. Ahearn.