Trade & Policy Round-Up for August
Updated: Sep 1, 2021
Below is a collection of stories related to trade and government policy that may impact the sewn products industry around the world.
Be sure to also check this week’s Behind the Seams for an update on the infrastructure legislation currently moving through the U.S. Congress.
Biden’s Buy American Proposal
In the last issue of Behind the Seams, we shared an article explaining President Biden’s proposal to strengthen the federal government’s Buy American rules and boost U.S. manufacturing. The President’s announcement was quickly followed by a Notice of Proposed Rulemaking (NPRM) outlining the technical details. The proposed rule directs the following changes to Buy American requirements for the Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA):
The Buy American statute says products bought with taxpayer dollars must “substantially all” be made in the U.S. However, today, products could qualify if just 55% of the value of their component parts was manufactured domestically. The NPRM proposes an immediate increase of the threshold to 60% and a phased increase to 75%.
The NPRM proposes applying enhanced price preferences to select critical products and components identified by the Critical Supply Chain review, mandated under Executive Order 14017, and the pandemic supply chain strategy called for under Executive Order 14001. These preferences, once in place, would support the development and expansion of domestic supply chains for critical products by providing a source of stable demand for domestically produced critical products.
The NPRM proposes to establish a reporting requirement for critical products. The new reporting requirement would bolster compliance with the Buy American Act and improve data on the actual U.S. content of goods purchased.
The NPRM also instructs on opportunities for the public to weigh in on the proposal. Interested parties can submit comments to the Regulatory Secretariat Division before September 28, 2021, to be considered in the formulation of a final rule. A virtual public meeting will be held on August 26, 2021.
Related: In a similar vein, Reuters and other news outlets have reported that China's government quietly issued new procurement guidelines in May that require up to 100% local content on 300+ items including medical equipment, erecting fresh barriers for foreign suppliers. Document 551 was issued (according to news reports) by the Chinese Ministry of Finance and the Ministry of Industry and Information Technology, with the title, "Auditing guidelines for government procurement of imported products." The document has not been publicly released. Read more.
USMCA Country of Origin Determination Comment Deadline Extended
U.S. Customs and Border Protection (CBP) has extended the public comment deadline for a proposed rule amending the way it makes origin determinations for goods imported from Canada and Mexico. Right now, CBP determines country of origin based on where the product was substantially transformed (meaning a new and different product with a distinctive name, character, or use emerged). CBP applies two different methods for determining if merchandise has been substantially transformed. One method involves case-by-case adjudication, relying primarily on tests articulated in judicial precedent and past administrative rulings. The other method consists of codified rules in part 102 of title 19 of the Code of Federal Regulations (19 CFR part 102) (referred to as the part 102 rules), which are primarily expressed through specified differences in the Harmonized Tariff Schedule of the United States classification of the good and its materials. This method is often referred to as the “tariff shift” method. In its July 6th notice of proposed rulemaking, CBP proposed applying the part 102 rules to all country of origin determinations for non-preferential purposes (including the application of section 301 tariffs) for goods imported from Canada and Mexico. Public comments on the proposal will be accepted until September 7th for anyone interested in sharing how this rule change will affect their business.
France Carbon Label Requirement
In July, France’s parliament approved an expansive climate bill that will, among other things, introduce mandatory “carbon labels” for goods and services, including clothing and textiles. The labels essentially aim to set up a "carbon score" informing consumers of the environmental footprint of their purchases. Read more.
Related: This Forbes article explores the growing trend of carbon labels and other environmental/traceability marketing tactics for the sewn products industry. As the EU is also reportedly eyeing carbon score legislation, we will continue to monitor the policies and regulations surrounding this topic.
FTC Keeps Care Labeling Rule
On July 21, 2021, the Federal Trade Commission (FTC) voted to retain the FTC Care Labeling Rule to “ensure American consumers continue to get accurate information on how to take care of their fabrics and extend the life of their clothes.” The Care Labeling Rule requires manufacturers and importers to attach labels with care instructions for garments and certain piece goods, providing instructions for dry cleaning or washing, bleaching, drying, and ironing clothing. Last summer, the Commission proposed repealing the 50-year-old rule and asked for public input. According to the FTC press release, it received more than 200 comments in response to the proposal, with an overwhelming majority opposed to the repeal of the rule. Read more.
UK Explores New Trade Scheme for Developing Countries
On July 19th, the UK Department for International Trade launched a consultation on new trading rules to grow “free and fair” trade with lower income nations. The proposed Developing Countries Trading Scheme (DCTS) would apply to 70 qualifying countries and include improvements such as lower tariffs and simpler rules of origin requirements for countries exporting to the UK. According to the official announcement, “the Government intends its new scheme to be best in class, and has studied programs in Canada, the U.S., Japan and the EU, before constructing an approach that takes some of the strongest elements of each and builds on them.” The consultation on the UK’s new scheme runs for eight weeks, through September 12th, and seeks the view of all sectors of society, including businesses, the public, civil society groups, consumers, associations, partner governments, and any other interested stakeholders.
Rebate Scheme for Apparel Extended in India
India’s Union Cabinet (the supreme decision-making body in India) in July approved an extension of the Rebate of State and Central Taxes and Levies (RoSCTL) scheme on exports of apparel through March 2024, leaving the rates unchanged. The scheme had previously expired in December 2020. Exporters say the move will provide much-needed clarity, particularly for companies struggling to maintain their share in an intensely competitive global market, and enable them to effectively price their products. Read more.
Related: India's government is expected to confirm a separate export incentive scheme for apparel exporters called the Refund of Duties and Taxes on Exported Products (RoDTEP) this week, according to reports by The Times of India.
New Jersey PPE Manufacturing Tax Credit
Companies in the U.S. state of New Jersey producing personal protective equipment (PPE) can now earn up to $500,000 in tax credits, according to the recently approved rules of a new program by the New Jersey Economic Development Authority. Tax credits are available for entities that invested in PPE manufacturing and hired additional employees after March 9, 2020. Read more.