Free trade agreements (FTA) function to offer benefits and incentives for trade with certain countries. The US belongs to many, most notably is NAFTA, where it shares free trade with Canada and Mexico. Various smaller Caribbean countries (CARIFTA) and South America (MERCOSUR) exercise bilateral and multilateral trade initiatives to encourage international trade and business within their regions. An importer or exporter of textiles, luxury goods, and fashion related items must keep abreast of these agreements to take advantage of cost efficient sourcing and protect the brand against unintended misapplication of duty free status.
Legal challenges arise in sourcing and manufacturing, specifically the cut make and trim of fashion, luxury, apparel, and textile products.
Colombia has enjoyed unilateral benefits for apparel exporters in the US, but effective May 14, 2012 US exporters will now enjoy reciprocal incentives. According to the United States Association of Importers of Textiles and Apparel, Colombia ranked 29th among suppliers, but this FTA may increase their ranking through increased trade.
The bilateral FTA will supplement a U.S. preference program that gave unilateral benefits to Colombian apparel exporters but no reciprocity to U.S. exporters. Government initiatives to increase US exports have been a key issue for the Obama Administration.
Kim Glas, US Department of Commerce Deputy Assistant Secretary for Textiles and Apparel, said that exporters of textile and apparel currently pay an average of 18.3 percent duties when shipping to Colombia. For all qualifying goods, this duty will be eliminated. Glas further went on to state that this [agreement] “will open new market access opportunities for our domestic textile and apparel producers,” and “gives a great advantage to U.S. exporters of yarn, fabrics and apparel.”
One of the most prominent challenges facing smaller brands in this regard is the necessity of oversight and compliance to import and export duties. The cut, make, and trim process involves regular in-house approvals of sourced materials. Failure to source even a thread from the proper country can negate free trade incentive and exponentially increase your final cost.
For more information on the import/export duties on apparel and textiles it is necessary to contact specialists and registered customs brokers. Import duties for the US are codified in the Harmonized Tariff Schedule of the United States found here.