Basic Facts on US Free Trade Agreements

Malaysia and the United States announced the launch of negotiations for an FTA on 8th March this year at Washington. First round of FTA talks are to start in June and the bilateral FTA is expected to be completed by April next year. In line with the Trade Promotion Act (TPA) in the US, the FTA has to be signed before 30 June 2007.

The negotiations were expected to focus mainly on liberalisation of trade in goods, services and investment, including flexibilities and longer phase-in period for sensitive sectors.

USA Current FTA Partners 

Country              Effective Date / Status

Israel                     1-1-1985

NAFTA                   1-1-1994

Jordan                   17-12-2001

Chile                      1-1-2004

Singapore              1-1-2004

Australia                 1-1-2005

Morocco                1-1-2006

DR-CAFTA            1-3-2006

(DR-CAFTA covers  El Salvador, Honduras, Nicaragua, Guatemala  Dominican Republic, Costa Rica, Colombia, Panama, Ecuador)

Bahrain                  Awaiting Implementation

Oman                    To be submitted to Congress

Panama                 Under Negotiation

Thailand                 Under Negotiation

UAE                       Under Negotiation

FTAA                     Under Negotiation   
        (FTAA =Free Trade Area of the Americas)

SACU                    Under Negotiation

(South African Customs Union : Botswana, Lesotho, Namibia, South Africa, Swanziland)

Korea                    Preliminary Discussions

Malaysia                Preliminary Discussions

Egypt                    Preliminary Discussions

Switzerland            Preliminary Discussions

Pakistan                Preliminary Discussions

MEFTA                Preliminary Discussions  
    (MEFTA=Middle East Free Trade Agreements)

Besides the above FTAs, US also offer special agreements and preference programs with some regional blocs including the followings : 

AGOA – African Growth and Opportunity Act (Expire on 30/9/15)

CBTPA – Caribbean Basin Trade Partnership Act (Expire on 30/9/08)

ATPDEA – Andean Trade Promotion & Drug Eradication Act (Expire  31/12/06)

      ATPDEA countries include Bolivia, Colombia, Ecuador & Peru. 

FTA Creates Competitive Edge 

Without quotas, textiles and apparel manufacturers will be searching for a competitive advantage. Without quotas, price will play a major factor in determining who has a competitive advantage. Eliminating duty is one way to reduce the price of a product. 

Duty Rates under FTA 

Products of FTA countries can be eligible for two or three different duty rates, depending on the inputs (raw material) and production. In regards to the textile and apparel sector, yarn forward is the required rule of origin in most FTAs with US except Jordan & Israel FTAs. 

  • FTA originating products received preferential treatment of reduced or free duties. An “originating” goods meets the applicable FTA preference rule of origin.

  • Some non-originating products which do NOT meet the applicable preference rule of origin may have a special rate of duty under special treatment rule, short supply list or tariff preference level (TPL);

  • Non-preferential claims received regular rate of duty.

Short Supply

At the request of an interested entity or actual purchaser of a textile or apparel good, fibers, yarns or fabrics not available in commercial quantities among the parties can be sourced from third countries to meet the tariff shift rule. 

Tariff Preference Level

Tariff preference level is similar as tariff rate quota (TRQ). A certain quantity of goods can enter during an annual period and receive a reduced rate or duty free treatment even though they do not meet the tariff shift rules. Usually the volume is reduced over a period of time to allow trading partners to integrate.

US FTA Fact Sheet

 

NAFTA

Bahrain

Chile

Morocco

Oman

Australia

Singapore

DR-Cafta

 

Effective Date

1/1/1994

 

1/1/2004

1/1/2006

 

1/1/2005

1/12004

3/1/2006

 

DeMinimis

7%

7%

7%

7%

7%

7%

7%

10%

 

An originating textile and apparel good may contain a small percent by weight of foreign fibers or yarns.

 

Visible Lining Rule

Certain fabrics, when used as visible lining material in overcoats, anoraks, suits, jackets, skirts and similar articles, must be formed and finished in the parties (fabric forward). Apply to the main body of the garment excluding sleeves.

 

Sewing Thread Requirement

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Yes

 

Narrow Elastomeric Yarn Requirement

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Yes

 

A textile or apparel good containing elastomeric yarns / Nylon Filament Yarn in the component is eligible for preferential treatment only if such yarns are wholly formed in the territory of a Party.

  

Nylon Filament Yarn Rule

  

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Yes

 

Bra Rule

Single Transform

75%

75%

75%

75%

75%

Fabric Fwd

Single Transform

 

Sets

N/A

10% foreign Value

10% foreign Value

10% foreign Value

10% foreign Value

10% foreign Value

N/A

10% foreign Value

 

Goods in the sets shall not be regarding as originating unless each products in the set is an originating good or the total value of the non-originating in the set does not exceed 10% of the FOB value.

 

Folklore

Yes

N/A

N/A

N/A

N/A

N/A

N/A

Yes

 

TPL

Yes +

TPL Canada

TPL Mexico

Yes

10yrs

 

Yes

Expire on 12/31/15

 

 

Yes +

Sub-Saharan cotton

Expire on 12/31/15

Yes

10yrs

No

Yes

Expire on 12/31/11

Nicaragua & Costa Rica only

 

 "The United States and Malaysia have had a strong bilateral relationship for many years. A free trade agreement between the two countries would further strengthen this relationship by developing deeper economic ties. Exxon Mobil Corporation, as the largest US investor in Malaysia, believes a free trade agreement would benefit both countries and supports the completion of an agreement between the two countries."

-Robert W. Haines, Manager, International Government Relations, Exxon Mobil Corporation

 

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