Understanding the USMCA: Key Changes to Textile and Apparel Trade

Introduction

The United States-Mexico-Canada Agreement (USMCA) went into effect on July 1, 2020, replacing the North American Free Trade Agreement (NAFTA). While the USMCA maintains many of NAFTA's duty-free benefits, it introduces some important changes to rules of origin and tariff preference levels (TPLs) for textile and apparel trade between the three countries. As logistics professionals, it's crucial that we understand these updates to ensure smooth cross-border operations for our clients in the textile and apparel industry.

Key Changes to Textile and Apparel Provisions

1. Rules of Origin

The USMCA tightens rules of origin requirements for many textile and apparel products. To qualify for duty-free treatment, more materials and processing steps must now occur within North America. Some key changes include:

• Sewing thread, pocketing fabric, narrow elastic bands, and coated fabrics used in apparel production must now be made in North America to qualify for duty-free treatment.
• The de minimis exception for non-originating fibers and yarns is now 10%, up from 7% under NAFTA.
• New requirements that certain knit fabrics must be formed in North America.

2. Tariff Preference Levels (TPLs)

While the USMCA maintains TPLs allowing a certain volume of non-originating textiles and apparel to qualify for preferential treatment, it reduces TPL volumes for certain product categories:

• The TPL for cotton/man-made fiber apparel exports from Canada to the U.S. is reduced from 9 million SME to 6 million SME.
• The TPL for wool apparel exports from Canada to the U.S. is reduced from 5.3 million SME to 4.8 million SME.
• Mexico's TPLs for fabric and made-up goods exports to the U.S. are substantially reduced.

3. New Textile-Specific Rules

The USMCA introduces some new provisions specific to the textile sector:

• A textile chapter origin rule that allows products to qualify as originating if they contain certain regional inputs, even if all other materials are non-originating.
• A special textile tariff preference level for U.S. cotton and man-made fiber apparel goods assembled in Mexico from U.S. fabric and yarn.

How FreightAmigo Can Help

As a digital logistics platform, FreightAmigo is well-positioned to help our clients navigate these changes:

• Our advanced shipment tracking capabilities ensure full visibility of textile and apparel shipments across North America, helping to prove origin and transit.
• Our customs documentation automation tools can help ensure all necessary paperwork is completed accurately to claim USMCA benefits.
• Our network of vetted carriers across the U.S., Mexico, and Canada allows for seamless cross-border transportation under the new rules.
• Our team stays up-to-date on all USMCA developments and can provide guidance to clients on compliance.

Conclusion

While the USMCA brings some significant changes to textile and apparel trade in North America, it also presents opportunities for companies with robust North American supply chains. By leveraging FreightAmigo's digital solutions and expertise, businesses can ensure they are maximizing the benefits of this new trade agreement while staying fully compliant with its rules.