USMCA: Changes for the Textile and Wearing Apparel Industries

Video credit: U.S. Customs and Border Protection

From findings of the 2020 USFIA Fashion Industry Benchmarking Study :

The surveyed U.S. fashion companies demonstrate more readiness and interest in using the US-Mexico-Canada Trade Agreement (USMCA) for apparel sourcing purposes in 2020 than a year ago:

For companies that were already using NAFTA for sourcing, the vast majority (77.8 percent) say they are “ready to achieve any USMCA benefits immediately,” up more than 31 percent from 2019.

Even for respondents who were not using NAFTA or sourcing from the region, about half of them this year say they may “consider North American sourcing in the future” and explore the USMCA benefits.

Nevertheless, when asked about the potential impact of USMCA on companies’ apparel sourcing practices, some respondents expressed concerns about the rules of origin changes. These worries seem to concentrate on denim products in particular. For example, one respondent says, “USMCA changes negatively affects our denim jeans sourcing particularly with the new pocketing rules of origin.” Another adds, “Denim pocketing ROO change is a concern but manageable.” 

It also remains to be seen whether USMCA will boost “Made in the USA” fibers, yarns, and fabrics by limiting the use of non-USMCA textile inputs. For example, while the new agreement expands the Tariff Preference Level (TPL) for U.S. cotton/man-made fiber apparel exports to Canada (typically with a 100 percent utilization rate), these apparel products are NOT required to use U.S.-made yarns and fabrics.

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Author: Sheng Lu

Professor @ University of Delaware

3 thoughts on “USMCA: Changes for the Textile and Wearing Apparel Industries”

  1. There are obviously a lot of benefits of having trade agreements with your neighboring countries but that doesn’t mean that it’s possibly to make everything domestically. I understand the perspective of U.S. apparel brands and retailers regarding difficulty with domestic sourcing but I’m really interested in knowing how Mexico feels about these trade deals. I feel like so much of the conversation is centered around the needs of the U.S. so it would be nice to hear an outside perspective regarding these free trade deals.

  2. While I do understand that the USMCA aims to increase the amount of products made domestically and improve the US, Mexico, and Canada’s economies, I think that companies raising concerns is also understandable. Sourcing has been traditionally outsourced to countries who are able to service needs at the lowest cost. By pulling the sourcing back to North America, this can cause issues for companies who have set contracts with foreign factories and suppliers. This also can make a big impact on their sourcing costs. While the USMCA does give companies a relatively good amount of time to revert their sourcing back to North America, in the grand scheme of things, this time pressure could be problematic when completely reevaluating sourcing strategies. However, bringing a majority of sourcing closer to home, these companies will be able to cut down on transportation costs. It will be up to the companies to perform a cost benefit analysis and analyze their new costs with these new guidelines in place.

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