Late last year, the president issued the necessary proclamation, before legislative authority expired, to determine the effective date of the pocketing rule for originating apparel under the Central American Free Trade Agreement (CAFTA). This rule will require that pocketing will become subject to the yarn forward standard presently applicable to the component of the garment determining its classification. The president also authorized the U.S. Trade Representative to implement other changes (e.g., more lenient single-transformation rules for selected classifications of apparel) that were negotiated by the United States with the other CAFTA parties as concessions for the pocketing rule. The rules, to be published in the Federal Register, are expected to take effect within the next few months.
The president’s proclamation also authorized the implementation of cumulation, which will allow the use of Mexican materials in the production of woven CAFTA apparel. Cumulation is not expected to take effect until mid-summer, after the United States has certified that the CAFTA parties have changed their laws to accommodate cumulation, and after the United States has completed consultation and layover requirements required under the U.S. legislation that implemented CAFTA. Cumulation will be subject to an initial cap of 125 million square meter equivalents.
Costa Rica has still not implemented CAFTA, and will not meet the February 29, 2008 deadline for doing so because it has not completed necessary implementing legislation. CAFTA allows the parties to agree to an extension, which would permit later implementation, and such an extension is likely to be granted. The next deadline that will affect apparel imports from Costa Rica will be the expiration of the Caribbean Basin Trade Partnership Act next September, after which there will be no preferential treatment for textiles from Costa Rica without CAFTA.
The United States and Honduras are in consultations over the socks safeguard, which will reimpose duties on originating cotton socks from Honduras at a rate to be determined (not to exceed the present normal trade relations duty rate, which is 13.5 percent for most cotton socks) for the remainder of 2008. CAFTA allows Honduras to seek concessions with respect to other textiles during the consultations or, if negotiations as to concessions fail, to take tariff action affecting U.S. exports to Honduras of other products.