Understanding the USMCA Rules for Fabric Importation from Mexico

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The USMCA, also known as the United States-Mexico-Canada Agreement, is the successor to the North American Free Trade Agreement (NAFTA) and went into effect on July 1, 2020. One of the key changes in the USMCA is the rules regarding fabric importation from Mexico.

Under the USMCA, Mexico is required to use yarns and fabrics from the United States, Canada, or Mexico in the production of apparel. This is known as the “yarn forward” rule, which means that the yarn used to make the fabric, as well as the fabric itself, must originate from one of the three countries. This rule is intended to increase textile and apparel production in North America and support the textile industries in all three countries.

Article 4.2.2:

“An originating good that is a textile or apparel good shall be considered to originate only if:

(a) the good is wholly obtained or produced entirely in the territory of one or more of the Parties; or

(b) the good is produced entirely in the territory of one or more of the Parties using non-originating materials that undergo an applicable change in tariff classification specified in Annex 4-B and comply with the relevant requirements of Annex 4-B.”

However, there are certain exceptions to the yarn forward rule. Apparel items that are made from fabrics that do not originate from the United States, Canada, or Mexico are still eligible for duty-free treatment under the USMCA if they meet certain conditions. For example, apparel items that use less than 7% (adjusted value of good) of non-originating fabrics are eligible for duty-free treatment.

(c) the good is produced in the territory of one or more of the Parties using non-originating materials that undergo an applicable change in tariff classification specified in Annex 4-B and comply with the relevant requirements of Annex 4-B and, for textile or apparel goods that are not wholly obtained or produced entirely in the territory of one or more of the Parties, the value of all non-originating materials used in the production of the good does not exceed 7 percent of the adjusted value of the good.”

Additionally, there are also some specific product categories that are exempt from the yarn forward rule, such as certain types of gloves, socks, and other hosiery.

It’s important for apparel sourcing companies to be aware of these rules and requirements when importing fabrics from Mexico. By ensuring that fabrics meet the “yarn forward” rule and other conditions, companies can take advantage of the duty-free treatment under the USMCA and avoid any potential tariffs or trade barriers. Additionally, it’s also important to stay informed of any updates or changes to the rules regarding fabric importation under the USMCA.

In summary, the USMCA requires that Mexico uses yarns and fabrics from the United States, Canada, or Mexico in the production of apparel, known as the “yarn forward” rule. However, there are certain exceptions and exemptions to this rule, and it’s important for apparel sourcing companies to stay informed of these rules and requirements when importing fabrics from Mexico.

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