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North American Free Trade pact finalized; agreement could result in duty free imports/exports of nonwoven goods, although the it must first be passed by Congress.

agreement could result in duty free imports/exports of nonwoven goods although the it must first be passed by Congress

President Bush announced August 12 that the U.S., Mexico and Canada had completed negotiations of a North American Free Trade Agreement (NAFTA). While subsequent reports indicate that the President's announcement was a bit premature since not all aspects of the agreement have been finalized, officials three countries involved are announcing that the overwhelming majority of substantive issues have been settled.

Congress is not expected to vote on the agreement until next year, but will hold hearings to review its provisions over the next three-six months.

The NAFTA Legislation

Basically, if adopted by the national legislatures of Canada, Mexico and the U.S.-beginning January 1, 1994-NAFTA would phase out duties on goods traded within North America over a 15 year period. This would create a huge duty-free zone that would be larger, in terms of economics and population, than the unified market created under the EC 1992 initiative.

If the agreement is not adopted by the three countries, it is likely that current duty rates will remain in effect, at least for the immediate future. The U.S. has already negotiated a separate Free Trade Agreement with Canada, however, and would likely pursue a similar, independent agreement with Mexico.

At press time, the agreement was still being finalized and copies had not been released to the public. The information contained in this article is based on conversations with officials in the Office of the United States Trade Representative, the Department of Commerce, the U.S. Custom Service and others. While this information is very reliable, differences may be discovered when the full text of the agreement is released.

Impact On Nonwoven Roll Goods

Under the agreement, tariffs on eligible nonwoven roll goods classified under Harmonized Tariff Schedule Category 5603 would be eliminated on January 1, 1990, five years after be eligible for duty eliminations, however, at least 93% (by weight) of the fibers contained in the roll good must be manufactured in either the U.S., Canada or Mexico.

The agreement allows this 7% de minimus exclusion to its "fiber forward" rule so that manufacturers can use some fibers that are not readily available in North America, or are available at lower prices from another source, without losing eligibility for duty free treatment.

Regarding the major categories of finished goods made from nonwovens, the dates for duty elimination and rules of origin that apply to eligible products vary depending on the specific product.

Under HTS Category 6210.10.40 (which includes some surgical gowns as well as overalls, coveralls and other protective apparel made from nonwovens) for instance, duties on eligible items would be eliminated on January 1, 1999. To be eligible for duty free treatment, items would be subject to a "single transformation rule." That is, they need only be cut or sewn in any of the three countries to qualify for the exemption-even if the fabric from which the finished good has been made does not qualify for duty elimination.

Similarly, eligible items classified under HTS Category 6307.90.60 (surgical drapes made from nonwovens) would be subject to duty eliminations on January 1, 1999. But generally speaking, these items would have to be manufactured from North American fiber to qualify for duty free treatment.

There is an annual tariff rate quota (TRQ) exception allowed for surgical drapes, however. Under the TRQ, the first six million square meters of fabric imported from Mexico-but made from fibers manufactured outside of North America-and the first 35 million square meters of fabric made from non- North American fibers that are imported from Canada each year could enter the U.S. duty free. TRQ treatment will be granted on a first-come, first-serve basis and will not be available once the quota has been filled. Also, of all the finished goods and roll goods researched, disposable surgical drapes appear to be the only nonwoven items eligible for TRQ treatment.

For eligible items contained in HTS Category 4818.40 (sanitary napkins and tampons, diapers and diaper liners and similar sanitary articles), duties would not be eliminated until January 1, 2004. But for eligible items classified under HTS 4818.50 (which includes disposable surgical gowns made with cellulose fibers), duties would be eliminated immediately.

Moreover, for items listed under either HTS 4818.40 or 4818.50, duty free treatment would be allowed if the item were converted to a finished product within North America, even if it was made from a roll good that did not qualify for duty free treatment.

Information on other finished products made from nonwovens will be available when the full NAFTA test has been released. Finally, regarding the time frames listed above, petitions can be submitted to eliminate duties on an accelerated basis.

Congressional Considerations

As previously noted, the agreement cannot be implemented until it is approved by the national legislatures of the three countries involved. In the U.S. Congress, the battle lines have already been drawn.

Several influential members of the House and the Senate have recently gone on record opposing the agreement because they believe it could cost U.S. workers their jobs and because it does not require improvements in Mexican environmental regulations.

Also, with the unusually high rate of Congressional turnover next year (it is expected that there will be about 125 new members out of 535 total) in both the House and the Senate, it is hard to predict which way many will vote on this issue.

INDA Position Statement

Because of the myriad issues involved in NAFTA, INDA would like to develop a statement on NAFTA as soon as possible.

At this point there is little that can be done to alter specific provisions of the agreement, so the focus is on the overall agreement. INDA is attempting to ascertain whether its members believe the pact is basically a positive development for the industry or if it poses major problems instead.

The association has released information to its members on issues of the agreement related to nonwoven fabrics according to U.S. officials these issues have been finalized) and is currently polling its memberships to determine their views on NAFTA. INDA intends to use the poll responses to represent its member's views to Congress and other government decision makers.

INDA hopes to have its position statement developed by the middle of this month.

Peter Mayberry is the of government affairs for INDA, Association of the Nonwoven Fabrics Industry. He works out of the Washington, DC offices of Keller & Heckman, INDA's legal counsel. This Capital Comments column appears monthly in NONWOVENS INDUSTRY.
COPYRIGHT 1992 Rodman Publications, Inc.
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Author:Mayberry, Peter
Publication:Nonwovens Industry
Date:Oct 1, 1992
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