Canada: Fashion, Textiles, and Apparel
Annex 300-B of NAFTA deals with the textile and apparel goods being imported and exported between member states.
There is a huge list of textiles and apparels goods covered under the Annex 300-B. However, the majority of the goods covered falls under chapters 50-63 of NAFTA. These are not the only chapters that may apply. As with all determinations of origin, it is very important that the correct tariﬀ classiﬁcation be used.
The provisions of NAFTA on trade in textiles and apparel are mentioned in detail. According to the rules of origin, it is important to ensure the majority of the textile and apparel production happens in Canada, the United States or Mexico.
The Annex-B determines the origin of goods. It also ensures that most of the textiles and apparel should be produced in a NAFTA country from the yarn being manufactured in a NAFTA country.
The criteria for the goods to qualify as originating is:
- They come upon on of the NAFTA rules of origin, or
- A specific quantity of certain types of yarns, apparel, fabric, and textiles meet Tariff Preference Levels (TPLs), but do not meet the NAFTA’s rules of origin.
Tariff Preference Levels (TPL)
Tariff Preference Levels are specific duty exceptions of preferential rates for specified goods up to specified quantity. In case if the quantity exceeds the specified level, the rate of duty will also be higher.
In order to qualify for TPL, the goods being imported from outside NAFTA, must be in incomplete form and they must be cut and sewed in any of the NAFTA country. In other words, the import of complete goods from Non-NAFTA country is not eligible for TPL.
In order to determine the eligibility of goods for TPLs, it is the responsibility of the importer to arrange Exporter’s Certification of Non-Originating Textile Goods on hand while he/she is importing. (To identify goods that are imported under a CCFTA TPL, or CCRFTA TPL, or CHFTA TPL, the importer must have an Exporter’s Certiﬁcation of Non-Originating Textile Goods in his possession at the time the goods are released.)
Summary of Tariff Preference Levels
- The rules of origin attempt to ensure that the majority of the production of textiles and apparel occurs in Canada, the United States or Mexico;
- In order to originate, most textiles and apparel must be produced (for apparel, this means both cut and sewn) in a NAFTA country from yarn made in a NAFTA country;
- These goods will qualify as originating when they meet one of the NAFTA rules of origin, or when a speciﬁed quantity of certain yarns, fabrics, apparel, and textile articles meet Tariﬀ Preference Levels (TPLs);
- A Tariﬀ Preference Level (TPL) is a NAFTA mechanism that provides for duty at the NAFTA preferential rate for particular goods up to a speciﬁed quantity, and at a higher rate of duty after that quantity is exceeded;
- In order to use the TPL, goods must undergo speciﬁc manufacturing processes in one or more of the NAFTA countries;
- To identify goods that are being imported under a TPL, the importer must have a completed Exporter’s Certiﬁcation of Non-Originating Textile Goods on hand at time of importation; since TPL goods do not originate under NAFTA, a Certiﬁcate of Origin is not required; and
- TPLs also apply under the Canada-Chile Free Trade Agreement (CCFTA) and the Canada-Costa Rica Free Trade Agreement (CCRTFA).