WASHINGTON — President Bush signed a bill Thursday that is intended to help textile producers and importers doing business in Central America recoup financial losses.
The bill’s enactment ends months of uncertainty for many companies doing business under the Central American Free Trade Agreement, which eliminated trade barriers between the U.S. and El Salvador, Nicaragua, Guatemala, Honduras, Costa Rica and the Dominican Republic.
The Pension Protection Act 2006, a sweeping pension reform bill, includes provisions that change certain CAFTA rules to ease implementation of the trade accord. The U.S. and the CAFTA countries still must meet and make a final endorsement of the changes.
The Bush administration and Congress now have fulfilled most of the commitments that Republican leaders and top trade officials made last year to House members from textile states to get them to vote in favor of the pact, which passed by two votes.
The bill gives the president limited authority to change the rules of origin for pocketing and lining to the U.S. or regional-origin only, and gives U.S. Customs & Border Protection the authority to enforce an arrangement with Nicaragua to purchase U.S. trouser fabric equivalent to the foreign fabric allowance allowed under CAFTA.
U.S. textile producers exporting millions of dollars worth of pocketing and lining fabric to the region have lost business, according to industry trade groups, because CAFTA has, until now, allowed the use of Asian fabrics.
The legislation also allows retailers and apparel firms that produce apparel in the region to apply for retroactive refunds of duties they have been paying because of the staggered implementation of CAFTA. Importers were damaged by the enactment of the pact, signed last summer, one country at a time, because it created more costly sourcing for companies that lost duty-free benefits.
The bill gives legislative approval to concessions the U.S. made to several of the CAFTA countries in exchange for the pocketing and lining change.
In the case of El Salvador, the U.S. agreed to allow an unlimited amount of foreign yarns and fabrics in the assembly of infants’ dresses, women’s and girls’ cotton coats and women’s and girls’ man-made fiber suits under “single transformation rules,” which means they have to be cut and sewn in the region, but can use fabrics and yarns from anywhere in the world.
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Nicaragua received an increase in its foreign-fabric allowance of 100 million square meters equivalent, to 10 years from six years. Honduras was given a foreign yarn and fabric allowance under single transformation rules for men’s woven, man-made fiber and cotton shirts, and Guatemala got a similar allowance for women’s wool and man-made fiber coats.