Rep. Jim McDermott (Democrat-Washington) recently introduced legislation (H.R. 3039) that would provide duty-free or reduced duty treatment to certain apparel products from the Philippines that are generally not produced in the United States. These products include men's and boys' cotton knitted shirts; women's and girls' cotton knitted shirts and blouses; men's and boys' cotton trousers, breeches and shorts; women's and girls' cotton trousers, slacks and shorts; men's and boys' cotton underwear; men's and boys' man-made fibre underwear; men's and boys' man-made fibre knitted shirts; women's and girls' man-made fibre knitted shirts and blouses; men's and boys' man-made fibre trousers, breeches and shorts; women's and girls' man-made fibre slacks, breeches and shorts; men's and boys' non-knitted man-made fibre shirts; brassieres and other body support garments; man-made fibre brassieres and other body support garments; man-made fibre swimwear; and cotton swimwear.
These products would be afforded duty-free treatment provided they are wholly assembled in the Philippines or the United States and the component determining the article's tariff classification consists entirely of (i) fabric components cut in the U.S. or the Philippines, or both, from fabric and yarns wholly formed in the U.S.; (ii) components knit-to-shape in the U.S. from yarns wholly formed in the U.S.; or (iii) any combination of the fabric components or components knit-to-shape described in points (i) and (ii). In addition, the fabrics, fabric components or knit-to-shape components that determine the tariff classification of the articles would have to be dyed, printed and finished in the U.S.
The legislation would also provide reduced duty treatment to the aforementioned apparel products if they are made with Philippine fabrics or knit-to-shape components from U.S. yarns (rather than from U.S. fabrics from U.S. yarns), or if the apparel is made with U.S. fabrics or knit-to-shape components from U.S. yarns but the fabric dyeing, printing or finishing does not take place in the U.S.
Qualifying apparel would be allowed to use foreign fibres and yarns in the component that determines the tariff classification of the article provided their total weight is not more than 10 percent of the total weight of that component, although any elastomeric yarns would have to be wholly formed in the U.S. or the Philippines. Lastly, the legislation requires the apparel to be imported directly into the U.S. from the Philippines.
Significantly, the legislation would also grant duty-free treatment to most other apparel (i.e., apparel other than the categories listed above) that is wholly assembled or knit-to-shape in the Philippines from any combination of fabrics, fabric components, components knit-to-shape or yarns, including inputs made in Hong Kong and/or mainland China. This apparel would include, for example, playsuits and sunsuits; babies' garments and clothing accessories; women's and girls' cotton coats; cotton dresses; man-made fibre dresses; men's and boys' cotton non-knitted shirts; cotton nightwear and pyjamas; man-made fibre nightwear and pyjamas; women's and girls' wool coats; wool dresses; wool skirts; women's and girls' wool suits; women's and girls' wool slacks, breeches and shorts; women's and girls' cotton non-knitted shirts and blouses; women's and girls' non-knitted man-made fibre shirts and blouses; women's and girls' man-made fibre suits; men's and boys' wool coats; cotton dressing gowns and robes; man-made fibre robes and dressing gowns; women's and girls' man-made fibre coats; cotton skirts; man-made fibre skirts; men's and boys' man-made fibre coats; women's and girls' cotton underwear; women's and girls' man-made fibre underwear; women's and girls' coats of silk and vegetable blends; and skirts made of silk and vegetable blends.
Rep. McDermott has said the bill is intended to strengthen the U.S. textile industry and the Philippine apparel industry, which have faced significant challenges in recent years. A press release noted that annual apparel imports from the Philippines have declined by almost US$1 billion since 2000 and that in 2008 U.S. textile exports to the Philippines totalled only about US$20 million. The bill notes that the establishment of a programme that provides preferential duty treatment to Philippine apparel would provide a strong incentive for apparel manufacturers in the Philippines to use U.S. fabrics, which would in turn open new opportunities for the U.S. textile industry and increase opportunities for U.S. yarn manufactures.
If enacted in its current form, the legislation would also likely boost demand for mainland Chinese yarns and fabrics in the Philippines for use in the production of garments that do not require U.S. or Philippine inputs, including most notably dresses, nightwear and pyjamas, babies' clothing, and girls' cotton knitted briefs and panties. At the same time, U.S. demand for mainland Chinese apparel could be negatively impacted by this legislation, although the overall impact would depend in part on whether it makes financial sense to use U.S. yarns and fabrics in Philippine apparel production.
