By  on April 13, 2007

WASHINGTON — The U.S.-South Korean free trade pact, if approved by Congress and implemented, would immediately eliminate tariffs on 61 percent of apparel and textile products, according to an official in the U.S. Trade Representative's office.

Duties on the balance of goods, including some apparel items, industrial fabrics and commodity fabrics and yarn, would be phased out over five or 10 years under the pact, said the official, who spoke on the condition of anonymity since the details of the deal have not been made public.

Negotiations for the agreement, which would be the largest such deal since the 1994 North American Free Trade Agreement, wrapped up April 1, but the prospects for congressional approval are uncertain.

Tariffs on apparel and textiles dropped to zero immediately under most of the recent trade deals, such as the Central American Free Trade Agreement. The South Korean deal, however, is structured somewhat differently, since U.S. textile firms see little opportunity to ship goods to the country, which has an industry with similar capabilities.

"Part of the whole strange dynamic of this negotiation for the textiles chapter was that we had little to no offensive interest," said the official.

Instead, the U.S. was focused more on defensive goals, such as combating transshipments — goods that are mislabeled by their country of origin to take advantage of duty free access to the U.S.

"We got a strong customs cooperation agreement that also has an important provision for data collection to help [U.S. Customs and Border Protection]," said the official. "This is information that previously they haven't been able to get hold of in order to find the true source of production."

The official said this program should not hinder U.S. brands, but would focus on the South Korean producers.

With some exceptions, the agreement carries a yarn-forward rule of origin, meaning to receive duty free access, goods must be made of South Korean or U.S. materials, starting with the yarn.

"Things that we've previously determined aren't available in the United States and where the [South] Koreans asked for them, we went ahead and made those exceptions," said the official.For instance, goods made of rayon are largely exempt from the yarn-forward rule, as are certain types of men's shirting fabrics and some women's knits.

"The biggest exception to the yarn-forward rule is, we created a short supply process that is modeled on the CAFTA process, with some important differences," said the official. "The total amount that can come in is limited under the process and it's time-limited."

Under CAFTA, companies can use the short supply provisions to push for permanent exceptions to the rule of origin for materials that aren't readily available in either market. Under the South Korean deal, there would be a limit on how much nonnative material could be brought in under short supply provisions. The program would also be reviewed after five years.

The agreement does not include trade preference levels, which also offer exceptions to the rules of origin, and does not open the door to goods from other trade agreements.

A spokesman for the American Manufacturing Trade Action Coalition said the group, which lobbies on textiles issues, has yet to decide whether to support the agreement.

"We're somewhat skeptical of the U.S. entering into a free trade agreement with [South] Korea from a textile perspective and a broader manufacturing perspective," said the spokesman. "The market for [South] Korean exports in the United States is a heck of a lot bigger than the market for U.S. manufactured products in [South] Korea."

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