New Rules Issued Governing CAFTA-DR Short Supply

The Committee for the Implementation of Textile Agreements (CITA) has issued new rules covering
requests for duty-free treatment of apparel under the Commercial Availability Provision, (also
known as short supply) in the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR).

CAFTA-DR provides a list of fabrics, yarns and fibers that the parties to the agreement have
determined are not available in commercial quantities in a timely manner from suppliers in the
United States or other participating countries. In those cases, components from non-participating
countries may be used in apparel, and the end product will be eligible for duty-free treatment.

Under the FTA, which covers textile trade between the United States, El Salvador, Guatemala,
Honduras, Nicaragua and the Dominican Republic, CITA has authority to establish procedures for
submitting requests and for determining whether additional fabrics, yarns or fibers are in fact not
available in commercial quantities.

The intent of the procedures is to foster the use of US and  CAFTA-DR products, but at
the same time improve procedures for seeking exemptions.  In its notice, CITA said that, based
on experience in implementing the previous procedures, it was concerned that due diligence efforts
have fallen short of what was expected when the procedures were originally adopted. It  said
that in the past, product descriptions may not have met recognized standards, that potential
suppliers may not be adequately substantiating their claims and that CITA had not been receiving
complete information.

Short supply has been a contentious issue with US textile and apparel importers and
manufacturers. Mike Hubbard, vice president of the National Council of Textile Organizations, sees
some improvements in the revised procedures, including the area of reasonable product
specifications, a better definition of due diligence, a more specific requirement for domestic
manufacturers to show they can make a product without disclosing business confidential information,
and other areas. He believes CITA has gone to great lengths to protect the interests of both
importers and domestic manufacturers.

The full text of the rules is available on the Office of Textiles and Apparel website:

September 16, 2008