Textile “Buy American” Procedure Has Problems

The recently enacted law requiring the Transportation Security Administration (TSA) to purchase
textiles and apparel made in the United States has run into problems where the North America Free
Trade Agreement (NAFTA) countries and Chile are concerned.

It seems the US government did not give timely notice to Canada, Mexico and Chile, as
required by World Trade Organization (WTO) rules. The WTO Government Procurement Agreement says a
country may not block foreign manufactured goods unless a waiver is claimed on grounds of national
security. The United States did notify the Central America-Dominican Republic Free Trade Agreement
and Caribbean nations in a timely fashion, so they will be denied participation in TSA contracts.

The office of the US Trade Representative (USTR) has told the National Textile Association
that due to the oversight, the Kissell amendment is not currently in effect for Canada, Mexico and
Chile, and companies in those countries are eligible to bid on TSA contracts. The USTR is
attempting to resolve the problem through negotiations, but that could take several months.

A USTR spokesman told Texile World: “We have informed key textile industry associations that
we did not exclude TSA from government procurement obligations under NAFTA and the US-Chile Free
Trade Agreement as we did other agreements. As a consequence, any TSA purchase of products from
Canada, Chile or Mexico that is covered by the agreements would not be subject to the ‘Buy
American’ requirement for textiles and apparel goods in the Recovery Act. We are working with
concerned stakeholders on a solution.”

How the program will be implemented should be clarified when the government issues
regulations under the legislation, probably in mid-August.

June 16, 2009