Friday, November 11, 2011

Free Trade Agreements Summary of the U.S. - Peru Trade Promotion Agreement


Free Trade Agreements
Summary of the U.S. - Peru Trade Promotion Agreement

**The information presented on this website is meant to serve as a guide. 
Only the agreement text and the customs regulations issued to implement the agreement
are definitive. For complex issues or where interpretation is required, U.S. exporters should seek legal assistance or an advanced ruling from the customs administration in the country to which they are exporting.**

If you have any questions about this Agreement, please contact Richard Stetson
at the U.S. Department of Commerce Office of Textiles and Apparel at 202-482-2582 or byemail.




Status: The United States-Peru Trade Promotion Agreement (U.S.-Peru TPA) entered into force on February 1, 2009. On Decmebr 31, 2010 Peru lost its former ATPDEA benefits.

How U.S. Textile and Apparel Companies Benefit:
Textile and apparel trade between the United States and Peru has grown in recent years. U.S. exports of textiles and apparel to Peru jumped from $23 million in 2004 to $34 million in 2008. Under the U.S.-Peru TPA, Peruvian tariffs on qualifying U.S. fibers, yarns, and fabrics will be eliminated, further improving market access for U.S. exporters. Similarly, due to the favorable conditions created by the Agreement, investment in the apparel sector in Peru is expected to grow, promoting increased sales of U.S. fibers, yarns, and fabrics to the Peruvian market. 

Key benefits to U.S. yarn and textile manufacturers include:
  • Immediate duty-free (zero tariff) market access for textile and apparel products.
  • Yarn forward rule of origin– The U.S.-Peru TPA adheres to a yarn-forward rule of origin, meaning that in order to enter the U.S. market duty free, textile and apparel products must be made using U.S. and regional yarns and fabrics Goods that meet the rule of origin qualify for immediate duty-free market access upon entry into force.
  • Regional Elastomeric Requirement – Consistent with other free trade agreements, elastomeric yarns must be sourced from the region for textile and apparel products to qualify for duty free entry.
  • Improved Customs Procedures – Specific textile customs cooperation language will help prevent transshipment and circumvention of the rules of origin of the Agreement.
  • Streamlined Short Supply Processes - Streamlined commercial availability (short supply) determination processes will allow yarns or fabrics that are deemed not commercially available in the region to be used in the production of apparel.
  • Safeguards - A special textile safeguard mechanism will provide for temporary MFN tariffs, if a surge in imports under the U.S.-Peru TPA is shown to be causing or threatening to cause serious damage to domestic industry.

Tariff Elimination:
Immediate duty-free (zero tariff) market access for all textile and apparel products that meet the rule of origin of the Agreement.

Qualifying Products/Rules of Origin:
In order for textiles and apparel to receive duty-free (zero tariff) entry, products must qualify as "originating" under the terms of the Agreement. "Qualifying" or "originating" goods are goods that meet the Rules of Origin of the Agreement.



The textile and apparel Rule of Origin is commonly known as the "yarn-forward" standard, which requires that the yarn production and all operations "forward" (i.e., fabric production through apparel assembly) occur in either the United States and/or Peru ('the region'). However, there are some exceptions to the yarn-forward rule of origin as noted below. These exception generally allow fibers, yarns, or fabrics to be sourced form outside the region. The Textile and Apparel Rules of Origin of the Agreement are found in Chapter 3 on pages 6-37.

Exceptions to the yarn-forward rule of origin
  • Knit Fabric (Chapter 60 HTSUS) follows a fiber-forward rule of origin - fiber production and all operations forward must occur in either the United States and/or Peru.
  • Brassieres (HTSUS 6212.10) follow a cut-and-assemble rule of origin - yarns and fabrics can be sourced from anywhere; the fabric must be cut and the brassiere must be assembled in the U.S. or Peru.
  • Luggage (HTSUS 4202.12, 4202.22, 4202.32, 4202.92) follows a fabric-forward rule of origin - yarns can be sourced from anywhere.
  • Regional Elastomeric Requirement - elastomeric yarns must be sourced from the region for textile and apparel products to qualify for duty free entry
  • Nylon Filament Yarn - U.S. and Peruvian fabric and apparel makers may source nylon filament yarn, other than elastomeric nylon filament yarn, from Mexico, Canada, and Israel for use in qualifying goods.
  • Viscose Rayon Filament Yarn - can be sourced from anywhere for use in qualifying products.
  • De Minimus - 10% (by weight) of the fibers or yarms of a qualifying products (with an elastomeric exception - all elastomeric content - spandex- must be sourced from the region) may be sourced from outside the region.
  • Short Supply - Fibers, yarns, and fabrics on the "short supply list" (Annex 3-B) have been determined to be not currently available in the U.S. or Peru and therefore may be sourced from outside the countries for use in qualifying textile and apparel products. For example, a fabric on the short supply list may come from any country, be cut-and-assembled into a garment in Peru and imported in to the U.S. duty free. Products may be added to or removed from the short supply list.

Components that determine the tariff classification of an apparel good - In addition to the 'essential character' or outer shell of a garment, the following apparel components are considered for classification purposes:
  • Narrow elastic fabrics of HTSUS 5806.20 and 6002 must be sourced in the region and meet a "fabric-forward" rule of origin (yarns permitted from anywhere).
  • Visible lining fabrics must be sourced in the region and meet a "fabric-forward" rule of origin (yarns permitted from anywhere).
  • Regional cotton and filament thread (HS 5204 and HS 5401) is required in the assembly of qualifying apparel.
  • Pocketing fabric used in qualifying apparel must be made in the U.S. or Peru of U.S. or Peruvian yarns.

Used Clothing is not permitted to enter the Peruvian market under the terms of the Agreement.

Footwear and travel goods under the US – Peru TPA
Peru will eliminate tariffs on 79 percent of U.S. footwear exports immediately upon implementation of the agreement. Tariffs on the remaining 21 percent will be eliminated over ten years. All U.S.




footwear imports from Peru are duty-free immediately except for the 16 rubber/fabric and plastic/protective footwear items

Footwear Rule of Origin
Two rules of origin cover footwear: 

1) The footwear must be assembled in Peru and/or the United States to qualify for duty-free treatment (cut-and-assemble). This rule applies to all footwear, except the following footwear items (HS numbers): 6401.10.00, 6401.91.00, 6401.92.90, 6401.99.30, 6401.99.60, 6401.99.90, 6402.30.50, 6402.30.70, 6402.30.80, 6402.91.50, 6402.91.80, 6402.91.90, 6402.99.20, 6402.99.80, 6402.99.90, 6404.11.90, 6404.19.20.

2) Footwear covered in exception above (i.e., 16 HS numbers listed above) follow a regional value content rule of not less than 20 percent of the adjusted value of the product. Under this rule of origin, to qualify for the duty benefits, uppers can only be made in the United States and/orPeru. 
NOTE: The regional value content is determined by the “Build-up method”: 
VOM
RVC = -------- x 100
AV
Where RVC is the regional value content, expressed as a percentage; AV is the adjusted value (value without Cost, Insurance, Freight); and VOM is the value of originating materials used by the producer for the production of the good.
Travel Goods Rule of Origin
The rule of origin for textile travel goods (4202.11, 4202.12, 4202.19, 4202.21, 4202.22, 4202.29, 4202.31, 4202.32, 4202.39 4202.91, 4202.92, or 4202.99 - with an outer surface of textile materials) is 'fabric-forward'. The travel goods must be assembled in Peru and/or the United States of fabric knit or woven in the US-Peru region.


U.S. travel goods exports to Peru are duty-free immediately. All travel goods imported into the United States from Peru are duty-free immediately as long as those goods meet the agreement’s rules of origin.


Exporters should be aware that commercial invoices for all shipments from the United States must bear a notarized affidavit: I, (name, title, and name of company), hereby swear that the prices stated in this invoice are the current export market prices for the merchandise described, that the products being shipped are of US origin, and that they have been manufactured in the United States. I accept full responsibility for any inaccuracies therein. (Signature) 
If the products being shipped contain any foreign components, the country of origin and percentage of foreign content in the goods must be indicated on the invoice. No certificate of origin is required. 
Exporters can use the free internet-based system on the AESDirectwebsite to file their Electronic Export Information (EEI) to the Automated Export System (AES).

Documentation Requirements:
For qualifying goods, in which US-Peru duty benefits are requested, the importer must make a claim of preference with Customs. The Agreement does not require that the importer provide a certificate of origin in support of the claim of preference. However, Peru and U.S. Customs officials may request verification of a claim of preferential treatment for up to five years after the date of importation (an audit). Therefore, it is recommended that importers and exporters maintain documents relating to the importation of the good and all supporting documents for at least five years.





Measures to Prevent Fraud:
Specific textile customs cooperation language will help prevent transshipment and circumvention of the rules of origin of the Agreement. 

Measures to Prevent Serious Damage (or the threat thereof) to the Domestic Industry:
A special textile safeguard mechanism will provide for temporary MFN tariffs, if a surge in imports under the U.S.-Peru TPA is shown to be causing or threatening to cause serious damage to domestic industry.


Intellectual Property Rights:
Peru’s implementation of the provisions in the U.S.-Peru TPA IPR chapter will bring about a number of important improvements in IPR protection, including: protection of trademarks, protection of test data and other undisclosed information, and provision of deterrent penalties against piracy and counterfeiting. Under the Agreement, U.S. companies will be treated at least as well as Peruvian companies. The Agreement provides for improved standards for the protection and enforcement of a broad range of intellectual property rights, which are consistent, both with U.S. standards of protection and enforcement and with emerging international standards. Such improvements include stronger protection for U.S. patents, trademarks and test data, including an electronic system for the registration and maintenance of trademarks; and further deterrence of piracy and counterfeiting of criminalizing end-user piracy.

Government Procurement:
Since 2002, Peru has applied a 20 percent price preference to bids by Peruvian firms on government procurement contracts. The U.S.-Peru TPA will require the use of fair, nondiscriminatory, and transparent procurement procedures for procurement covered by the agreement. Under the agreement, U.S. suppliers will be permitted to bid on the procurement of most Peruvian central government entities. When the U.S.-Peru TPA is implemented, the price preference will no longer be applied to U.S. companies in procurement covered by the agreement. The anti-corruption provisions in the agreement will require each government to ensure under its domestic law that bribery in trade-related matters is treated as a criminal offense or is subject to comparable penalties. Peru is not a signatory to the WTO Agreement on Government Procurement.


Additional Resources:








Office of Textiles and Apparel (OTEXA)
U.S. Department of Commerce
Washington, DC 20230
Phone: (202) 482-5078  |  Fax: (202) 482-2331
OTEXA@trade.gov



references
http://web.ita.doc.gov/tacgi/fta.nsf/FTA/Peru?opendocument&country=Peru


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