Mexico to Start Increasing Fabric Exports to Central America
After much delay, Mexican textile factories are getting ready to start shipping duty-free woven fabric to Central America to sew clothing destined for the United States.
A special provision of the Dominican Republic–Central American Free Trade Agreement called cumulation is expected to take effect Aug. 15.
However, the exact date won’t be confirmed until Mexico and the Central American countries in the free-trade pact exchange letters acknowledging a change in the regulations. The letter exchange should take place June 16, said Megan Curtis, a senior trade analyst with International Development Systems, a Washington, D.C., company that consults on apparel and textile quotas and tracks trade agreements.
Once the letters are exchanged, the newest chapter in DR-CAFTA takes place in 60 days, which would be Aug. 15.
A U.S. trade official who requested anonymity acknowledged that cumulation should start Aug. 15.
Cumulation basically allows Mexican textile factories to ship up to 100 million square meters of woven fabric a year, free of duty, to the Dominican Republic, Guatemala, Honduras, El Salvador and Nicaragua to make garments exported to the United States that are duty- and quota-free. Costa Rica still isn’t a member of the trade pact but is expected to join later this year.
As part of that 100 million square meters, Mexico can ship up to 20 million square meters of denim and 45 million square meters of cotton and man-made bottom-weight fabrics. The annual 100 million-square-meters cap can increase each year, depending on demand.
Originally, Canada was to be included in the cumulation clause, but that country opted not to participate.
In addition to fabric, the regulation is coupled with a pocketing provision that says all pocket-lining fabric must be formed in the DR-CAFTA region for duty-free status. Originally, pocketing fabric could be used from outside the region.
This newest amendment to DR-CAFTA benefits both Central American apparel factories and Mexican textile mills. Mexican fabric is much cheaper than U.S. fabric, used by many Central American garment makers to gain free duty and quota status for their products.
Getting cumulation and pocketing amendments passed has been tedious because each country has had to approve the matter. In early May, the issue was stalled in the Dominican Republic’s legislature. That country’s Senate approved the issue on March 25, but the lower house, known as the Chamber of Deputies, was stalling. However, on May 29, the Chamber of Deputies approved the pocketing amendment, setting the ball rolling. —D.B.
