The 2015 National Trade Estimate Report on Foreign Trade Barriers ("NTE"), released April 1, 2015, is the thirtieth in an annual series that surveys significant foreign barriers to U.S. exports. This document is a companion piece to the President’s Trade Policy Agenda. The issuance of the NTE Report continues the elaboration of an enforcement strategy, utilizing this report, among other tools, in that strategy. The complete report is over 400 pages in length. Below are excerpts from some of the country-by-country reports that may be of interest to the U.S. textile industry.
Argentina maintains administrative mechanisms that restrict the entry of products deemed sensitive, such as textiles, apparel, footwear, toys, electronic products, and leather goods. While the restrictions are not country specific, they are to be applied more stringently to goods from countries considered “high risk” for under-invoicing, and to products considered at risk for under-invoicing or trademark fraud.
Argentina restricts entry points for several classes of goods, including sensitive goods classified in 20 Harmonized Tariff Schedule chapters (e.g., textiles; shoes; electrical machinery; iron, steel, metal, and other manufactured goods; and watches), through specialized customs procedures for these goods.
Certificates of origin have become a key element in Argentine import procedures in order to enforce antidumping measures, reference prices (referred to as “criterion values”), and certain geographical restrictions. Argentina requires certificates of origin for certain categories of products, including certain organic chemicals, tires, bicycle parts, flat-rolled iron and steel, certain iron and steel tubes, air conditioning equipment, wood fiberboard, most fabrics (e.g., wool, cotton, other vegetable), carpets, most textiles (e.g., knitted, crocheted), apparel, footwear, metal screws and bolts, furniture, toys and games, brooms, and brushes. To receive the MFN tariff rate, a product’s certificate of origin must be certified by an Argentine embassy or consulate, or carry a “U.S. Chamber of Commerce” seal. For products with many internal components, such as machinery, each individual part is often required to be notarized in its country of origin, which can be very burdensome. Importers have stated that the rules governing these procedures are unclear and can be arbitrarily enforced.
Argentina maintains an import prohibition on used clothing, which is due to expire in December 2015.
In October 2014, Argentina launched the “Ahora 12” program, which allows individuals to finance the purchase of certain domestically-manufactured goods, ranging from clothing to home appliances, in 12 monthly installments without interest. The program is effective through March 1, 2015, but Argentina announced in February 2015 that it would extend the program past the expiration date. The list of qualifying goods for the Ahora 12 program can be found at http://www.ahora12.gob.ar/. Argentina claims the program has been very successful in increasing the consumption of locally-produced goods and has stated that more than four million transactions have transpired since the program’s inception.
Brazil imposes relatively high tariffs on imports across a wide spread of sectors, including automobiles, automotive parts, information technology and electronics, chemicals, plastics, industrial machinery, steel, and textiles and apparel.
U.S. footwear and apparel companies have expressed concern about the extension of non-automatic import licenses and certificate of origin requirements on non-MERCOSUR footwear, textiles and apparel. They also note the imposition of additional monitoring, enhanced inspection, and delayed release of certain goods, all of which negatively impact the ability to sell U.S.-made and U.S.-branded apparel, footwear, and textiles in the Brazilian market.
The Ministry of Development, Industry, and Commerce maintains an 8 percent preference margin for domestic producers in the textile, clothing, and footwear industries when bidding on government contracts.
Brazil prohibits imports of all used consumer goods, including automobiles, clothing, tires, medical equipment, and information and communications technology (ICT) products, as well as imports of certain blood products.
Ecuador’s Organic Code for Production, Trade, and Investment (Production Code), which came into effect in 2010, covers an array of issues, including import and export policies, customs procedures, taxes, and investment and labor rules. Among other things, the Production Code calls for strategic import substitution and for a transformation of Ecuador’s “productive matrix” to increase the production of higher value-added products. According to Ecuador’s National Plan for Good Living 2013-2017, produced by the National Secretariat of Planning and Development (SENPLADES), products subject to import substitution measures include fertilizers, agrochemicals, agricultural commodities and food products, pesticides and fungicides, soaps, detergents, cosmetics, ceramic tiles, floors, textiles, clothing, footwear, leather, radios, telephones, TVs, electronics, pharmaceuticals, and electrical appliances. Ecuador applies a combination of tariff and nontariff measures, such as non-automatic import licensing, to most of the sectors listed above.
India maintains very high tariff peaks on a number of goods, including flowers (60 percent), natural rubber (70 percent), automobiles and motorcycles (60 percent to 75 percent), raisins and coffee (100 percent), alcoholic beverages (150 percent), and textiles (some ad valorem equivalent rates exceed 300 percent). Rather than liberalizing its customs duties, India instead operates a number of complicated duty drawback, duty exemption, and duty remission schemes for imports. Eligibility to participate in these schemes is usually subject to a number of conditions.
India maintains several export subsidy programs, including exemptions from taxes for certain export-oriented enterprises and for exporters in Special Economic Zones, as well as duty drawback programs that appear to allow for drawback in excess of duties levied on imported inputs. India also provides pre-shipment and post-shipment financing to exporters at a preferential rate. Numerous sectors (e.g., textiles and apparel, paper, rubber, toys, leather goods, and wood products) receive various forms of subsidies, including exemptions from customs duties and internal taxes, which are tied to export performance.
India not only continues to offer subsidies to its textiles and apparel sector in order to promote exports, but it has also extended or expanded such programs and even implemented new export subsidy programs that benefit the textiles and apparel sector. As a result, the Indian textiles sector remains a beneficiary of many export promotion measures (e.g., Export-Oriented Units, Special Economic Zones, Export Promotion Capital Goods, Focus Product, and Focus Market Schemes) that provide, among other things, exemptions from customs duties and internal taxes based on export performance.
In late 2013, Indonesia’s Ministry of Trade issued regulation Ministry of Trade 67/2013 on the “Obligation to Affix Indonesian-Language Labels on Goods.” The regulation requires the use of pre-approved Bahasa Indonesia-language labels on a wide range of products, including various information and communications technology products, building materials, motor vehicle goods, household products, and apparel and textiles, that are distributed or sold in Indonesia. The regulation also requires that labels be “embossed or printed on the goods, or wholly attached to the goods” and must be attached “upon entering the customs territory” of Indonesia. The new regulation removed the option of using stickers and attaching them in the customs territory, and as a result significantly increased the costs for foreign goods entering the Indonesian market, without a clear benefit to consumer health or safety. In fall 2014, Indonesian officials clarified that “permanent stickers” are permitted.
The Indonesian government imposes non-automatic import licensing requirements on a broad range of products, including electronics, household appliances, textiles and footwear, toys, food and beverage products, and cosmetics. The measure, originally known as Decree 56 in 2009, has been extended twice by the Ministry of Trade, most recently in December 2012 through MOT Regulation 83/2012, which will remain in effect until December 31, 2015. The decree also requires pre-shipment verification by designated companies (known in Indonesia as “surveyors”) at the importers’ expense and limits the entry of imports to designated ports and airports. Indonesia informally limits application of the decree to “final consumer goods.” While the Indonesian government appears to exempt selected registered importers from certain requirements of this decree, the approval process to qualify as a registered importer is opaque, ill-defined, and potentially discriminatory. The United States continues to seek withdrawal of the measure.
In the second half of 2014, the Government of Mexico set out several new regulations governing the importation of footwear and apparel and textile goods, to include the creation of reference prices and the establishment of an import licensing system. According to the Mexican government, the measures are designed to enhance the productivity and competitiveness of Mexican footwear and apparel producers and protect Mexico’s domestic footwear and apparel industries from damage caused by the importation of undervalued goods. U.S. exporters have expressed a number of concerns with regard to the schemes, noting significant confusion during the early period of implementation, lack of information regarding how to comply with new requirements, insufficient consultation with the trade community prior to operationalization, a lack of transparency in how reference prices are determined, and uneven enforcement by Mexico’s customs and tax authorities. The U.S. Government will continue to monitor the implementation of these schemes and encourage SAT to clarify the process for complying with their requirements.
The government continues to ban the import of nearly 50 different product categories, citing the need to protect local industries or promote health and safety. The list of prohibited imports currently includes bird eggs; cocoa butter, powder, and cakes; pork; beef; live birds; frozen poultry; refined vegetable oil and fats; cassava; bottled water; spaghetti and other noodles; fruit juice in retail packs; nonalcoholic beverages (excluding energy drinks); bagged cement; all medicaments falling under HST headings 3003 and 3004; waste pharmaceuticals; soaps and detergents; mosquito repellant coils; sanitary plastic wares; toothpicks; rethreaded or used tires; corrugated paper; paper board; telephone recharge cards and vouchers; textile fabrics and yarn; certain printed fabrics, lace and embroidered fabrics; carpets and rugs; made-up garments and certain other textile articles; footwear; bags and leather and plastic suitcases; glass beverage bottles; used compressors; used motor vehicles more than ten years old; most types of furniture; ball point pens; pistols and air pistols; airmail photographic printing paper; beads; blank invoices; cowries; used or inferior tea; cartridge reloading implements; indecent or obscene articles; manilas; matches; materials likely to offend religious views or breach the peace; meat and vegetables determined unfit for human consumption; materials or products bearing inscriptions of the Koran; used clothing; silver or metal alloy coins not legal tender in Nigeria; nuclear industrial waste; toxic waste; certain spirits and alcohols; and weapons and ammunition that contain or are designed to contain noxious liquid or gas.
Paraguay requires non-automatic import licenses on personal hygiene products, cosmetics, perfumes and toiletries, textiles and clothing, shoes, insecticides, agrochemicals, poultry, barbed wire, wire rods, and steel and iron bars. Obtaining a license requires review by the Ministry of Industry and Commerce.
Paraguay prohibits the importation of used cars over 10 years old and used clothing.
The Philippines’ simple average most favored nation tariff is 7.12 percent. Six percent of its applied tariffs are 20 percent or higher. All agricultural tariffs and about 60 percent of non-agricultural tariff lines are bound under the Philippines’ WTO commitments. The simple average bound tariff in the Philippines is 25.7 percent. Products with unbound tariffs include certain automobiles, chemicals, plastics, vegetable textile fibers, footwear, headgear, fish, and paper products. Applied tariffs on fresh fruit, including grapes, apples, oranges, lemons, grapefruits, and strawberries, as well as on processed potato products, including frozen fries, are between 7 percent and 15 percent, whereas bound rates are much higher at 35 percent and 45 percent.
The Philippines offers a wide array of fiscal incentives for export-oriented investment, particularly investment related to manufacturing. These incentives are available to firms located in export processing zones, free port zones, and other special industrial estates registered with the Philippine Economic Zone Authority. The available incentives include: income tax holidays or exemption from corporate income tax for four years, renewable for a maximum of eight years; after the income-tax-holiday period, payment of a special five percent tax on gross income in lieu of all national and local taxes; exemption from duties and taxes on imported capital equipment, spare parts and supplies, and raw materials; domestic sales allowance of up to 30 percent of total sales; exemption from wharfage dues, imposts, and fees; zero VAT rate on local purchases, including telecommunications, electricity, and water; and exemption from payment of local government fees (e.g., mayor’s permit, business permit, health certificate fee, sanitary inspection fee, and garbage fee). Furthermore, under the Omnibus Investment Code, which is administered by the Board of Investments, tax incentives are available to producers of non-traditional exports, including electronics, garments, textiles, and furniture, and for activities that support exporters, such as logistics services and product testing.
In 2014, the Russian government accelerated its promotion of import substitution and called for more local production across a variety of sectors. Government officials, including President Putin, have signaled that import substitution is now a central tenet of Russian economic policy. The medical device and pharmaceutical industries (see below) are examples of sectors in which localization policies have been developed and implemented over several years. In addition, there are currently sectorial import substitution proposals for defense, health care, consumer goods, oil and gas equipment, information technology (IT), light industry, textiles, and agriculture. The preferred mechanism for implementing these policies appears to be through government procurement, which may also be extended to state-owned enterprise (SOE) procurement in 2015 (see discussion below on Government Procurement).
U.S. exports face a disadvantage compared to EU goods in South Africa. The European Union-South African Trade and Development Cooperation Agreement (TDCA) of 1999 covers a significant amount of South Africa-EU trade. Tariffs for EU imports on TDCA-covered tariff lines average 4.5 percent based on an unweighted average, while the general tariff rates, which U.S. imports face, average 19.5 percent for TDCA-covered lines. Key categories in which U.S. firms face a tariff disadvantage include cosmetics, plastics, textiles, trucks, and agricultural products and machinery.
In November 2011, the government introduced an all-inclusive tax under the EDB levy on imported textiles not intended for use by the apparel export industry, replacing the import tariff, the EDB Levy, the Ports and Airports Tax, the VAT, and the NBT. Currently, this all-inclusive tax is Rs 100 per kg (approximately $0.77.)
Apparel imports are subject to the 15 percent import duty, the Rs 75 (approximately $0.57) per unit EDB Levy, the 12 percent VAT, the 5 percent PAL, and the 2 percent NBT.
Although intellectual property rights (IPR) enforcement has improved in Sri Lanka, counterfeit goods continue to be widely available and music and software piracy are reportedly widespread. U.S. and other international companies in the recording, software, movie, clothing, and consumer product industries complain that inadequate IPR protection and enforcement is damaging their businesses. Although the government of Sri Lanka published a policy in 2010 requiring all government ministries and departments to use only licensed software, it has yet to put systems in place to monitor compliance with this policy.
Redress through the courts for IPR infringement is often a frustrating and time-consuming process, and police do not actively utilize existing authorities for IP enforcement. Some industry sectors, including apparel, software, tobacco, and electronics, have reported some success in combating trademark counterfeiting through the courts.
Taiwan provides incentives to industrial firms in export processing zones and to firms in designated emerging industries. Taiwan has notified the WTO of these programs. The Ministry of Finance (MOF) in October 2011 resumed tax rebates for customs duties on certain components and raw materials that are imported into Taiwan and then used to produce goods for export. On January 1, 2013, the program was expanded to cover a total of 1,751 products in categories including electronics, textiles, machinery, chemicals, mineral products, basic metal products, and plastics. On January 29, 2013, MOF announced that tax rebates would be expanded to include all components and raw materials that are imported into Taiwan and then used to produce goods for export, with the exception of 51 items identified on a negative list. The rebates were effective retroactively from January 1, 2013.
High tariffs in many sectors remain an impediment to access to the Thai market. While Thailand’s average applied most favored nation (MFN) tariff rate was 11.4 percent ad valorem in 2013, ad valorem tariffs can be as high as 80 percent, and the ad valorem equivalent of some specific tariffs (charged mostly on agricultural products) is even higher. Thailand has bound all tariffs on agricultural products in the WTO but only approximately 70 percent of its tariff lines on industrial products. The highest ad valorem tariff rates apply to imports competing with locally produced goods, including automobiles and automotive parts, motorcycles, beef, pork, poultry, tea, tobacco, flowers, wine, beer and spirits, and textiles and apparel. About one-third of Thailand’s MFN tariff schedule involves duties of less than 5 percent, and almost 30 percent of tariff lines are duty free, including for products such as chemicals, electronics, industrial machinery, and paper.
Thailand applies import tariffs of 80 percent on motor vehicles, 60 percent on motorcycles and certain clothing products, 54 percent to 60 percent on distilled spirits, and 30 percent on certain articles of plastic and restaurant equipment.
ARGENTINA
BRAZIL
ECUADOR
INDIA
INDONESIA
MEXICO
NIGERIA
PARAGUAY
PHILIPPINES
RUSSIA
SOUTH AFRICA
SRI LANKA
TAIWAN
THAILAND
Friday, April 10, 2015
2015 National Trade Estimate Report on Foreign Trade Barriers ("NTE")
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