ITC Reports on Proposed Modifications to KORUS Rules for Cotton Yarn, Rayon Fabric, and Cashmere Yarn

On July 24, 2019, the U.S. International Trade Commission released its finding that proposed modifications to the U.S.-Korea FTA apparel rules of origin relating to certain cotton yarn, certain woven fabric of rayon, and certain cashmere yarns would likely have a negligible effect on U.S. Imports and Exports. However, USITC noted that two domestic U.S. textile manufacturers, American Woolen Company and Parkdales Mills, filed objections

With respect to the effect of the proposed modification on U.S. production of cotton yarns with viscose rayon staple fibers, the Commission received one objection from a U.S. firm, Parkdale Mills (Parkdale), which indicated that the modification could have an adverse effect on their operations. In opposing the proposed modification, Parkdale stated that it “produces enough of this product line to sustain one of our facilities year round.” Parkdale further stated that giving Korean producers duty-free access to the U.S. market for cotton yarns with viscose rayon staple fibers by way of the proposed ROO modification would erode the benefits afforded to Parkdale by the miscellaneous tariff bill (MTB) process. In addition to Parkdale, there are a number of other firms producing cotton yarns in the United States. Any of these companies could potentially blend viscose rayon staple fibers with cotton to produce the yarns covered by the proposed modification. According to industry sources, there are at least two other firms that currently do blend viscose rayon fibers with cotton in their yarns. However, only Parkdale provided a written submission objecting to the modification.

The Commission did not receive any comments on the proposed modification to the KORUS ROOs for HTS headings 6110 and 6117 from U.S. producers of knit tops, knit clothing accessories, and parts of knit garments of cashmere yarn. It did receive an objection, however, from a U.S. firm that produces cashmere yarn. American Woolen Company (American Woolen), a Connecticut-based textile mill that currently produces cashmere yarns and sells to outside companies that make knit garments and accessories, indicated that the modification could have an adverse effect on their operations. It stated that the firm is actively trying to expand its business, and would therefore be harmed should the KORUS ROOs be modified as proposed. American Woolen states, “American Woolen is manufacturing cashmere yarns today and is capable of supplying cashmere yarns of heading 5108 in commercial quantities in a timely manner.” Based on available information, American Woolen is the sole representative of the U.S. cashmere yarn industry as the only known firm in the United States that imports raw cashmere fiber and processes it into finished yarn.

Proposed modifications to the United States-Korea Free Trade Agreement (KORUS) rules of origin are likely to have a negligible effect on U.S. imports and U.S. exports, but they could impact the U.S. industry that produces some of the affected articles, reports the United States International Trade Commission (USITC) in its publication U.S.-Korea FTA: Advice on Modifications to Certain Textile and Apparel Rules of Origin.

The USITC, an independent, nonpartisan, factfinding federal agency, produced the report at the request of the U.S. Trade Representative (USTR).

As requested, the report provides advice on the probable economic effect of the proposed modifications to the U.S.-Korea FTA rules of origin on U.S. trade under the agreement, on total U.S. trade, and on domestic production of the affected articles. The proposed modifications, detailed in the USTR's request letter, cover the following of headings of the Harmonized Tariff Schedule of the United States (HTS):

• Certain cotton yarns (under HTS heading 5206) with viscose rayon staple fibers (under HTS subheadings 5504.10 or 5507.00);


• Certain woven fabrics (under HTS heading 5408) with cuprammonium rayon yarns (under HTS subheading 5403.39); and


• Certain apparel (under HTS heading 6110), accessories, and apparel parts (under HTS heading 6117) of cashmere yarns (under HTS heading 5108).

Each of the proposed modifications to the rules of origin would liberalize the current rules of origin by allowing the use of more non-originating materials. However, because U.S. imports from Korea are a small portion of total U.S imports of the affected articles, and because Korea is not a major producer of the affected articles, the likely effect of the proposed modifications on imports under KORUS and on total U.S. imports of these products is negligible.