Importers and exporters in both Canada and the U.S. are reminded that in accordance with a new provision in the United States-Mexico-Canada Agreement (USMCA aka CUSMA in Canada), effective July 1, 2021 apparel goods of Chapter 61 or 62 containing sewing thread of headings 52.04 (cotton), 54.01 (man-made filaments), or 55.08 (man-made staple fiber), or yarn of heading 54.02 (synthetic filament yarn) used as sewing thread shall be considered originating only if such sewing thread is both formed and finished in the territory of one or more of the Parties.
Defining ‘Formed and Finished’
As explained in recent a Canada Border Service Agency bulletin:
“Sewing thread is considered formed and finished in the territory of one or more Parties if all production processes and finishing operations, starting with the extrusion of filaments, strips, film or sheet, and including slitting a film or sheet into strip, or the spinning of all fibres into yarn, or both, and ending with the finished single or plied thread ready for use for sewing without further processing, took place in the territories of one or more of the Parties, even if non-originating fibre is used in the production of sewing thread of headings 52.04, 54.01 or 55.08, or yarn of heading 54.02 used as sewing thread.”
Tariff Preference Levels
Apparel goods of Chapter 61 or 62 that are produced in Canada using non-originating sewing thread may nonetheless be eligible for duty-free treatment when imported into the United States or Mexico under the CUSMA Tariff Preference Levels, regardless of the origin of the yarn or fabric used.
The CUSMA TPLs provide duty-free access for specified quantities of yarns, fabrics, apparel, and made-up textile goods that do not meet the applicable rules of origin.
Imports into the U.S. from Canada under TPLs are also exempt from the U.S. merchandise processing fee.
Need More Information?
Should you have any questions about the implementation of this new USMCA/CUSMA rule, don’t hesitate to contact one of our knowledgeable trade experts.