comercio exterior

1. Short Supply:
Procedures and Strategies
under the
US-Colombia TPA
August 13, 2014

2. “Yarn Forward” Rule of Origin
Yarn Fabric Apparel
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3. Commercial Availability or “Short Supply”
• Benefits bilateral (FTA) trade
• Fibers, yarns or fabrics “not commercially
available” in the FTA region (US and Colombia)
can be sourced from outside the region and used
in qualifying textile and apparel goods
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4. Short Supply Provisions under other FTAs:
NAFTA….1995
CAFTA…2003 (2006)
Peru/Colombia…2012
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5. Level of Trade under ATPDEA and Colombia TPA
($US millions)
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Imports 2010 2011 2012 2013 2014
(Jan-June)
All Textiles &
Apparel
$292 $264 $259 $281 $131
Textiles &
Apparel:
TPA/ATPDEA
$242 $50 $198 $246 $114
Apparel using
Short Supply
$0.2 $0.01 $5.5 $7.7 $1.7
Percent of
imports
0.1% 0.01% 2.8% 3.1% 1.49%

6. Hallmarks of the Colombia TPA Short Supply Process
• You can use a fiber, yarn or fabric from a third county and still get duty-
free treatment on the apparel.
• Once a request has been accepted, CITA can make a decision within 30
business days.
• Requestors and Suppliers have to provide evidence. CITA does not
collect information – it only reviews information submitted on the
record.
• Any textile producer, apparel producer and importer/brand or retailer
can use short supply to their advantage.
• It can be a powerful tool, if used strategically!
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7. CAFTA Short Supply: What Doesn’t Matter!
• PRICE: CITA does NOT consider whether the product is available
outside the region at a lower price. As long as a potential supplier can
demonstrate that it can produce the subject product or one
substitutable, price is irrelevant.
• NON-MEASUREABLE CRITERIA: As long as a supplier can meet
all physical specifications included in a description, CITA does not
consider a customer’s preference or other non-measureable criteria (eg
hand and feel) as reasonable requirements.
• TERMS OF SALE: Issues regarding samples, financing and means of
delivery are considered terms of sale, and are not relevant.
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8. Short Supply Strategies:
Factors to Consider
Whether you want to Add a product, or object to a Request to
Add a product, think carefully!
• How critical is this product for you and your customer?
• What are the opportunities/threats for US and
Colombian suppliers and existing/potential customers?
• How much flexibility is there in product specifications?
• What are the critical price points and extent of foreign
competition?
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9. • A carefully crafted product description is
often the key to having a request approved.
• Reasonable due diligence with US and
Colombian suppliers is also a must.
• But how well you know your suppliers and
how flexible you can be in terms of product
specifications can make or break a request.
• ITS ALL ABOUT RELATIONSHIPS – with
your customers and your suppliers.
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Adding a Product:
Product Description and Due Diligence are CRITICAL!

10. Adding a Product:
How do you start?
If you think that a product isn’t available, you
must compile evidence to support your claim.
• Describe the product:
– Reasonable specifications (industry standards)
– Reasonable deadline and quantities
– Is there a substitutable product?
• Identify potential suppliers, and contact them to confirm
whether they can or cannot supply the product.
• Collect documents to support your claim.
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11. Product Descriptions:
• You don’t have to include all the specifications that you would for a mill.
Only use the specifications that are relevant, but include ranges.
• You can start due diligence with a broader description, but if you learn
that a supplier can make some part of the range, you can narrow the
description in your Request.
• You can’t include non-measurable criteria (for example, hand and feel),
but you may be able to get the same effect using performance criteria.
• If you add performance criteria, you must cite the industry standard test
used to measure performance (ASTM, AATCC)
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12. Don’t forget TOLERANCES!
• Some physical parameters can change after construction. Dyes and other
finishing processes can affect yarn size, thread count, colorization, and
weight.
• Even though you provide specifications based on construction parameters,
take into account how post-construction processes can affect physical
characteristics.
• Customs tests the entered apparel, NOT the fiber, yarn or fabric. If test
results fall outside specifications, they will deny duty-free treatment.
• CITA CANNOT MAKE ANY CHANGES to a product description once
its been submitted by a requestor. Expansion of specifications must be
made in a new Request.
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13. Example of Product Description:
Certain Cotton/Polyester three thread circular knit fleece fabric:
HTS: 6001.21
Fiber content: 70—90% cotton and 10-30% polyester
Yarn description:
Face yarn - 100% ring spun combed cotton yarn
Tie yarn - 100% multifilament polyester yarn
Fleece yarn - cotton and staple polyester yarn of no less than cotton
Machine gauge: 21
Weight: 232-271 grams/meter squared (6.85 - 8.0 ounces per square yard)
Finish: napped on one side.
Performance Criteria:
1. Torque must not exceed 4% (must meet AATCC 179)
2. Vertical and horizontal shrinkage must be under 5%
3. Must meet a class-1 flammability rating
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14. Downstream Products and Finishing
• CITA will not accept a Request if it finds that it is only an “upstream input”
and not the “downstream” product that is unavailable.
• For example, if the inquiry is for a fabric that calls for a specific yarn, if a
supplier can make the fabric but the yarn isn’t available in the CAFTA region,
a supplier will say so in its response to the requestor.
• Confirm with the supplier, but be prepared to modify your Request to ask for
the upstream input.
• In the same way, CITA also does not accept Requests where the only aspect of
the product that’s “unavailable” is a finishing process.
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15. Tips for Product Descriptions
• Choose your Description Carefully: Craft a
product description that gets you what you need, but is
likely to get approved.
• Be flexible: Consider flexibilities of both your
suppliers and your customers.
• Tolerances: Consider obtaining independent lab
tests on garment samples to determine reasonable
tolerances.
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16. Due Diligence:
Contacting Potential Suppliers
• Do your homework – find out as much about potential suppliers as you can,
before you contact them.
• US and Colombian suppliers have a stake in whether you can use third-country
(cheaper) inputs and still get duty-free treatment. Understand suppliers’
concerns, and be willing to address them.
• Remember: suppliers don’t have to currently make the product – all they have
to show is that they’re capable of making the product.
• They don’t have to make the entire range of specifications, or the entire
quantity, as long as they can demonstrate what they can do.
• Be flexible when working with suppliers – they can be a partner or a roadblock
to your success.
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17. Due Diligence:
What must the Potential Supplier provide?
• An offer to supply the specified product or one substitutable.
• Detailed information on its production capacity and capability,
and, if applicable, information about the substitutable product.
• Must identify all sub-contractors, with information about the
contractor’s capability.
• While a requestor may ask for certain information and/or a
sample (free or otherwise), suppliers are NOT required to provide
business proprietary information, or provide samples.
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18. Due Diligence:
Substitutable Products
• Suppliers may propose another product as a substitute for
the purposes of the end use, and explain why it’s
substitutable.
• If you don’t think it’s a good substitute, you must tell the
supplier why it is not substitutable, using measurable
criteria.
• “Customer Preference” or other non-measureable criteria
(e.g. hand and feel) are not acceptable arguments.
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19. Due Diligence:
What if I don’t think the Supplier is capable?
If you don’t think a supplier has demonstrated its ability to
supply the product as specified, be sure to:
• Tell the supplier why you don’t think they’re capable.
• Give the supplier an opportunity to respond, and to provide
information that supports their claim.
• Address the supplier’s arguments, and answer all questions.
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20. Tips on Due Diligence with Suppliers:
• Know your supply chain – Get a feel for what suppliers are capable
of. Don’t assume they’re not capable just because its not currently
being produced.
• Work With Potential Suppliers – Most existing suppliers will
work with good customers. Many potential suppliers are eager to build
new business relationships. Be sensitive to their concerns and find
ways to address them.
• Act In Good Faith – Play it straight with suppliers and they’ll
(usually) play it straight with you.
• DON’T LEAVE QUESTIONS UNANSWERED.
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21. Responding to Due Diligence Inquiries:
What must a Supplier provide?
REMEMBER: A requestor may ask anything they like, but….
• No business confidential information (i.e. details about equipment
names, current customers, current production schedule).
• You don’t have to supply a sample, but if you do, make sure you clearly
state if its to spec – it can be tested!
• Don’t forget about using sub-contractors!
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22. Responding to Due Diligence Inquiries:
Tips for Suppliers
• Think about whether you want to make an Offer – is it strategically
important?
• Make sure you respond to the initial inquiry.
• Clarify any questions about the product’s specifications and criteria,
its substitutability, and requirements for quantity and deadlines.
• Answer ALL outstanding questions from the requestor regarding
production capability and normal business practice.
• You may consult with other suppliers about the inquiry.
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23. Filing a Request:
What do I need?
• Complete product description, no broader than was
presented during due diligence.
• Explanation of how you identified potential suppliers.
• Summary of your due diligence communications with
suppliers.
• Explanation whether the product may or may not be
substituted with another product.
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24. How to File a Request under CAFTA:
• Submit electronic and original signed hard copy versions.
• If you want to hold certain information as “Confidential” you must
also prepare a “Public” version.
• You must submit an electronic copy of the “Public” version, but are not
required to submit an electronic copy of the “Confidential” version.
• Official Receipt date is the date all required versions have been
received.
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25. So I submitted a Request…..
• Once you submit a Request, CITA has two business days to
review the Request to see if it meets requirements.
• CITA will “Reject” a submission if its deficient in terms of
– Inadequate Due Diligence
– Improper Product Description
• If rejected, CITA will send requestor an explanation of each
deficiency.
• If accepted, CITA issues email notice to all interested parties.
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26. The Request was Accepted. Now what?
• If a Request is accepted, CITA allows potential suppliers 8
business days to submit a Response with an Offer to Supply.
• The supplier must provide information demonstrating their
capability to supply the product.
• If a requestor doesn’t think the supplier has met their burden,
they can file a Rebuttal.
• Usually, if Responses and Rebuttals are filed, CITA will extend
the deadline by 14 business days, and will call a public meeting
for the parties to present their case.
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http://otexa.ita.doc.gov/

28. For More Information:
Maria Dybczak
Direct Phone: (202) 482-3651
Email: Maria.Dybczak@trade.gov
www.OTEXA.trade.gov
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