Tuesday November 4 2014 CTE4829 Exam 2 Review Chapter 5 Global Sourcing and Line Review Line review ensures that new product lines that are proposed in a two dimensional sketch format are attractive and functional in a three dimensional garment format Sourcing personnel focus on whether proposed products are The size of neck opening the number of button the length of zippers etc a functional b producible Heat transfer rhinestones on highly brushed or pile fabric c produced within the budget Estimate potential up charge or discount due to different trims fabrications and details from the past Global Sourcing and Product Classi cation During the development stage sourcers must check the proposed products against product classi cations recognized by his or her country U S International Trade Commission USIT publishes Harmonized Tariff Schedules of the United States HTSUS with a product classi cation numbers b article descriptions c tariff rates d special tariff programs It is critical for sourcers to understand product classi cation and interpretation or such classi cations Product details and ber contents directly affect how they will be classi ed by USCBP affecting duty rates Harmonized Tariff Schedule of the US 1 Tuesday November 4 2014 Totally there are 22 sections and 99 chapters Sections 11 and 12 address textile based goods Section 11 Chapters 61 and 62 deal with apparel products Chapter 61 includes knitted apparel while Chapter 62 contains non knitted or woven apparel Rates of Duty in New Product Development Two critical aspects of the proposed products to reduce the overall cost of sourcing Sourcing personnel must compare different duty rates assigned for different ber contents of the proposed products Sourcing personnel must have full knowledge of different duty rates from different countries depending on trade preference programs between the sourcer s and the supplier s countries Chapter 6 PEST Analysis Political environment analysis etc Economic environment analysis Social environment analysis industry etc Technological environment analysis Tax policies trade agreements import export regulations and or political stability Currency exchange rates unemployment rates in ation rates etc Work ethics culture and the quality of the labor force in the textile and apparel Ease of communication infrastructure related to air ocean and ground transportation the degree of automation in the textile and apparel industry etc Enforcement of Intellectual Property Rights protected for their intellectual property rights IPR in the suppliers countries Sourcers must consider if they could share their unique designs and brands and be IPR are the rights given to persons over the creation of their minds 2 Tuesday November 4 2014 Four major intellectual property rights Trademarks Name logo color and three dimensional images Similar logo or color that would likely create confusions among consumers is considered a trademark infringement Copyrights Drawing designs websites or marketing materials Patents Processes and products that the sourcer may uniquely possess Trade secrets Any confidential or classified information that the sourcer may In the U S Customs and Border Protection CBP and Immigration and Customs Enforcement ICE monitor counterfeit and pirated goods coming into the country only share with the supplier Trade Barriers Trade barriers raise the overall product cost either through tariffs or quotas This increased price would then reduce the overall demand for such products While domestic producers may still protect some of their market shares Tariffs Three different types of tariffs a ad valorem Ad valorem tariffs are assessed based on the percentage of the value of the products that are being imported Specific tariffs are set based on a pre determined monetary amount per unit Combination tariffs are assessed based on both ad valorem and specific b specific c combination tariffs Quotas In the United States there are two types of quota a quantity control on imports a absolute quotas b tariff rate quotas When Country A sets an absolute quota against Country B on a Product C during the period Country B could ship only a certain amount of quantity of Product C during that period Allow a specific quantity of merchandise to be entered into Country A from Country B at a reduced duty rate during a specific period Quantities above and beyond the specific quantity specified they will be subject to higher rates of duty 3 Tuesday November 4 2014 As of January 1 2005 quotas on textiles and apparel were eliminated among the members countries of World Trade Organization Free Trade Agreement Free trade agreements FTA are negotiated to promote trade among member countries by eliminating or reducing tariff rates and easing government trade rules Under FTAs qualified goods would gain duty free access to other FTA member Each FTA has different rules and conditions Five common provisions in FTAs related to textile and apparel trades countries resulting in lower prices for the goods most textile and apparel products to be duty free FTAs are established to ensure reciprocal market access Most FTAs have the yarn forward rule of origin as a common provision for Most FTAs also have a safeguard mechanism that allows tariff snapback if textile and apparel imports cause serious damage to domestic markets such as sudden drops in price through dumping products at below the market price FTAs have policies on illegal transshipment Transshipment can be illegal if the goods enter into the ultimate destination country with a false country of origin Most FTAs have rules on short supply of textile and apparel products As of December 31 2011 the U S has FTAs with 17 countries 9 countries are bilateral 8 are multilateral NAFTA CAFTA DR Three additional FTAs have been signed with South Korea Colombia and Panama and waiting to be implemented Trade Reference Programs A Trade Preference Program TPP is legislated by U S Congress and provides duty free treatment to certain apparel products from designated beneficiary countries that meet the program s rules TPPs are designed to allow duty free entry of apparel from a beneficiary country into the United States if the apparel is cut and assembled in a beneficiary country using U S fabrics made of U S yarns Currently the United States offers four TPPs as follows The African Growth and Opportunity Act AGOA African Growth and Opportunity Act AGOA Currently 38 countries in the sub Saharan