In the recent and impending free trade agreements (FTAs) making waves in global trade, the yarn forward rule has become increasingly important. The yarn forward rule, which is a rule of origin (ROO) for the textile and apparel industries, is a hot button issue with many benefits and drawbacks. Here’s what you need to know:
What is the yarn forward rule?
Certain free trade agreements require that garments be created entirely in one of the FTA-member nations. “Yarn forward” means that every step in the supply chain, from the yarn to the textile to the finished apparel product must be produced in a nation that is part of the agreement in order to be imported duty-free.
What does it mean?
For example, in the recent FTA between the United States and Korea, the yarn forward rule was adopted and only goods that are composed entirely of product made in either Korea or the US are eligible for lowered import tariffs. Products that include
What are the benefits?
Yarn forward strengthens industries in each FTA member-nation. It also has been shown to stimulate employment.
What are the drawbacks?
Yarn forward is difficult to enact, especially when member-nations of one agreement are also members of other FTAs. For example, a garment made in Korea from American textiles could only be exported to the US without heavy tariffs.
Yarn Forward and the TPP
The Trans-Pacific Partnership is a comprehensive initiative to stimulate trade between the Americas and the Pacific Rim. The US has been a strong supporter of a yarn forward rule in the TPP talks. There has been opposition to the rule and a push for a more flexible rule of origin, which would aid in price-competitiveness and allow for a more realistic and diversified supply-chain.