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Trans-Pacific Partnership (TPP)Footwear & Travel Goods
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contained in this presentation are provided for informational use only and should not be
considered legal advice. The hiring of a lawyer is an important decision that should not be
based solely on presentation materials. Please contact us and we will send you free written
information about our qualifications and experience.
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Agenda
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Implementation
Interaction with other FTAs
Rules of origin
Market Access
Documentation
TPP Countries
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Implementation1. Within 2 years of signing, if all countries have completed domestic
procedures; or
2. At least 6 countries are ready if those 6 account for at least 85% of original countries’ GDP
Last 5 US free trade agreements took an average of 4 years to be implemented after signing.
February 4, 2016: Anticipated date of signing
March 14, 2016: Earliest date implement bill goes to US Congress
House must vote on bill within 60 legislative days, Senate within 15 after House
Accumulation – staggered implementation
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Interaction with other FTAs
Other free trade agreements remain in effect
Other FTAs primarily at duty-free rate for travel goods but not footwear
Best FTA to use depends on:
• Specific goods
• Applicable rule of origin
• Sources for materials
• Duty phase out
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Footwear Rules of Origin
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Two Options for All Footwear
Both options require uppers to be formed within TPP
1) A change from any other chapter; or
2) A change from any other heading, except from heading 64.01 through 64.05, subheading 6406.10 or assemblies of uppers of subheading 6406.90, provided there is a regional value content of not less than: (a) 45 per cent under the build-up method; or (b) 55 per cent under the build-down method.
Footwear Rules of Origin
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Option 2 permits foreign:
• Outer soles and heels, of rubber or plastics
• Footwear parts other than uppers, parts of uppers, assemblies of uppers
Footwear Rules of Origin
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Built up method = add up value of originating materials
Build down method = subtract value of non-originating materials
Travel Goods
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• Luggage
•Briefcases
•Backpacks
•Handbags
• Tote bags
• Sports bags
•Wallets
• Etc.
Travel Goods Rules of Origin
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Substantial Transformation
•Non-textile Travel Goods – A change from any other chapter
• Textile Travel Goods – cutting & assembly
Rules of Origin
Direct Shipment – customs custody in non-TPP Parties
Permits outside TPP Parties: unloading; reloading; separation from a bulk shipment; storing; labelling or marking required by the importing Party; or any other operation necessary to preserve it in good condition or to transport the good to the territory of the importing Party
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US Market Access Baskets for Footwear
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US Phase Out Basket
Tariff Elimination Day 1
Intermediate Elimination
Free
EIF Free NA NA
B5 20% off20% off January 1
each yearJanuary 1 year 5
B7 14.29% off14.29% off January
1 each yearJanuary 1 year 7
US1 40% off5% off in years 4
and 5January 1 year 12
US2 50% off NA January 1 year 12
US3 55% off NA January 1 year 12
US4 None25% off in years 9
through 12January 1 year 12
US Market Access
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If duty phase out is not identical for all TPP countries for a product• First assess if goods qualify for TPP using the product specific
rules of origin• Second use the “tariff differential” rules to determine which
country’s duty rate applies• Similar concept as NAFTA marking rules• Various options
US Market Access
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Tariff Differential Country Options Include:• Wholly obtained• Entirely produced• Tariff differential tariff shift rule• Highest rate
Value of Footwear Potentially Immediately Free into US From New FTA Partners*
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2014 Value When Free Percent Trade
$1,381,723,254 Immediately 38.87%
$58,607,206 January 1 Year 5 1.65%
$59,716,931 January 1 Year 7 1.68%
$2,054,434,006 January 1 Year 12 57.8%
*Assuming all footwear would qualify
Rank by Value
2014 Value HTSUS Description MFNRate
5 $390,937,541 64041190athletic footwear outer sole rubber/plastics,
textile upper, > $12/pair20%
7 $254,908,291 64029931outer soles & uppers rubber/plastics, below
ankle, > 90% external surface upperrubber/plastics
6%
9 $117,934,500 64041181athletic footwear outer soles rubber/plastics,
veg fiber upper, $6.51 to $12/pair90¢ + 20%
10 $111,784,695 64041189athletic footwear outer soles rubber/plastics,
man-made fiber upper, $6.51 to $12/pair90¢ + 20%
11 $81,511,012 64021990Sports footwear outer soles & uppers
rubber/plastics, > $12/pair9%
High Volume Footwear Immediately Free Into US From New FTA Partners*
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*Assuming footwear would qualify
Footwear Market Access Into All TPP Countries
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Australia – up to Jan 1 year 4
Brunei – up to Jan 1 year 7
Canada – up to Jan 1 year 12
Chile - up to Jan 1 year 4
Japan – up to April 1 year 16
Malaysia – day 1
Footwear Market Access Into All TPP Countries
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Mexico – up to Jan 1 year 13
New Zealand – up to Jan 1 year 5
Peru – up to Jan 1 year 16
Singapore – day 1
United States – up to Jan 1 year 12
Vietnam – day 1
US Market Access Baskets for Travel Goods
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US Phase Out Basket
Tariff Elimination Day 1
Intermediate Elimination
Free
EIF Free NA NA
B5 (JP, MX non-textile)
20% off20% off January 1
each yearJanuary 1 year 5
B6 (PE non-textile)
16.67%16.67% off January
1 each yearJanuary 1 year 6
All textile travel goods are duty free on day 1
Value of Travel Goods Potentially Immediately Free into US From New FTA Partners*
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2014 Value When Free Percent Trade
$893,554,316 Immediately 99.99%
$62,240 January 1 Year 5 0.01%
*Assuming all travel goods would qualify
High Volume Travel goods Immediately Free Into US From New FTA Partners*
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Rank by Value
2014 Value HTSUS Description MFNRate
1 $ 248,539,616 42029230 mmf tote and sports bags and backpacks 17.6%
2 $ 180,856,233 42029100 Leather sport and golf bags 4.5%
3 $ 93,093,055 42022190 Leather handbags valued over $20 9%
4 $ 71,052,498 42029245 Plastic tote and sports bags 20%
5 $ 59,851,140 42022215 Plastic handbags 16%
*Assuming travel goods would qualify
Travel Goods Market Access Into All TPP Countries
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Australia – day 1
Brunei – day 1
Canada – day 1
Chile - day 1
Japan – up to April 1 year 11
Malaysia – day 1
Travel Goods Market Access Into All TPP Countries
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Mexico – up to Jan 1 year 10
New Zealand – day 1
Peru – up to Jan 1 year 6
Singapore – day 1
United States – up to Jan 1 year 6
Vietnam – up to Jan 1 year 4
Leather Footwear into Japan
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• Japan to eliminate its quota for TPP originating leather footwear
• Tariff elimination will eventually go to zero
Goods HTS When Free
Footwear with leather uppers
6403* April 1, year 11
Footwear with leather sole and textile uppers
6404* April 1, year 11
Other footwear 6405* April 1, year 11
*Some goods within these headings, not subject to the Japan TRQ, have different market access schedules.
Additional Savings
• US ad valorem Merchandise Processing Fees waived for
qualifying goods
• Effective 3 years after implementation
• All other US FTAs exempt MPF except Jordan and Morocco
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Documentation
Self certification Importer, exporter, producerBrunei, Malaysia, Mexico, Peru & Vietnam have 5 year
transition period to allow importer certificationFree form
Recordkeeping – 5 years
Post entry claims 1 yearLonger if domestic law permits
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Questions?
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Elise [email protected]