DUTY FREE SOURCING AND

AMERICAN TRADE

PREFERENCE PROGRAMSOpportunities and Challenges

OVERVIEW OF TEXTILES AND APPAREL Total American Imports of

Textiles & Apparel: $107. 4 billion (2014)

Approximately - $82 Billion in Apparel - $25 Billion in Textiles

Growth in textile and apparel imports between 2013 and 2014: 2.6%

A growth of $2.7 billion Current environment presents opportunity

for investment2008 2010 2012 2014 2015

93.1 93.3

100.9

107.4110.4

Total U.S. Textiles & Apparel Imports by

year ($billions)

CURRENT TEXTILES AND APPAREL IMPORTS

China Vietnam CAFTA India NAFTA Indonesia Bangladesh AGOA+QIZ+ HELP & HOPE

0

5

10

15

20

25

30

35

40

45 Approx. Imports in $billions (2014)

$5 Billion

$2.9 Billion

$6 Billion

$1.5 Billion

$10 Billion

$41 Billion

$6.7 Billion $8.2 Billion

$5.1 Billion

• Currently $2.9 Billion come from AGOA, QIZ, and HELP & HOPE programs

• Represents big growth potential for duty-free sourcing

$6.2 billion

$1.2 billion $840 Million $930 Million $750 million $750 Million $435 Million

- Duties paid- Duties Saved

SIGNIFICANT OPPORTUNITIES IN TRADE PREFERENCE PROGRAMS

3 Long-term Strategies for Apparel Haiti HELP and HOPE Programs Egypt-Israel QIZ Program AGOA (African Growth and

Opportunity Act)

Provide potential duty-free sourcing, often using 3rd country inputs

PREFERENCE PROGRAM UTILIZATION

AGOA+QIZ+HELP & HOPE3%

Other17%

China40%

Vietnam10%

Bangladesh5%

Indonesia5%

India6%

CAFTA-DR8%

NAFTA6%• Preference programs

combined exports to US: • Growth of 23% from

2009 to 2014

2014 US Market Share

AGOA: 10 year renewal (to 2025) with 3rd party sourcing

Haiti HELP & HOPE II: 5 year extension to 2025

QIZ: does not expire, recently expanded

Renewal, Extension and Expansion of Duty-Free

Sourcing

Preference Programs: Not a World Away

HAITI – HOPE II & HELP

The HOPE II and HELP programs extended until 2025

Maintain enhanced access to the American market

Renewed opportunity for growth and investment

HAITI – HOPE II & HELP

$854.3 million total U.S. imports in 2014 (includes CBTPA)

8% increase 2013-2014 12% increase 2014-2015 (YTD) 60% increase in Haitian textile and

apparel imports since 2010 Haiti’s share of U.S. clothing imports

are up 25% since 2009. Textiles and apparel now account for

90% of Haitian exports and nearly one-tenth of GDP

HAITI’S GROWING COMPETITIVE ADVANTAGES

Proximity of Haiti to the American market is a major benefit for both producers and consumers

Reduction of shipping costs Quick turn around from production to the market to meet consumer

needs A growing competitive advantage

A growth in foreign direct investment in recent years. Tax benefits Benefits of 3rd party sourcing Competitive labor costs

THE HAITIAN OPPORTUNITYHOPE- HELP- CBTPA

Presented by Mark D’Sa – US Department of State

WHAT’S AVAILABLE IN HAITI ?

HOPE Woven 200,000,000

HOPE Knit 200,000,000

HOPE Value Add 332,915,916

CBTPA Knit 970,000,000

CBTPA T Shirt 72,000,000

Total 1,774,915,916

Available TPLs (SMEs)

Exports are

growing at

15.5% per year Jobs are growing at

11.3 % per yearSME utilization is growing at an average of 6.78% annually

Based on the last five years

TEE SHIRTS, JEANS, WORK WEAR,PERFORMANCE KNITS, UNDERWEAR, WOOLEN SUITS, OVERCOATS, CHILDREN’S WEAR, SCRUBSJust some of the products “MADE IN HAITI”

THE NUMBERS BEHIND THE PROGRESS

Category 2010 2011 2012 2013 2014Year Ending

Aug-15

Total US Export (US $$) 517,569,303 701,475,798 730,050,515 803,337,058 854,286,569 904,725,306

Total SMEs Exported/Utilized 253,059,766 275,627,575 270,374,140 306,440,449 313,930,534 335,151,576

Apparel Industry Jobs 27,144 26,835 29,404 31,462 36,350 40,904

USD Exports per job $ 19,067.5 $ 26,140.3 $ 24,828.3 $ 25,533.6 $ 23,501.7 $ 22,118.3

SME Utilization / Job 9,322.86 10,271.20 9,195.15 9,740.02 8,636.33 8,193.61

Change in SME utilization/yr 0 8.92% -1.91% 13.34% 2.44% 6.76%

Change in Jobs0 -1.14% 9.57% 7.00% 15.54% 30.01%

Change in Exports0.00% 35.53% 4.07% 10.04% 6.34% 12.62%

THANK YOUQuestions / Queries to DSAMC@STATE.GOV

QIZ: QUALIFYING INDUSTRIAL ZONEEGYPT-ISRAEL

Allows Egypt to export products to the United States duty-free Products must contain inputs

from Israel.

Never expires 

QIZ RULES OF ORIGIN

Eligibility: QIZ factories must meet a regional value content of 35%.

Can include inputs from Israel, Egypt, and the United States.

Israel’s contribution must be at least 10.5% of the content requirement.

QUALIFYING INDUSTRIAL ZONES

Since its inception, the QIZ program has continued to expand  

In total, the program now encompasses 15 designated zones

QIZ EXPORTS

Egyptian textile and apparel production have provided an important source of exports to the U.S.

Egyptian operations and trade have continued throughout periods of unrest

2014

2013

2012

2011

2010

2009

Egypt’s Textiles and Apparel Exports Value To U.S.

$ Export Value

Arab Spring

QIZ Your Duty Free Gateway

to the US MarketSourcing Journal Summit NYC 2015

Gabby BarIsraeli Co-Chairman of QIZ committee

Ministry Of Economy

What is QIZ?

• A QIZ is an area in Egypt, that was designated by the United States, from which goods can be exported duty free and quota free to the United States.

• In order to enter the US duty free and quota free, these goods must meet the QIZ Agreement criteria and must be approved by the QIZ Committee.

“Win.Win.Win”• For the U.S:

(a) An unlimited term agreement

(b) Allows unlimited textile and apparel imports to USA, duty free

(c) Access to highly professional, experienced and skilled

Egyptian suppliers

(d) Diversifies the sources of imports into the U.S

“Win Win Win”

• For Israel: “Opens” new markets for Israeli export

• For Egypt: Improves competitiveness of their exports to the U.S

• Joint objective: To enhance business and industrial cooperation

and to increase bilateral trade between Egypt and Israel, thus

contributing to the bilateral cooperation and peace!

QIZ Rules of Compliance

The final products must undergo substantial transformation

Other inputs- Direct & Indirect, Local & Foreign origin

65.0%

Israeli direct inputs10.5%

Egyptian direct inputs

24.5%*

The Final Product

11.7% Minimum Egyptian inputs

*Up to 15% can also be sourced from the U.S.

Israeli IndustryAdvanced Technology and Materials!

Fabrics

Zippers

Chemicals

Interlining

Elastics

Labels

Threads

Hangers

Packaging

Washing Materials

Yarn

THANK YOU FOR LISTENING!

תודה רבהشكرا

BY THE NUMBERS

Land Area1 Million KM2

12 Day Shipping

90 Million People-------------

Labor Force

27 Million

$286 Billion

More than 1,500 Garment Factories

Total Garment Industry Output

$3.2 BillionTextile & Garment Workers

1,500,000

56%% of Garment Production

Exported to the U.S.

Over 30 Years of Garment Export Experience

EGYPT & GARMENT INDUSTRY FACTS

Q.I.Z. Stats• Duty Free• No Expiration• No Fabric Restriction• Stress Tested & Passed!• Nearly $7.5 Billion in Total QIZ Exports• Est. $900 MM in 2015 Exports• Over 700 Certified QIZ Factories• 15 Designated Zones• New Zones being added• Flexibility in Israeli component use

What’s in it for You!

Experienced Managers and Supervisors

Quality Control

15 Commercial Ports• High Compliance Standards• Multiple Ports• Competitive Pricing• Air Cargo Service• Lead time 75 to 120 days• Qualified Production Personnel• Quality Control• Laundry Experts• Training Institutes• University Degrees in Textiles• Banks : Trade Facilitation• Customs Officials• Sales & Merchandising• Experienced Machine Operators• Product Diversity• Product Development• Garment Export Council

Vision For the FutureEgypt to become the leading exporting MENA country in the Textiles industry, focusing

on high and medium value added products catering to the world’s largest retailers and manufacturers with reliable and agile delivery.

V. Strategic Objectives Creation of 1 Million New Job Opportunity Train 750,000 Workers, Supervisors and Managers Increase exports to achieve USD 10 Billion Attract local and Foreign Investments of USD 13.5 Billion Increase the Value-Added to 70% of locally manufactured raw materials

VI. Strategic Focus Expanding the Industrial Base through Developing and Enhancing the

Competitiveness of local industry Backward Vertical Integration of Industry, promoting investments into primary

textiles and fiber production Foster Export’s growth and market entry Focus on Human Capital Development Reform of Government policy

Thank You

AGOA: OPPORTUNITIES AND POTENTIAL

• Renewal: 10 years (to 2025) with 3rd party sourcing benefits

AFRICA: A HUGE AND DIVERSE OPPORTUNITY

• Sub-Saharan Africa Pop.:• 800 Million (approx.)• Pop. Growth: 2.3%

• Economic Growth: • 4.7% per annum• Global GDP Avg: 2.4%

• Continued growth + duty free access to American/EU markets

• well positioned to provide duty-free sourcing opportunities

AGOA ELIGIBILITY• 41 AGOA participant-

nations 26 qualified for textile and apparel benefits

*South Africa does not qualify as an LDBC and is ineligible for 3rd party fabric provision

• Benin• Botswana• Burkina Faso• Cameroon• Cape Verde• Chad• Cote d'Ivoire• Ethiopia• Ghana• Kenya• Lesotho• Liberia• Madagascar

• Malawi• Mauritius• Mozambique• Namibia• Niger• Nigeria• Rwanda• Senegal• Sierra Leone• South Africa*• Tanzania• Uganda• Zambia

AGOA Apparel Provision:Qualifying Countries

AGOA ELIGIBILITY AGOA textile and apparel

benefits: Eligibility based upon progress in:

Market-based economies The rule of law Barriers to U.S. trade and investment Corruption Poverty Education Human rights Labor rights

Eligibility is reviewed on a yearly basis.

RULES OF ORIGIN

Certain apparel allowed to enter the U.S. duty-free provided one of the following rules

is met: Apparel made of U.S. yarns and fabrics Apparel made of U.S. fabrics and/or knit-to-shape components,

from U.S. yarns and sewing thread Apparel made of regional sub-Saharan Africa (SSA) yarns and

fabrics (subject to a cap) Apparel made in a designated SSA lesser-developed beneficiary

country (LDBC) of third-country (China, Pakistan India, etc.) yarns and fabrics (subject to a cap)

Items containing less than 10% 3rd party fabrics that are otherwise eligible (de minimis rule)

SHORT SUPPLY LISTQualification for short supply:1) Yarns and fabrics designated as ‘not

available’ in commercial quantities in the U.S.2) Yarns and fabrics considered in short supply

in NAFTA Short supply items can be sourced from

anywhere and qualify as duty-free Not subject to a cap or de minimis rule

US IMPORTS THROUGH AGOA (2014)

Top 10 African textile-apparel exporters to the American market (Approx. 2014):

1) Kenya - $380 million 2) Lesotho - $290 million 3) Mauritius - $223 million 4) Swaziland - $55 million

5) √ Madagascar - $20 million 6) South Africa - $18 million 7) Tanzania - $17 million 8) Ethiopia - $12 million 9) Botswana - $9 million 10) Malawi - $4 million Total African Exports0

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

$802,968,443

Total AGOA Textile-Apparel Exports to U.S. Market

2010 2011 2012 2013 2014

$1,035,857,859

US IMPORTS THROUGH AGOA (2014)

Valuable import items: Men’s/boys’ woven cotton trousers ($166,081,359)

Lesotho, Kenya, Mauritius

Men’s/boys’ woven cotton shirts ($148,078,693) Kenya, Mauritius, Ethiopia

Manmade fiber sweaters ($97,870,263) Lesotho, Kenya, Malawi

Women’s/girls’ woven cotton trousers ($94,570,113) Kenya, Lesotho, Mauritius

Women’s/girls’ knit synthetic fiber trousers ($83,335,904)

Lesotho, Kenya, Mauritius

THE FUTURE OF AGOA

Problem: AGOA has been underutilized Only 4 countries achieved a per capita value >$10 for

non-energy AGOA exports Mauritius, Lesotho, Swaziland, South Africa

The countries that focused on textile and apparel production have benefitted the most

GROWING AGOA Multiple Market Access

Duty free access to the US and EU markets AGOA Competitive Advantages

Target high duty rate items Leverage existing production

Only scratched the surface of what is possible

OVERVIEW 3 great opportunities for duty free

sourcing Flexibility in 3rd country inputs

Full range of products A growing presence in the US market 10 years or more to capitalize on these

investments and strategies

Gail W. StricklerAssistant United States Trade Representative for Textiles and Apparel

For further contact: stricklergw@gmail.com+1-202-290-7454

www.ustr.gov

Mark D’SaUnited States Department of StateContact: DSAMC@STATE.GOV

Gabi BarIsraeli Co-Chairman of QIZ committee

Ministry Of EconomyContact: Gabi.BarBachar@economy.gov.il

Waleed El-ZorbaChairman of Nile Clothing Company

Contact: wzorba@gmail.com

Hon. Joshua SetipaMinister of Trade and Investment

Government of LesothoContact: jsetipa@gmail.com

Karla MagruderFabrikology International

Contact: karla@fabrikology.com