Bahrain's textile industry which exports $200 million worth of goods to the US has got a temporary respite with the extension of a key clause under the 10-year-old US-Bahrain Free Trade Agreement (FTA).

Garment firm MRS Fashions' executive director Harinder Lamba told the Gulf Daily News (GDN), our sister newspaper yesterday (January 10) that the US government has issued a notice correcting the date of termination of the 'tariff preference level' (TPL) in its record.

The Federal Register Notice (FRN) issued on December 30 last year amends the previously incorrect expiration date of the US-Bahrain FTA TPL, he said.

Before, the expiration date had been listed as December 31 this year, but the industry's representatives from Bahrain have succeeded in convincing the US authorities that the date was incorrect since the programme was not initiated until August 2006, and therefore the 10-year programme should be set to expire on July 31, next year and not December 31 this year.

Lamba, however, said this was not a new benefit and the TPL needed to be extended for an additional 10 years for Bahrain-based textile manufacturers to remain viable.

The US-Bahrain FTA contains the 'yarn forward' rule of origin, limiting allowances for the use of yarn and fabric from a third-party.

The rule was suspended for the first 10 years of the FTA with the TPL set at a level of 65 million square metres equivalent.

This allowed companies like MRS, WestPoint Bahrain, Ambattur Clothing International and Noble Garments Factory to use raw materials imported from countries that are not signatories to the US-Bahrain FTA, but still export their products to the US duty-free.

After the TPL expires, all trade under the Bahrain FTA must adhere to the yarn forward rule.

This means that the four Bahrain-based textile exporters will no longer be able to export their products to the US duty-free unless they can prove that all the constituent parts 'from the yarn to the fabric to the thread' are made by either the US or Bahrain, Mr Lamba said.

The industry has been using the offices of American Chamber of Commerce Bahrain (AmCham Bahrain) to convince the US Congress to extend the TPL in Bahrain through July 31, 2026, he said.

'Full support of the Bahraini government and private sector is needed as legislation will have to be passed by the US Congress.'

MRS, Ambattur and Noble, all apparel manufacturers and WestPoint Bahrain, a home furnishing manufacturer, together are believed to employ around 6,200 people.

The firms, he said, will be forced to leave Bahrain if the tax-exempt status is not continued making the business 'completely uncompetitive'.

'We will be unable to match the prices set by factories in India, China, Vietnam and Bangladesh, because the labour costs in Bahrain are too high,' Lamba said.

'We recently hosted a visiting American Jewish Committee (AJC) delegation to highlight how companies have successfully used the FTA to their benefit,' he said.

'They were very impressed with what is manufactured here in Bahrain and how Bahrain supports job creation and growth both in Bahrain and the US.' – TradeArabia News Service