The Americas Act: Sparking fashion circularity, nearshoring, and the US economy

The Americas Trade and Investment Act (Americas Act) is the latest chapter in a global story trending toward sustainable fashion. Last December, the EU announced new financial incentives for clothing manufacturers to participate in sustainable practices.

Now, in the US, this proposed bipartisan bill, which faces a long and uncertain legislative path forward, follows suit with incentives designed to bolster local and regional investment in circular and sustainable textile manufacturing practices.

The Americas Act seeks a real-world impact on global businesses by capitalizing on the growing consumer demand for responsible and sustainable corporate practices.

Fashion, apparel, and textile companies are encouraged to keep apprised of this and further policy changes aimed at making the industry more sustainable.

The Americas Act

The Americas Act is the latest, and most notable, proposed bipartisan US legislative reaction to growing consumer demands for sustainability and environmentally responsible fashion.

Consumers increasingly support brands committed to circularity and ethical production practices, and the Americas Act may have the potential to significantly influence the textile industry's trajectory.

Framed as an ideological alternative method of global governance – grounded in sustainable and circular practices – the Americas Act likely presents a lucrative opportunity for US and foreign-based international companies providing consumer goods to the US market.

The Americas Act, if passed, could reshape the fashion industry in the US and across the Western Hemisphere. It would allocate $14 billion in new incentives for textile recycling and reuse development to bolster a domestic circular economy.

Key provisions

The Americas Act proposes remarkable opportunities for preexisting and prospective US and foreign-based players in the textile and apparel industry. Accompanying the lofty ambitions are robust grants and tax incentives that would become available for textile reuse and recycling programs.

Among the Americas Act’s stated goals are to:

• Bring textile and apparel investment back to the US and to Americas Partner countries (ie, countries in the Western Hemisphere that entered an agreement under the terms of the Americas Act)
• Create new jobs throughout the textile supply chain in the US and in Americas Partner countries
• Reward existing textile manufacturing enterprises in the Western Hemisphere
• Solidify the textile and apparel supply chain in the US and in Americas Partner countries, and
• Establish a textile reuse and recycling industry in the US to reduce demand for Chinese textiles, create viable alternatives to textiles that rely on forced labor, reduce the industry’s carbon footprint, and improve relevant environmental standards.

This proposed bipartisan bill, introduced by Senators Bill Cassidy (R-La.) and Michael Bennet (D-Colo.), aims to deliver 15 percent net income tax exclusion for circular businesses (including resale, repair, rental, fiber recycling, sorting, and reuse).

Its tax incentive program would allow companies to deduct income from foreign sales of certain textile fiber products from the US or Western Hemisphere or domestic sales of certain finished textile products from the Hemisphere. Companies would also be able to deduct a portion of income related to certain domestic textile production activities.

The Americas Act allocates over $14 billion in grants, including $10 billion in preferential loans, and $3 billion in grants for textile reuse and recycling, manufacturing support programs and components, and machinery to aid with product transportation and processing; $1 billion in innovation program research and development related to textile use and recycling; and $100 million for a public education program.

Key takeaways

The proposed Americas Act shows a potential federal path for promoting sustainability in the fashion industry, specifically by providing tax relief to responsible US and foreign-based international companies involved in the textiles supply chain. And it signals that Congress is likely paying attention to the sustainability initiatives occurring in Europe and elsewhere.

Given the increasing customer demand for sustainable fashion, and the considerable financial incentives the Act proposes, brands without sustainable practices may be increasingly left behind by those adapting to the changing marketplace.

Embracing textile recycling is a significant step toward achieving sustainability in the fashion industry. Many companies have already determined that circular practices are worth the investment.

However, long-term success may require a well-developed infrastructure supported by innovation, research and development, private capital investment, and continued consumer demand for responsible industry practices.

Companies also are encouraged to be aware of how they promote and otherwise convey their sustainability practices to consumers amid growing numbers of “greenwashing” and other similar false advertising class action claims.

Be it through the Americas Act or otherwise, it is likely well worth the time to review your sustainability practices given rising consumer demand, heightened federal interest, and increased class action litigation.

Please contact the authors for more information about the Americas Act.