What: A discussion of the fundamentals of nearshoring and its future in the apparel industry

Why it is important: The industry trend will decrease the supply chain risk and increase efforts in sustainable practices.

Nearshoring, the manufacturing of apparel in Canada, the US, Mexico, and Central America, is proven to be a favourable strategic plan for many companies. In addition to sustainability, the Covid-19 pandemic revealed flaws in the supply chain because of inventory being stranded on the other side of the world and the need for proximity.

There has been USD 2 billion of new investment in the United States and Central America significantly in the production of yarn, fabric, textiles, and apparel products. The “yarn forward” rule indicates that if a garment is produced in one of the included NAFTA countries, for example, Guatemala, then the yarn, fabric, cutting, and sewing also needs to happen in the region. The rules of origin will drive investments as close-by suppliers are appealing to brands and retailers.

There are still many businesses that benefit from trade agreement loopholes such as the “de minimis” rule where brands and retailers outside the North American region can sell and ship directly to customers without paying tariffs on items that cost less than USD 800.

Consumer preferences are a nudge for companies to evaluate their sourcing decisions and evade the risk of supply chain disruptions, human rights concerns, and environmental awareness.

Nearshoring: Driving sustainable growth