Wednesday saw the introduction of a highly-anticipated bipartisan bill aimed at harnessing economic potential across North, Central and South America—and it includes billions of dollars in incentives for circular fashion.
The Americas Act, formally introduced by Senators Michael Bennet (D-Co.) and Bill Cassidy (R-La.), would “establish a regional trade, investment, and people-to-people partnership of countries in the Western Hemisphere to stimulate growth and integration through viable long-term private sector development.”
First teased in draft form last January, the sweeping legislation looks to facilitate the onshoring and reshoring of critical industries while supporting free-trade agreement expansion. It also contains provisions related to enforcement of the Uyghur Forced Labor Prevention Act (UFLPA) and de minimis reform.
Beyond these significant objectives, the bill contains an unprecedented $14 billion in incentives to accelerate domestic circularity and innovation for apparel, footwear, accessories and home textiles. Such business models include reuse, repair, rental, recycling and activities that support those efforts, from collection and sortation of post-consumer goods to technology and reverse logistics.
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Section 232 of the bill, entitled “Textile Reuse and Recycling Programs,” includes a 15 percent net income tax exclusion for businesses engaged in any of these activities. It contains $10 billion in loans and $3 billion in grants for programs that carry out reuse and recycling, along with support for those that erect, expand or retrofit manufacturing facilities or provide low-carbon transportation for product collection and drop-off.
Funding is also available in grant or loan form to businesses that provide the inputs, like chemicals, solvents and machinery necessary for transporting, collecting, mailing back, sorting and pre-processing textile products. An additional $1 billion is allocated for research and development related to textile reuse and recycling, while $100 million is earmarked to fund public education.
The American Circular Textiles (ACT) coalition, made up of over a dozen fashion brands, recycling bodies and rental and resale pioneers, worked closely with Senators Bennet and Cassidy to develop Section 232. Rachel Kibbe, CEO of circularity consultancy Circular Services Group and executive director of ACT, said the language was carefully crafted to encompass a broad scope of businesses related to textile circularity, ensuring that any group engaged in advancing the bill’s goals can access its benefits.
ACT pushed for an incentive-based structure rather than the implementation of regulations that would force compliance or institute penalties. “We are an industry group and we wrote this with the industry in mind. It’s not a regulatory bill, so it shouldn’t be fear-inducing,” she told Sourcing Journal. The group has incorporated feedback from across the sector, as well as other trade organizations, into the bill’s verbiage. “We want this to be beneficial for businesses,” she added.
ACT pulled from precedents set by the renewable energy and transportation sectors, which have received both tax breaks and incentives in order to accelerate innovation and drive economies of scale for the past two decades. The coalition first engaged with Congress on the issue of textile circularity in Q1 of 2023. “We spent the whole quarter writing a public policy paper specifically around the issue at hand in the United States with textile waste, and the corresponding opportunity in certain policy levers that could help start to change things,” Kibbe said.
Policymakers had to be brought up to speed on the industry’s current circularity efforts and capabilities, as well as areas of potential. “Reuse, repair and rental are such key tools” in the industry’s fight against waste, and channels that make it possible to facilitate these solutions exist on a commercial scale. Encouraging consumers to engage more with resale, rental and repair through education is a key focus of the law, Kibbe said. By contrast, textile-to-textile recycling remains in its early stages, and will require more time and investment to advance.
A notable provision of the Americas Act is the establishment of a Reshoring and Nearshoring Account controlled by the Secretary of the Treasury, to be funded in part by revenue from de minimis entry. “It creates reciprocity for de minimis and takes those funds and uses them to bolster the economy of the Western hemisphere,” Kibbe said. The funding will go toward strengthening a number of industries within the U.S. and beyond, with the goal of developing infrastructure and creating jobs.
According to Kibbe, the success of the legislation will depend on the buy-in of constituents and consumers. “We can’t sit back” now that the bill has been written, she said, because “90 percent of the battle is public advocacy.” That’s why $100 million is allocated to educational outreach.
“It’s going to be a process that is worked on together as an industry, and across multiple industries,” she said. “It’s going to be full of compromises, as all policy is. But the best thing we can have is consumers saying ‘We want to shop secondhand, we want to shop recycled content, and we want clothes that are made in America—and we are willing to spend money on that.’”
Alon Rotem, chief legal officer for online resale marketplace and ACT coalition member ThredUp, said that with the Americas Act, “policymakers are contemplating circular textiles in federal legislation for the first time, signaling that they’re finally starting to understand the powerful role public sector support can play in lessening fashion’s environmental impact.”
“There is a long history of government action to curb pollutive industries—from plastic bags to electric vehicles—and we believe circular fashion should be the next frontier in sustainable policy,” Rotem added. “We are proud of the work we’re doing to engage policymakers through the American Circular Textiles group, and until fashion is no longer one of the most damaging sectors of the global economy, we will continue to advocate for the government to provide resources that make fashion and textile industries more sustainable and planet-friendly, like the Americas Act.”
Jessica Fortier, senior vice president of operations for The RealReal, told Sourcing Journal that the bill is “a tremendous step in the right direction” despite being in its first draft, with much more work likely to come. “Not only will this bill promote textile reuse and recycling in the U.S., but it will help hold fashion brands with non-sustainable business practices accountable,” she said.
“Resale is a readily available, turnkey solution to combating the fashion waste crisis, and one of things we hope to achieve from this bill is helping more luxury retailers grow their circular footprint,” Fortier added.
The Americas Act “would no doubt be a catalyst for the industry to reduce its overall carbon footprint,” Gayle Tait, CEO of resale technology platform Trove, said Tuesday. The secondary market for apparel products has the potential to lower emissions by up to 16 percent by 2040 if it continues on its current trajectory, the company’s research showed. Trove powers branded resale for labels like Carhartt, Filson, Brooks, Canada Goose, Patagonia, Lululemon and REI.
“For successful resale programs processing millions of items per year, efficiency must be incorporated into every touchpoint of the logistics chain. Decreasing the number of physical touchpoints in this chain benefits resale programs,” Tait said. “The Americas Act has great potential to shorten our supply chains by bringing logistics and labor closer to home, thus improving our overall environmental footprint.”
Even without the benefit of government incentives, the corporate interest in resale is booming. The company last year announced its expansion across the U.S. and Canada with five re-commerce partner facilities. “The move to partner with a growing network of third-party logistics providers was necessary to support the growing volume of Trove’s partners’ resale programs,” the CEO added.
Scaling the logistics to power growing resale operations will be essential to supporting the sector’s growth. “Should The Americas Act pass, logistics providers across the Americas would need to be ready for a large influx of volume to support resale programs, and to do so with technology to manage at scale,” she said.
Kathleen Talbot, chief sustainability officer and vice president of operations for Reformation, said the California women’s wear brand is in favor of the Americas Act. “The future of fashion must be circular so we can cut off our harmful dependence on virgin materials and the toxic cycle of waste the industry continues to perpetuate at a faster and faster clip,” she said.
Reformation got its start sourcing deadstock fabrics for its dresses and separates, and still sources some reclaimed materials to support its business.
Much of the company’s manufacturing takes place in Downtown, Los Angeles, and the legislation stands to have an impact on its circularity initiatives. “It’s encouraging to see lawmakers begin to incorporate incentives for circular practices into federal legislation,” Talbot said. “Regulation and standardization of practices across the fashion ecosystem will be critical to driving progress and widespread adoption of circularity.”
“It is incredibly exciting to see textile circularity get the attention it deserves in policy,” echoed Shannon Parker, director of industry engagement and impact strategy at Virginia-based textile-to-textile recycling firm Circ.
“Scaling chemical recycling infrastructure takes significant investment,” she added. “Government incentives, such as those we see outlined in the bill, serve as a catalyst for further investment in innovations like Circ and accelerate our ability to make a positive environmental impact through recycling.”
Seattle-based cotton waste recycler and ACT member Evrnu also rallied behind the bill. “The United States is the largest exporter of fashion waste worldwide, accounting for about 10 percent of global carbon emissions,” CEO Stacy Flynn said, noting that the company is “dedicated to reducing this impact and actively support circular textile policies that will address the negative environmental impact of linear textile production.”
“We believe that this legislation will help enable fashion’s circular economy and aid in the development of textile reuse and recycling, in addition to supporting Western manufacturing competitiveness,” she added.