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Earned Import Program for Haitian Apparel Still Underutilized, GAO Reports

Friday, December 02, 2011
Sandler, Travis & Rosenberg Trade Report

The Government Accountability Office reported this week that the Earned Import Allowance Program created to aid the apparel industry in Haiti continues to be underutilized because Haitian exporters prefer to use other trade preferences to ship apparel to the U.S. market. Under the EIAP, for every two square-meter equivalents of U.S. or other qualifying fabric a firm imports into Haiti it earns a credit to export one SME of apparel produced in Haiti to the U.S., duty-free, regardless of the fabric’s source.

The report states that this year, for the first time since the program was established in 2008, one company has opted to use the EIAP to export apparel from Haiti to the U.S. The value of these exports, about $350,000, represents 0.2% of total apparel exports under the HOPE II law and only 0.07% of total apparel exports from Haiti to the U.S. under all preference programs based on year-to-date data as of August 2011. Three other companies have established EIAP accounts, but not all of these accounts are being used to earn credits, and those with credits have not used them to export apparel from Haiti to the U.S.

GAO attributes the modest level of EIAP use to the availability of other HOPE II provisions that are simpler and more advantageous because firms can import most types of apparel duty-free, regardless of the fabric’s source, without being required to purchase any kind of qualifying inputs or register for a program. Apparel producers said they do not expect EIAP participation to increase significantly unless certain provisions of HOPE II and the Caribbean Basin Trade Partnership Act, which are subject to volume caps, begin to approach their limit.

The report notes that apparel exports under other HOPE and HOPE II provisions have increased substantially over the past five years and that CBPTA continues to be the most common trade preference used to export Haitian apparel to the U.S. Exports under HOPE and subsequently HOPE II grew steadily from $13.7 million in 2007 to almost $160 million in 2010 and were about $140 million from January to August 2011. Exports under CBPTA were even higher, reaching more than $313 million for the first eight months of 2011 and accounting for more than two-thirds of the value of all Haitian apparel exported to the U.S. According to GAO, CBTPA continues to be heavily used in part because of its treatment of men’s and boys’ T-shirts, the most common garments produced in Haiti and exported to the U.S. These items are specifically excluded from the knit tariff preference level under HOPE II, but CBTPA allows T-shirts to be assembled in Haiti with fabric produced in the Dominican Republic or other parts of the region made with U.S. yarns.

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