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Performance of U.S. Program Aiding Dominican Apparel Exports Continues to Worsen

Wednesday, July 30, 2014
Sandler, Travis & Rosenberg Trade Report

Five years after its implementation, the Earned Import Allowance Program is still not providing enough incentives to help reverse the decline in Dominican apparel exports to the U.S. market, the International Trade Commission found in an annual report issued July 25.

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The EIAP provides an uncapped duty-free benefit for U.S. imports of certain woven cotton bottoms (pants and trousers, bib and brace overalls, breeches and shorts, and skirts and divided skirts) assembled in the Dominican Republic from third-country fabric. To qualify, the bottoms must be accompanied by a certificate documenting the purchase of certain U.S.-produced woven cotton fabric at a ratio of 2:1. Under this formula, for every two units of qualifying “wholly formed” fabric (defined as formed in the U.S. from U.S.-formed yarns) purchased for apparel production in the Dominican Republic, a one-unit credit is received that can be used toward the duty-free importation of apparel into the U.S. that has been manufactured using third-country fabric.

The ITC reports that utilization of the EIAP continued to decline in 2013. Only five of 12 firms registered to participate are currently using the program, down from seven in 2012. In addition, from 2012 to 2013 U.S. imports of woven cotton bottoms from the Dominican Republic plummeted 76 percent (after a 50 percent drop a year earlier) and U.S. exports to the DR of cotton fabrics of a weight suitable for making bottoms fell 25 percent, the second straight year of decline after steady growth from 2008 through 2011.

The recommendations for improving the EIAP that were submitted by industry and other sources were the same as those received during the previous four annual reviews, the ITC states: lowering the 2-for-1 ratio of U.S. to foreign fabric to a 1-for-1 ratio, expanding the program to include other types of fabrics and apparel items, and changing the requirement that dyeing and finishing of eligible fabrics occur in the United States.

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