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Apparel Import Program for Dominican Republic to Expire Dec. 1

Tuesday, August 14, 2018
Sandler, Travis & Rosenberg Trade Report

The Dominican Republic Earned Import Allowance Program is scheduled to expire Dec. 1 after being in effect for ten years. The Department of Commerce states that entries of qualifying apparel after Dec. 1 may no longer use allowances to qualify for duty-free treatment under this program.

The so-called DR 2-for-1 program 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 DR 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 DR, 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 in the DR using third-country fabric.

The International Trade Commission recently reported that activity under the program fell precipitously for the second straight year in 2017. This decline was attributed to increased imports from Haiti, which offers lower labor costs and trade preferences under the HOPE/HELP programs; increased competition from other Western Hemisphere suppliers; a significant drop in woven trouser manufacturing capacity in the DR; a shift by U.S. importers to Asian suppliers; and uncertainty surrounding the program’s renewal.

Industry and other sources have recommended improving the program by lowering the 2:1 ratio of U.S. to foreign fabric to 1:1, expanding the program to include other types of fabrics and apparel items, and allowing U.S. qualifying greige fabrics to be dyed and finished outside the U.S.

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