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Imports Under Dominican Republic Apparel Program See Major Drop

Tuesday, August 07, 2018
Sandler, Travis & Rosenberg Trade Report

Nine years after its implementation, the Earned Import Allowance Program is still not providing enough incentives to substantially boost apparel exports from the Dominican Republic to the U.S. market, the International Trade Commission found in a recent annual report.

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 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 ITC reports that activity under the EIAP fell precipitously for the second straight year in 2017. U.S. imports of woven cotton bottoms from the DR tumbled 57 percent by value to $1.5 million (following a 57 percent fall a year earlier) and 80 percent by quantity to 154,000 square meter equivalents (following a 61 percent decline a year earlier). These declines were attributed to increased imports from Haiti, which offers lower labor costs and trade preferences under the HOPE/HELP programs, as well as increased competition from other Western Hemisphere suppliers. Additionally, the report states, the decline likely reflects a significant drop in woven trouser manufacturing capacity in the DR along with a simultaneous shift by U.S. importers to Asian suppliers during the life of the program. Finally, uncertainty surrounding the program’s renewal after its expiration on Dec. 1, 2018, may also explain why U.S. imports of woven cotton bottoms reached their lowest level under the program in 2017.

The recommendations for improving the EIAP that were submitted by industry and other sources this year were virtually the same as those received during previous annual reviews, the ITC states: 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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