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Imports, Exports Under Dominican Republic Apparel Program See Major Drop

Tuesday, October 03, 2017
Sandler, Travis & Rosenberg Trade Report

Eight 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 in 2016, marking the resumption of a steady decline since 2010 that was briefly interrupted in 2015. U.S. exports to the DR of cotton fabrics of a weight suitable for making bottoms tumbled 47 percent by value to $4.9 million and 52 percent by quantity to 1.5 million square meter equivalents, while U.S. imports of woven cotton bottoms from the DR fell 57 percent by value to $3.5 million and 61 percent by quantity to 745,000 SMEs. These declines were attributed to (1) increased competition from other Western Hemisphere suppliers, particularly Mexico and Nicaragua, which offer well-established supply chains, high-level skills, and trade preferences under NAFTA or CAFTA-DR; and (2) increased imports from Haiti, which offers trade preferences under the HELP/HOPE programs that provide more sourcing flexibility and coverage for a wider range of products than the EIAP as well as a tariff preference level for woven apparel that allows the use of third-country fabric.

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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