ITC Says "2 for 1" Program Doesn't Encourage Apparel Production in DR
The International Trade Commission has issued its second annual report on the effectiveness of the earned import allowance program (EIAP) for certain apparel in the Dominican Republic. According to the report, it appears that the EIAP provides insufficient incentive to increase production of woven cotton bottoms in the Dominican Republic.
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(The ITC is required to evaluate the effectiveness of the EIAP program and make recommendations for improvements annually under the Dominican Republic-Central America-U.S. Free Trade Agreement (DR-CAFTA) Implementation Act, as amended. The EIAP, aslo known as the "2 for 1" program1, began at the end of 2008 and allows apparel manufacturers in the Dominican Republic who use U.S. fabric to produce certain apparel to earn a credit that can be used to ship eligible apparel made with non-U.S.-produced fabric into the U.S. duty free.)
The following are highlights of the report:
EIAP Doesn't Provide Enough Benefits to Make DR Apparel Industry Competitive
While a few U.S. and Dominican apparel industry sources stated that the EIAP has helped to maintain production of cotton bottoms in the Dominican Republic, these same sources also indicated that the program, as it is currently structured, does not provide sufficient benefits to make the apparel industry in the Dominican Republic competitive vis-a-vis other suppliers of cotton bottoms to the U.S. market.
Increase in U.S. Exports of Cotton Fabrics to DR Not Attributable to EIAP Benefits
In addition, although U.S. exports of cotton fabrics of a weight suitable for making bottoms (bottom-weight fabrics) to the Dominican Republic have increased since the program started at the end of 2008, it appears that this increase is not necessarily attributable to benefits provided under the EIAP.
Industry Recommends Changing U.S. Fabric Ratio, Expanding Program, Etc.
The ITC received several recommendations from industry and other sources concerning possible improvements to the program. The recommendations were very similar to recommendations expressed during the first annual report. They include changing the ratio of U.S. fabric to foreign fabrics required under the program, including other types of fabrics and apparel items in the EIAP, expanding the program to other DR-CAFTA countries, and changing the requirement that dyeing, finishing, and printing of eligible fabrics take place in the U.S.
1Under this program, one square meter equivalent (SME) credit will be issued to a qualifying apparel producer for every two SMEs of "qualifying woven fabric" that this producer can demonstrate was purchased for the manufacture in the Dominican Republic of "qualifying apparel articles" wholly assembled in the Dominican Republic. "Qualifying apparel articles" include the following articles of cotton (but not of denim) classified in HTS Chapter 62 (and meeting the requirements of the rules relating to HTS Chapter 62 of General Note 29(n)): trousers, bib and brace overalls, breeches and shorts, skirts and divided skirts, and pants.
(See ITT's Online Archives or 07/30/10 news, 10073011, for BP summary of the ITC's first report on the EIAP for certain apparel from the Dominican Republic from April 2009 - May 2010.)
(Inv. No. 332-503, dated 07/22/11)