Eight years after its implementation, the Earned Import Allowance Program (EIAP) is not providing enough incentives to significantly boost Dominican apparel exports to the U.S. market, as intended, reports the U.S. International Trade Commission (USITC) in its publication Earned Import Allowance Program: Evaluation of the Effectiveness of the Program for Certain Apparel from the Dominican Republic; Eighth Annual Review.
The EIAP 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 United States duty free. The Dominican Republic-Central America-United States Free Trade Agreement Implementation Act, as amended, requires the USITC, an independent, nonpartisan, factfinding federal agency, to evaluate annually the effectiveness of the EIAP program and make recommendations for improvements.
The USITC's eighth annual review was submitted to the U.S. House of Representatives Committee on Ways and Means and the U.S. Senate Committee on Finance on September 28, 2017. Highlights of the report follow.
- Of the 12 registered firms, only 5 firms are currently using the program, the same number reported in the sixth and seventh annual reviews.
- In 2016, U.S. imports of woven cotton bottoms from the Dominican Republic fell 57 percent by value to $3.5 million from $8.2 million in 2015 and fell 61 percent by quantity to 745,000 SMEs from 1.9 million SMEs in 2015. U.S. government sources and a user of the program in the Dominican Republic attributed the decline in U.S. imports under the EIAP to increased imports from Haiti and increased competition from other Western Hemisphere suppliers. Haiti offers lower labor costs and trade preferences under the HOPE/HELP programs that provide more sourcing flexibility and coverage for a wider range of products than the EIAP as well as a tariff preference level (TPL) for woven apparel from Haiti that allows the use of third-country fabric up to a specified level.
- The recommendations offered during the eighth annual review of the EIAP were virtually the same as those received by the Commission during the previous seventh annual reviews-1) lowering the 2-for-1 ratio of U.S. to foreign fabric to a 1-for-1 ratio; 2) expanding the program coverage to enable other types of fabrics and apparel items to be included in the EIAP; and 3) changing the requirement that dyeing and finishing of eligible fabrics occur in the United States.
Earned Import Allowance Program: Evaluation of the Effectiveness of the Program for Certain Apparel from the Dominican Republic; Eighth Annual Review (Inv. No. 332-503, USITC Publication 4730, September 2017) is available on the USITC's Internet site at https://www.usitc.gov/publications/332/pub4730.pdf.
USITC general factfinding investigations, such as this, cover matters related to tariffs or trade and are generally conducted at the request of the U.S. Trade Representative, the House Committee on Ways and Means, and the Senate Committee on Finance. The resulting reports convey the Commission's objective findings and independent analyses on the subject investigated. The Commission makes no recommendations on policy or other matters in its general factfinding reports. Upon completion of each investigation, the USITC submits its findings and analyses to the requester. General factfinding investigations reports are subsequently released to the public, unless they are classified by the requester for national security reasons.