USITC Reports on Dominican Republic 2-for-1 Program

On July 28, 2016, the U.S. International Trade Commission ("USITC") published Earned Import Allowance Program: Evaluation of the Effectiveness of the Program for Certain Apparel from the Dominican Republic.

Seven years after its implementation, the Earned Import Allowance Program (EIAP) is not providing enough incentives to substantially 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; Seventh 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 seventh 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 July 29, 2016. 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 annual review.
• In 2015, U.S. imports of woven cotton bottoms from the Dominican Republic tripled by value to $8.2 million from $2.7 million in 2014 and increased more than fivefold by quantity. U.S. industry sources attributed these increases, however, to incidental larger orders rather than to incentives offered by the EIAP. Moreover, the value and quantity of U.S. imports of woven cotton bottoms under the EIAP in 2015 accounted for less than 25 percent and 41 percent, respectively, of what they were at their peak in 2010.
• U.S. exports to the Dominican Republic of cotton fabrics of a weight suitable for making bottoms rose 13 percent by quantity and 11 percent by value between 2014 and 2015.
• Except for one addition, the recommendations offered during the seventh annual review of the EIAP were virtually the same as those received by the Commission during the previous six 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. The new recommendation proposed during the seventh annual review was to add countries to the EIAP to foster regional integration and create further opportunities in other CAFTA-DR countries.

BACKGROUND

On October 16, 2008, H.R. 7222, the Andean Trade Preference Extension Act of 2008, Became Public Law No: 110-436. Sec. 2 of the Act created the Dominican Republic-Central America-United States Free Trade Agreement ("CAFTA-DR") Earned Import Program–a 2-for-1 matching program for trousers assembled in the Dominican Republic. Under this program the D.R. may ship, duty-free, one square meter equivalent of trousers of third-country fabric for every two sme of trousers of U.S.-made fabric.