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Incentives under EIAP to encourage more apparel production

26
Jul '11
The Earned Import Allowance Program (EIAP) appears to provide insufficient incentive to increase production of woven cotton bottoms in the Dominican Republic, according to the U.S. International Trade Commission (USITC) in its report Earned Import Allowance Program: Evaluation of the Effectiveness of the Program for Certain Apparel from the Dominican Republic; Second Annual Report.

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 USITC, an independent, nonpartisan, factfinding federal agency, is required to evaluate the effectiveness of the EIAP program and make recommendations for improvements annually under the Dominican Republic-Central America-United States Free Trade Agreement Implementation Act, as amended.

The USITC's second annual report was submitted to the U.S. House of Representatives Committee on Ways and Means and the U.S. Senate Committee on Finance in July 2011. Highlights of the report follow.
- 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-…-vis other suppliers of cotton bottoms to the U.S. market.

- 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.

- The USITC 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 Dominican Republic-Central America-United States Free Trade Agreement countries, and changing the requirement that dyeing, finishing, and printing of eligible fabrics take place in the United States.

Earned Import Allowance Program: Evaluation of the Effectiveness of the Program for Certain Apparel from the Dominican Republic; Second Annual Report (Investigation No. 332-503, USITC Publication 4246, July 2011) will be available on the USITC's Internet site.

USITC general factfinding investigations, such as this one, cover matters related to tariffs or trade and are generally conducted at the request of the U.S. Trade Representative, the Senate Committee on Finance, or the House Committee on Ways and Means. 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.

U.S. International Trade Commission (USITC)


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