Earned Import Allowance Program: Evaluation of the Effectiveness of the Program for Certain Apparel from the Dominican Republic

Investigation No. 332-503
USITC Publication 4175

Summary

The Earned Income Allowance Program (EIAP) had initial beneficial effects on U.S. and Dominican textile and apparel industries, according to a newly released report by the U.S. International Trade Commission (USITC).

The EIAP program 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 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 first annual report found:

• The EIAP has helped slow job losses and production declines in the Dominican industry that makes woven cotton trousers and other bottoms. Dominican trouser manufacturers and U.S. apparel companies that import trousers from the Dominican Republic indicated that the EIAP has helped them to be more cost-competitive.
  
  
• Most of the benefits to U.S. textile firms under the EIAP to date appear to have accrued to U.S. firms that have dyed and finished third-country unfinished fabrics. As of May 2010, no U.S. firms reported increased sales or exports of domestically woven fabrics as a result of the EIAP.
  
  
• Reports on planned use of the program going forward have been mixed, as some Dominican trouser manufacturers and U.S. firms that import woven cotton trousers from the Dominican Republic indicate the program may become less cost-effective in the future. A few of the firms indicated that they may move production out of the Dominican Republic if it is no longer economical to produce there.
  
  
• The USITC received several recommendations from industry and other sources concerning possible improvements to the program. The recommendations focused on the legislation establishing the program, (e.g., changing the ratio of U.S. fabric to foreign fabrics required under the program), as well as on implementation of the program, (e.g., changing how Commerce interprets the definition of "wholly formed" fabrics). Sources also suggested expanding the program to other Central American Free Trade Agreement countries and allowing for the use of additional types of fabrics.
  
  

View the publication at: http://www.usitc.gov/publications/332/pub4175.pdf.

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