Just four Dominican Republic apparel manufacturers are using the EIAP programme

Just four Dominican Republic apparel manufacturers are using the EIAP programme

A nine-year-old programme meant to boost the Dominican Republic's apparel exports to the United States has seen activity fall "precipitously" for the second year in a row, according to the latest annual review.

Now in its final year, the Earned Import Allowance Program (EIAP) enables manufacturers who use US fabric to earn a credit that can then be used to export apparel made with non-US fabric while still earning duty-free treatment.

But the latest review by the US International Trade Commission (USITC) says the initiative is still not providing enough incentives to boost Dominican apparel exports to the US market as intended. Indeed, only four of the 13 registered firms are currently using the programme – one less than was reported in the last three annual reviews.

In 2017, US imports of woven cotton bottoms from the Dominican Republic fell 57% by value (from $3.5m in 2016 to $1.5m) and 80% by quantity (from 745,000 SMEs in 2016 to 154,000 SMEs).

US government sources and a former user of the programme in the Dominican Republic attributed the decline in US imports under the EIAP to increased imports from Haiti and increased competition from other Western Hemisphere suppliers.

Haiti offers lower labour costs and trade preferences under the HOPE/HELP programmes, which 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.  

Also, the decline in US imports under the EIAP likely reflects a significant decline in woven trouser manufacturing capacity in the Dominican Republic, along with a simultaneous shift by US importers to Asian suppliers during the life of the programme.

Finally, uncertainty surrounding the programme's renewal after it expires on 1 December 2018 may also explain why US imports of woven cotton bottoms reached their lowest level in 2017.

The recommendations offered during the ninth annual review of the EIAP were virtually the same as those received during the previous eight reviews.

Suggestions include lowering the 2-for-1 ratio of US to foreign fabric to a 1-for-1 ratio; expanding the programme coverage to enable other types of fabrics and apparel items to be included in the EIAP; and changing the requirement that dyeing and finishing of eligible fabrics occur in the United States.

The EIAP is a special provision under the Dominican Republic-Central America-United States Free Trade Agreement (DR-CAFTA).