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Earned Income Allowance Program Benefits U.S., Dominican Textile and Apparel Industries |
The International Trade Commission released July 27 a report finding that the Earned Income Allowance Program has had some initial benefits for firms in the U.S. and the Dominican Republic. The report states that there has been limited use of the EIAP to date and that potential improvements to the program could spur greater interest in the future.
The EIAP provides an uncapped benefit for duty-free imports of woven cotton pants and trousers, bib and brace overalls, breeches and shorts, and skirts and divided skirts (collectively referred to as bottoms) assembled in the Dominican Republic from foreign fabric, provided such imports are accompanied by a certificate documenting the purchase of certain U.S.-produced woven cotton fabric at a ratio of 2:1. Under this formula, for every two units of qualifying fabric (i.e., formed in the U.S. from U.S.-formed yarns) purchased for apparel production in the Dominican Republic, a one-unit credit is received that can be used in the manufacture and importation of apparel using non-qualifying fabric. Nine companies are currently registered to use the EIAP, and the first imports into the U.S. under the program entered in April 2009.
The ITC is required to evaluate the effectiveness of the EIAP and make recommendations for improvements each year. Highlights of this first annual review, much of which the ITC states is “based on anecdotal information,” include the following.
• The EIAP has helped slow job losses and production declines in the Dominican industry that makes woven cotton trousers and other bottoms, and 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. However, there were no reports of new investment as a result of the program.
• Most of the benefits to U.S. textile firms under the EIAP to date appear to have accrued to U.S. firms that dye and finish 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 EIAP going forward have been mixed, as some Dominican trouser manufacturers and U.S. firms that import woven cotton trousers from the Dominican Republic indicate that 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 ITC received several recommendations from industry and other sources concerning possible improvements to the program, focusing on the legislation establishing the program (e.g., changing the required ratio of U.S. fabric to foreign fabrics from 2:1 to 1:1, similar to the EIAP in place for Nicaragua) and the implementation of the program (e.g., changing how the Department of Commerce interprets the definition of “wholly formed” fabrics). Sources also suggested expanding the program to other DR-CAFTA countries and allowing for the use of cotton polyester blended fabrics, including polyester cotton twill fabrics, as well as broadwoven fabrics such as poplin fabrics, along with denim apparel and/or other apparel items. |
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