Importers: Tariff Preferences for Caribbean Countries Need Long-Term Renewal

An every-other-year report on Caribbean Basin Initiative trade, produced by the Office of the U.S. Trade Representative, revealed that imports covered by tariff preferences grew to $1.9 billion, a 34% increase from 2021, but that was mostly because of rising oil prices. Petroleum products, methanol, and apparel, mainly T-shirts and sweaters, account for 85% of imports from the 17 countries covered by the programs. Almost $10 billion worth of exports from these countries don't receive tariff benefits. The report said tariff preferences also have covered significant amounts of polystyrene from The Bahamas, as well as agricultural products, particularly fresh or chilled yam from Jamaica and cane sugar from Belize and Guyana.

In public comments submitted to USTR for this report, the American Apparel and Footwear Association warned that the security concerns in Haiti and the pending expiration of HOPE and HELP "have led many companies to rethink their sourcing strategy with regards to Haiti. AAFA argues that a sourcing shift out of Haiti threatens the employment of 53,000 workers in the Haitian apparel export industry." Almost 100% of the apparel imported under the preferences comes from Haiti.

HOPE is the program of the Haitian Hemispheric Opportunity through Partnership Encouragement Act, and it has been enhanced, as HOPE II, since first passed; HELP, the Haitian Economic Lift Program, works alongside HOPE.

Hanes Brands Inc. said it uses yarn spun in the Dominican Republic, made with cotton grown in the U.S. to supply a Haiti cut-and-sew factory. The company said "this supply chain is only economically feasible" with the tariff preferences. Hanes asked that the law be updated "to minimize requirements that force companies to seek documentation and services from the non-functional Haitian government. Specifically, it requests the removal of visa requirements under Haiti HOPE. HBI says it is rethinking Haiti’s viability in its supply chains, and believes these actions will make it easier to continue."

The report said that in the first few months of 2023, 9,000 jobs were lost in Haiti's garment sector due to factory closures and reduced international orders. In 2022, imports from Haiti under the HOPE Acts were $740 million, a 1.3% drop from 2021, the report said. Still, Haiti is the largest beneficiary among the 17 countries.

Much of the apparel produced in Haiti must be made through the yarn-forward rule, where the yarn has to be made in Haiti or in CAFTA-DR countries, though some apparel can be made with fabric and yarn from anywhere, as long as Haitian or trading partner countries' work accounts for 60% of the value. That segment has to stay below 1.25% of all apparel imports -- and it doesn't reach that level. Another quota allows yarn from any country as long as the garment is wholly assembled or knit to shape in Haiti.

The National Council of Textile Organizations told USTR it "strongly opposes any effort to expand the list of beneficiaries or loosen its rules of origin for textile and apparel goods. NCTO believes such actions would harm U.S. producers and create a backdoor for China to export forced-labor-made cotton, fibers, and fabrics into the United States."

Haiti Pathway Forward said the preferences should cover more tariff lines and sectors. The organization said the HOPE and HELP Acts promote sub-assembly rather than manufacturing, "which has not created a sustainable industrial base in the country."