GAO-12-204R Haiti EIAP

United States Government Accountability Office

Washington, DC 20548

November 30, 2011

The Honorable Max Baucus 

Chairman 

The Honorable Orrin G. Hatch 

Ranking Member 

Committee on Finance United States Senate

The Honorable Dave Camp 

Chairman 

The Honorable Sander M. Levin 

Ranking Member

Committee on Ways and Means House of Representatives

Subject: Earned Import Allowance Program for Haiti

The United States has historically provided assistance to support development in Haiti. Over 

the last several years, Congress has attempted to promote Haiti’s economic development 

through the use of trade preferences for Haitian products. In 2000, Congress extended 

preferences under the Caribbean Basin Economic Recovery Act1 to allow for duty-free 

treatment of apparel through the Caribbean Basin Trade Partnership Act (CBTPA).2 In 2006, 

Congress passed the Haitian Hemispheric Opportunity through Partnership Encouragement 

(HOPE) Act, giving preferential access to U.S. imports of Haitian apparel.3 In 2008, Congress 

amended HOPE (now known as HOPE II), expanding trade preference provisions already in 

place and creating new ones to further support the growth of the apparel industry in Haiti.4 It 

was the intent of Congress that HOPE II would help Haiti attract new investment and create 

jobs while simultaneously providing incentives to encourage the use of inputs manufactured 

by U.S. companies. Most recently, in an effort to support Haiti’s recovery from the 

devastating earthquake that hit the country in January 2010, Congress passed the Haiti 

Economic Lift Program (HELP) Act of 2010,5

 

1

In 1983, Congress passed the Caribbean Basin Economic Recovery Act (Public Law 98-67, Title II) to allow for 

duty-free treatment of most goods, including certain apparel, exported from Haiti and other Caribbean Basin 

countries to facilitate the economic development and export diversification of these economies. 

expanding and modifying several trade 

preference provisions under HOPE II. The various provisions included under HOPE II and 

2

Public Law 106-200, Title II.

3

Public Law 109-432, Div. D, Title V.

4

Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2008 (HOPE II), Public Law 110-

234, Title XV, Subtitle D, Part I.

5

Public Law 111-171 H.R. 5160, 111th Cong., 2d Sess.
Page 2 GAO-12-204R Haiti EIAP

CBTPA offer different avenues through which qualifying apparel goods produced in Haiti can 

be exported to the United States duty-free.

One trade preference provision originally created under HOPE II was the “3-for-1” Earned 

Import Allowance Program (EIAP). The provision under Hope II established that for every 3-

square-meter equivalent (SME) of qualifying fabric a firm imports to Haiti,6 the firm would be 

allowed to earn a credit to export 1 SME of apparel produced in Haiti to the United States, 

duty-free, regardless of the source of the fabric.7 In this way, EIAP was designed to both aid 

Haiti’s apparel industry and encourage the use of U.S.-manufactured inputs. The HELP Act 

reduced the EIAP exchange ratio from 3-for-1 to 2-for-1. The change sought to encourage 

the use of EIAP, since no apparel from Haiti was exported to the United States under the 

original 3-for-1 model. This report responds to a mandate in the Food, Conservation, and 

Energy Act of 2008, which requires GAO to review EIAP annually and conduct an evaluation 

of the program. We issued our first report under this mandate in June 2010, focusing on 

EIAP as it existed during the period of our first review, from October 2009 to June 2010, at 

which time it featured the 3-for-1 exchange ratio.8 That report also included a more complete 

discussion of HOPE II and CBTPA preference provisions. In this report, we assess the extent 

to which EIAP has been used since it was amended under the HELP Act—signed into law on 

May 24, 2010.

To address this question, we reviewed data provided by the Department of Commerce’s 

(Commerce) Office of Textiles and Apparel (OTEXA), which has responsibility for managing 

the Haitian EIAP. We interviewed cognizant OTEXA officials responsible for managing trade 

data. We discussed OTEXA’s data collection and processing methods, and determined the 

data to be sufficiently reliable for the purposes of this report. For this report, we also 

conducted interviews with OTEXA officials and obtained written information from a 

representative of the one company that established an EIAP account since the program was 

amended in 2010. Through these sources, we identified the key elements of the program, the 

extent to which the program has been used, and some of the factors influencing the 

program’s use. In our previous review of the Haiti EIAP, we met with EIAP account holders, 

Haitian industry representatives and associations, U.S. apparel buyers and associations, and

a U.S. textile-manufacturing association; their views are included in this review as 

appropriate. We conducted this performance audit from September 2011 through November 

2011 in accordance with generally accepted government auditing standards. Those 

standards require that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions based on our audit 

objectives. We believe that the evidence obtained provides a reasonable basis for our 

findings and conclusions based on our audit objectives. 

 

6

Qualifying woven fabric is wholly formed in the United States from yarns wholly formed in the United States. 

Qualifying knit fabric, or knit-to-shape components, are wholly formed or knit to shape in the United States, 

specified Free Trade Agreement partner countries, or countries designated as beneficiaries of certain trade 

preference programs, from yarns wholly formed in the United States.

7

For example, if a firm bought 300 SMEs of U.S.- woven fabric for apparel production in Haiti, it would earn credits 

that would allow it to export 100 SMEs of apparel made from fabric manufactured in another country, such as 

China, to the United States duty-free.

8

GAO, International Trade: Exporters’ Use of the Earned Import Allowance Program for Haiti Is Negligible 

because They Favor Other Trade Options, GAO-10-654, (Washington D.C.: June 16, 2010).
Page 3 GAO-12-204R Haiti EIAP

Results in Brief

In 2011, for the first time since the program was established in 2008, one company has 

opted to use EIAP to export apparel from Haiti to the United States. The value of these 

exports (about $350,000) represents 0.2 percent of total apparel exports under HOPE II, and 

only 0.07 percent of total apparel exports from Haiti to the United States under all preference 

programs based on year-to-date data as of August 2011. Total apparel exports from Haiti to 

the United States, for the same period, were valued at about $465 million—approximately 

$140 million were exported under various provisions of HOPE II, including EIAP, and about 

$313 million were exported under CBTPA.9 Three other companies have established EIAP 

accounts, but not all of these accounts are being used to earn credits, and those with credits 

have not used them to export apparel from Haiti to the United States. The level of EIAP use

continues to be modest due to the availability of other more flexible provisions. Apparel 

producers stated that they did not expect participation in EIAP to increase significantly unless 

certain provisions of HOPE II and the CBTPA, which are subject to volume caps, begin to 

approach their limit. Furthermore, the use of the more flexible trade preferences under 

HOPE II and CBTPA has continued to increase, while little has been exported using EIAP. 

Exporters considered the other HOPE II provisions simpler and more advantageous because 

firms can import most types of apparel duty-free, regardless of the fabric’s source, without 

being required to purchase any kind of qualifying inputs or to register for a program. 

Background

At its peak in the 1980s, Haiti had a well-established garment assembly industry that 

employed more than 100,000 people. However, global economic forces and a series of 

violent internal political struggles in the 1980s and 1990s nearly decimated the industry. 

Nevertheless, production in the apparel sector in Haiti began increasing steadily during the 

past decade, with Haitian apparel exports to the United States growing from $251 million in 

2000 to $518 million in 2010. The Haitian government considers the apparel industry an 

engine of economic growth and job creation. 

After the January 2010 earthquake, concerns arose that damage to apparel production 

plants and an already poor infrastructure, particularly Haiti’s roads and port facilities, would 

be a major setback for the country’s progress in apparel production. However, while the 

damage caused by the earthquake brought apparel production in Haiti to a halt, by March 

2010 there were signs that production had been restored. U.S. imports of apparel from Haiti 

began to recover soon after the earthquake, reaching $80 million in June 2011, as shown in 

figure 1. Further, from 2009 to 2010, even with the damage from the earthquake, U.S. 

imports of apparel from Haiti increased from $513 to $518 million. Notably, during the 12 

months ending in August 2011, imports of textiles and apparel increased 50 percent over the 

same period a year earlier.

 

9

There were also about $12 million in apparel exports from Haiti to the United States that did not enter under the 

trade preference provisions of HOPE II or CBTPA.
Page 4 GAO-12-204R Haiti EIAP

Figure 1: U.S. Monthly Imports from Haiti, January 2009 through August 2011

EIAP is one of several trade preference provisions created under HOPE II and amended 

under HELP. As with other preferences, EIAP was meant to help the industry by providing 

incentives for apparel production in Haiti and encouraging the use of U.S.-manufactured 

inputs. In addition to EIAP, HOPE II also includes five other provisions allowing for the dutyfree treatment of certain qualifying Haitian-produced apparel, including the Value-Added 

Restraint Limit, Woven Apparel Restraint Limit, Knit Apparel Restraint Limit, Certain Types of 

Apparel, and Apparel Made with “Short Supply” yarns or fabrics. Under HOPE II, these 

preferences were given a duration of 10 years and were set to expire in 2018; HELP 

extended them until September 2020.

Commerce’s OTEXA is responsible for the administration and management of the Haiti 

EIAP. As amended by HELP, under the Haiti EIAP, producers or other entities controlling 

production10 can qualify for a credit to export 1 SME of apparel produced in Haiti to the 

United Sates free of duty, if they import 2 SMEs of U.S. or other qualifying fabric.11

 

10Entities eligible to use the program are referred to as Qualifying Apparel Producers. Such an entity is defined as 

an individual, corporation, partnership, association, or other entity or group that exercises direct, daily operational 

control over the apparel production process in Haiti, or an individual, corporation, partnership, association, or 

other entity that is not a producer and that controls the apparel production process in Haiti through a contractual 

relationship or other indirect means.

EIAP is

administered through an online account mechanism in which firms can open an account, 

submit requests for credits on qualifying purchases, and deposit the credits for electronic 

11Qualifying woven fabric is wholly formed in the United States from yarns also wholly formed in the United States. 

Qualifying knit fabric, or knit to shape components, are wholly formed or knit to shape in the United States, 

specified Free Trade Agreement partner countries, or countries designated as beneficiaries of certain trade 

preference programs, from yarns wholly formed in the United States.
Page 5 GAO-12-204R Haiti EIAP

storage. Subsequently, they can redeem those credits in the form of a certificate qualifying 

future apparel exports from Haiti to the United States for duty-free treatment, as shown in 

figure 2.

Figure 2: Example of EIAP Transaction Process as Amended under the HELP Act

Exporters’ Participation in EIAP Remains Modest Due to the Availability of Other, More 

Flexible Trade Preferences 

The use of the Haiti EIAP continues to be modest, even after it was amended by the HELP 

Act of 2010 to a more advantageous “2-for-1” exchange ratio. To date, the Haiti EIAP has 

experienced little activity. Four accounts have been opened with OTEXA, but only one was 

opened after the program was amended under the HELP Act of 2010. Since the program 

was established in 2008, more than 13 million SMEs of qualifying fabric have been imported 

into Haiti under the program, resulting in almost 6 million credits for duty-free exports of 

apparel approved and deposited. However, according to OTEXA officials, not all accounts 

are being used to earn credits. Moreover, they explained that only one account holder has 

redeemed credits to export apparel under the program. From January through August 2011, 

OTEXA reported that about $350,000 in apparel had been exported from Haiti to the United 

States under EIAP, out of a total of $465 million in apparel exported from Haiti to the United 
Page 6 GAO-12-204R Haiti EIAP

States during the same period, including $140 million exported under HOPE II.12 Thus, 

Haitian apparel exports under EIAP represented only about 0.07 percent of total Haitian 

apparel exports to the United States, and 0.2 of apparel exports under HOPE II.

According to OTEXA, the other three account holders may not be using EIAP credits 

because they prefer to export their products under other provisions of U.S. trade preference 

programs for Haiti, including HOPE II and the CBTPA. OTEXA suggests that these 

companies may be using the Woven and Knit Apparel Restraint Limit programs to export 

their garments to the United States because these provisions allow Haitian apparel made 

with third-country fabric to enter duty-free without the need to earn or use credits. A 

representative from the company that opted to use EIAP to export apparel from Haiti to the 

United States explained that the company has a high volume of qualifying U.S. exports to 

Haiti that allow it to earn credits under the program, providing an incentive to use EIAP. 

Additionally, this individual commented that the program, as it is administered by Commerce, 

is transparent and ensures a predictable means of exporting to the United States. He noted 

that the company expects to continue exporting under the program. The other account 

holders have told us that they intend to hold on to the credits until it becomes necessary to 

use them, for instance, if certain provisions of HOPE II and the CBTPA, which are subject to 

volume caps, begin to approach their limit. They have continued exporting apparel duty-free 

to the United States under the HOPE II provisions discussed above and have not needed to 

use credits earned under EIAP.

Apparel Imports under Other Provisions of HOPE II and CBTPA Increased Substantially 

Over the Past 5 Years 

While use of EIAP continues to be very modest, exports under other HOPE and HOPE II 

provisions have increased substantially over the past 5 years and CBPTA continues to be 

the most common trade preference used to export Haitian apparel to the United States. The 

primary provisions used under HOPE II and CBTPA are the HOPE II Knit Apparel and 

Woven Apparel Restraint Limit provision, and the CBTPA T-shirt Restraint Limit program. 

The HOPE II Value-Added Restraint Limit rule has also been used extensively, but its use 

has decreased in recent years.13 

Exports under HOPE and subsequently HOPE II have grown steadily from $13.7 million in 

2007 to almost $160 million in 2010, and were about $140 million from January to August, 

2011. Producers consider Woven Apparel Restraint Limit, and Knit Apparel Restraint Limit 

programs to be simpler than EIAP and, more importantly, more flexible because they allow 

for fabric inputs from any source without being required to purchase any kind of qualifying 

inputs or to register for a program.

 

12At the time of our review, August 2011 was the last month for which OTEXA had recorded data on exports from 

Haiti to the United States.

13In addition to EIAP, there are two other provisions of HOPE II which were generally not used to export apparel 

from Haiti to the United States in 2010. These two provisions are known as “Duty- Free Treatment of Certain 

Articles” and “Short Supply.” Duty-Free Treatment of Certain Articles refers to articles, such as brassieres, 

luggage, headwear, and certain sleepwear, that qualify for duty-free treatment as long as they are wholly 

assembled or knit to shape in Haiti and they are imported directly from Haiti or the Dominican Republic to the 

United States. There are no restrictions on the source of inputs used for these products. Short Supply refers to 

any apparel wholly assembled or knit to shape in Haiti that is made of fabric, components, or yarns deemed to be 

in short supply as defined in all other preference arrangements and Free Trade Agreements of the United States 

that qualify for duty-free treatment.
Page 7 GAO-12-204R Haiti EIAP

• Value-Added Restraint Limit: Most HOPE and HOPE II exports have entered under the 

Value-Added Restraint Limit rule, but the share of imports under this rule show a 

decreasing trend over the last 5 years. Specifically, the percentage of apparel under 

HOPE and HOPE II that was exported under the value-added rule has decreased from 

89 percent in 2007 to 46 percent in 2010, and is down to about 37 percent based on 

year-to-date data through August 2011. This decrease occurred in part because 

exporters have increasingly chosen to export apparel under HOPE II’s woven duty-free 

provisions, which do not have value-added requirements, such as restrictions on the 

amount of inputs that must be sourced from specified countries. 

• Woven Apparel Restraint Limit: The woven apparel duty-free provision of HOPE II 

accounts for a significant portion of apparel exports from Haiti. Based on year-to-date 

figures through August 2011, 46 percent of apparel exports under HOPE II entered the 

United States under the woven apparel provision, which allows the use of third-country 

fabric, without having to include any U.S. or regionally produced inputs. Under HOPE II, 

the woven provision was limited by an annual cap known as a Tariff Preference Level 

(TPL) that was set at 70 million SMEs; the HELP Act of 2010 increased the TPL to 200 

million SMEs. In the period from January through August 2011, about 16 million SMEs of 

woven apparel were exported under the Woven Apparel Restraint Limit, thus far reaching 

only 8 percent of the 200 million SMEs limit.

• Knit Apparel Restraint Limit: Although the knit apparel duty-free provision accounted 

for only 11 percent of apparel exports under HOPE II in 2010, use of this provision 

experienced significant increase since 2009. Exports under this provision almost tripled 

from $6.6 million in 2009 to $18.3 million in 2010, and during 2011 have already 

exceeded last year’s amount, reaching $22.6 million and accounting for 16 percent of 

exports under HOPE II through August. The knit provision was also initially capped by an 

annual TPL of 70 million SMEs, and was later increased by the HELP Act to 200 million 

SMEs. In the period from January through August 2011 about 18 million SMEs of knit 

apparel have been exported under the Knit Apparel Restraint Limit, thus far reaching only 

9 percent of the 200 million SMEs limit. Table 1 shows the level of imports under various 

HOPE and HOPE II provisions.
Page 8 GAO-12-204R Haiti EIAP

Table 1: U.S. Imports of Apparel from Haiti under HOPE and HOPE II, 2007-August 

2011

Source: GAO analysis of OTEXA calendar-year data.

Notes: Table includes data on imports under the initial HOPE program, amended in 2008 and now referred to as HOPE II. “The 

Knit TPL,” “EIAP,” “Certain Articles,” and “Short Supplies” provisions were passed in 2008 under HOPE II, and were unavailable 

in 2007.

Some percentage totals do not add to 100 percent because of rounding.

a

Includes duty-free treatment of “Certain Articles” and articles made with materials in “Short Supply” from U.S. or other trade 

partners. 

While exports under HOPE II have grown significantly since its inception in 2008, CBTPA 

continues to be the most common trade preference used to export Haitian apparel to the 

United States. In 2010, more than $350 million in apparel was exported from Haiti to the 

United States under CBTPA. Apparel exports under CBTPA reached more than $313 million 

in the period from January through August 2011, accounting for more than two-thirds of the 

value of all Haitian apparel exported to the United States. CBTPA has played an important 

role in sustaining the Haitian apparel industry, since it supports the production of knits. 

CBTPA continues to be heavily used, in part because certain men’s and boys’ T-shirts are 

specifically excluded from the knit TPL under HOPE II. CBTPA allows T-shirts to be 

assembled in Haiti with fabric produced in the Dominican Republic, or other parts of the 

region, made with U.S. yarns. T-shirts and sweatshirts are the most common garments 

produced in Haiti and exported to the United States. Since the implementation of the 

Dominican Republic-Central America-United States Free Trade Agreement, Haiti has 

become the major beneficiary of preferences for apparel under the CBTPA.14

 

14Haiti’s share of apparel exports to the United States under the CBTPA provision for duty-free treatment of knit 

apparel has grown from 5.4 percent in 2005 to 100 percent in 2009. Similarly, Haiti’s share of apparel exports to 

the United States under the CBTPA provision for duty-free treatment of T-shirts has grown from 3.1 percent in 

2005 to 100 percent in 2009. The caps on these preferences are 970 million SME for knit apparel, of which 14.8 

percent was filled in 2009, and 12 million dozen T-shirts, of which of 63.5 percent was filled in 2009. Haiti’s 

dominance of apparel exports to the United States under CBTPA since 2009 is due to the fact that former CBTPA 

beneficiaries have joined the Dominican Republic-Central America-United States Free Trade Agreement and no 

longer qualify for CBTPA preferences.

Dollars in millions 

Provision 2007 (HOPE) 2008 (HOPE II) 2009 (HOPE II) 2010 (HOPE II) 2011(HOPE II) 

through August 

Annual 

value

Percent Annual 

value

Percent Annual 

value

Percent Annual 

value

Percent Annual 

value

Percent

Value-Added 

Restraint Limit

12.2 89 47.8 64 67.3 49 74 46 52 37

Woven TPL 1.5 11 27 36 63.9 46 67.5 42 65.1 46

Knit TPL n/a 0.14 .2 6.6 5 18.3 11 22.6 16

EIAP n/a 0 0 0 .35 0.2

Othera n/a 0 0.6 0.004 0 0 

Total U.S. 

HOPE and 

HOPE II 

imports

13.7 100 74.9 100 137.9 100 159.8 100 140.1 100
Page 9 GAO-12-204R Haiti EIAP

Agency Comments

We requested comments on a draft of this report from OTEXA at the Department of 

Commerce. The Department of Commerce generally concurred with the draft report and 

stated that it is pleased by the growing usage of the EIAP benefits, and that it anticipates 

greater interest in the program from U.S. importers, brands and retailers. OTEXA also 

provided technical comments, which were incorporated in the report as appropriate. 

_____________

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If you or your staffs have any questions about this report, please contact me at (202) 512-

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Public Affairs may be found on the last page of this report. Key contributors to this report 

were Juan Gobel, Assistant Director; Francisco M. Enriquez; and Gezahegne Bekele. 

Loren Yager

Director

International Affairs and Trade

(320867)
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