The following research report contains market research, analysis, statistics and business intelligence relating to research on Textile Machinery And Equipment In The Dominican Republic.

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ABSTRACT
On October 2000 the Proclamation implementing the Caribbean Basin Trade Partnership Act (CBTPA - Title II of the Trade and Development Act of 2000) was signed. The Presidential Proclamation declares the 24 current beneficiary countries of the Caribbean Basin Initiative to be "Beneficiary Countries" for purposes of enhanced trade preferences made available under the CBTPA. In addition, the Proclamation modifies the Harmonized Tariff Schedule to reflect new trade preferences. It also delegates to the Office of the United States Trade Representative the authority to publish (through a Federal Register notice) additional determinations regarding the compliance of CPTPA Beneficiary Countries with customs-related procedures established in the CPTPA.

Caribbean Basin Initiative (CBI) countries are the United States biggest export customers for yarn and fabric, including cut pieces of apparel sewn in the Caribbean. The textile industry in the Dominican Republic is predicted to increase U.S. textile shipments by $8.4 billion and increase U.S. textile and textile-related employment by 121,400 in five years as a result of the CBPTA. Recent studies done by the American Textile Manufacturers Institute (ATMI) show a strong and positive impact on U.S. textile production and jobs.

The studies show direct U.S. textile industry employment would increase by 63, 100 jobs while "textile related employment"in areas such as cotton, wool, and man-made fiber production, chemicals, energy and transportation would benefit with an increase of 58,300 jobs.
CBTPA is expected to bring significant benefits to the Dominican Republic as well. The National Free Trade Zone Council (Consejo Nacional de Zonas Francas de Exportacion) anticipates textile exports to the U.S. will grow by 20% to reach $4.5 billion per year. The effect on employment could follow, with as many as 35,000 new jobs per year being added to the 150,000 now working in the free trade zone textile sector. These jobs pay better, and provide more benefits, than most other jobs requiring comparable skills. The indirect impact of these new jobs will reverberate throughout the economy, helping to spread the benefits of CBTPA to a greater number of Dominicans.
Enhanced CPTPA Preferences

The CPTPA significantly expands preferential treatment for apparel made in the Caribbean Basin region. Duty- and quota-free treatment is provided for apparel made in the CBI from U.S. fabrics formed from U.S. yarns and fabrics.
Duty/quota-free treatment is also available for certain knit apparel made in CPTPA beneficiary countries from fabrics formed in the Caribbean Basin region, provided that U.S. yarns are used in the fabric. This "regional fabric" benefit for knit apparel is subject to an overall yearly limit, with a separate limit provided for T-shirts.

New duty/quota free treatment will also be available for apparel made in the CBI from fabrics determined to be in "short supply" in the United States, and for designated "hand-loomed, handmade, or folklore" articles.
In addition to these apparel preferences, the CPTPA provides NAFTA-equivalent tariff treatment for certain items previously excluded from duty-free treatment under the CBI program (i.e. footwear, canned tuna, petroleum products, watches and watch parts).
Beneficiary Country Designation The CPTPA authorized the President to designate individual countries as being "Beneficiary Countries" in order to receive the enhanced trade benefits available under the Act. Through the Proclamation were designated all 24 countries as CPTPA Beneficiary Countries. These countries are: Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Costa Rica, Dominica, Dominican Republic, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Montserrat, Netherlands Antilles, Nicaragua, Panama, St. Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Trinidad and Tobago, and British Virgin Islands. Eligibility Review Process

The USTR-chaired Trade Policy Staff Committee (TPSC) conducted a review of countries' eligibility for CPTPA preferences, taking into account the criteria established in the Act. This review relied upon information provided by U.S. Embassies, keyed to the various eligibility criteria, as well as on information from other reliable sources, such as the International Labor Organization.
Through a series of meetings, the TPSC identified a number of concerns regarding certain countries' performance with respect to the eligibility criteria established in the CBTPA. For each of these areas of concern, the TPSC further identified specific policy objectives to be pursued with the relevant governments, with the general aim of soliciting assurances that these concerns would be addressed. For those countries for which concerns and objectives have been identified, U.S. Embassy officials in the Caribbean Basin region and other U.S. government officials conducted intensive advocacy with local government officials.

TPSC recommendations to the President regarding the designation of CBTPA
Beneficiary Countries were based on the results of these efforts. The eligibility review process involved direct, issue-specific advocacy with a majority of the countries that were potentially eligible for CPTPA benefits. Objectives with respect to intellectual property protection, worker rights, implementation of WTO agreements, and commitments to stand by international anti-corruption guidelines were pursued with a range of countries. The review concluded that CBI countries satisfied the CBTPA criteria regarding commitments to eliminate the worst forms of child labor; however, several countries were urged to expand upon their current efforts to combat all forms of child labor, Dominican Republic was not included in those.
Major Provisions of the CBTPA for the Textile Industry

CBI trade enhancement legislation would provide CBI beneficiary countries certain trade benefits similar to Mexico's under the North American Free Trade Agreement (NAFTA). Because of the differences between the CBI and NAFTA, the CBI countries have experienced some lack of investment and slower growth of their exports to the United States than in the pre-NAFTA period (prior to 1994).

Under a new CBTPA, apparel manufactured in eligible CBI countries from U.S. yarns and fabric, as well as non-textile products currently excluded from the CBI legislation, would enter the United States free of quota and duty. Benefits to Caribbean Basin Countries

The Caribbean Basin taken together is the largest supplier of apparel to the United States, with 2000 shipments amounting to $8.4 billion. About 80% of these apparel products are made from U.S. fabric. Current US tariffs average 5.7% on apparel made from U.S. fabric, and 15.8% for apparel made from CBI regional and other non-U.S. fabric.
Benefits to the United States

Democratic stability and economic growth in Central America and the Caribbean benefit the U.S. economy and society by increasing opportunities for U.S. exports and reducing the incentives for illegal migration and crime -- including the drug trade -- in the region. U.S. merchandise exports exceeded $22 billion to Caribbean Basin countries in 2000, more than to France, Brazil or China. The U.S. maintains a trade surplus with the CBI region of around $2 billion.

CBI countries are the United States biggest export customers for yarn and fabric, including cut pieces of apparel that are sewn in the Caribbean.

Opportunities for the U.S. Economy

Important parts of the U.S. apparel, textile, cotton and related industries support CBI enhancement as a way of maintaining the competitiveness of U.S. industry in comparison with Asian producers. As a result of the Agreement on Textiles and Clothing, the United States will phase out by2007 quotas on imports of textiles and apparel from countries that are members of the World Trade Organization (WTO).
These U.S. producers want to strengthen their strategic partnership with CBI countries in order to reduce their costs and prepare for a more open market after2007. Their strategy is to combine highly efficient U.S. cotton/yarn/textile manufacturing with U.S. design/financing/ marketing industries and with Caribbean Basin low-cost sewing/assembly operations. They are concerned that without such a partnership, substantial parts of these sectors will move to lower-cost and technically efficient Asian producers.

CBPTA will increase U.S. textile shipments by $8.4 billion and have a very strong and direct positive impact on U.S. textile production and jobs. Textile shipments are also expected to increase by 11 percent from the U.S. CBI countries are the United States' biggest export customers for yarn and fabric. This Act has increased the demand for U.S. yarn and thread.
The Textile Market in the Dominican Republic and the CBTPA

As a result of its longtime status as a major clothing exporter to the United, the Dominican Republic will obtain important benefits from this law. The Dominican Association of Free Trade Zones, as well as other textiles related associations, stated on several occasions that this law will create greater opportunities and work stability in Dominican apparel manufacturing plants, as well as more new business - contractor companies will offer large contracts, the rest will be interested in direct investments, strategic alliances and joint investments. There is no doubt that this is the beginning of a boom in a region that, despite competition from Mexico, has succeeded in maintaining its production and export capacity. The Dominican apparel industry has a decades-long history characterized by the high quality of its labor force and excellent customer service. Some 280 apparel manufacturers are located within the Dominican Republic's 55 free zones, generating approximately 140,000 direct jobs.

In 1999, the Dominican apparel industry did not grow, unlike in years past, but remained stable. Nonetheless, with the recent approval of H.R. 434 on parity, the interest of international investors has once again increased, and some 13,000 new jobs have already been generated in the free zones - especially in the apparel sector - just in the first quarter of 2000.
It has been estimated that, within the first year of the enactment of this law, 30,000 new apparel jobs will be generated in Dominican free zones, which represents a growth of 25% and an increase of approximately US$600 million to $1 billion in exports for the sector, which will continue concentrating on producing garments with high value added. This growth also spurs increases in auxiliary industries such as transportation and communications. The Dominican Associations of Free Trade Zones estimated that each direct employee generated by the free zones creates one or two indirect jobs.

The National Council of Free Zones (Consejo Nacional de Zonas Francas), believes that parity will result in both the creation of new companies and the return of companies that ceased production in the country years before. The textile parity legislation includes something vital for the Dominican Republic: the incorporation of regional fabrics - basically knit fabrics - which is the basis of the Central American apparel industry. This will accelerate companies' verticalization process and offering of full package production, a process that grew very fast in the first months of 2001. This legislation also plays a key role in financing the costly verticalization process by lending the support of an economic power such as the United States.

Although textile parity will increase between Caribbean and Central American countries, each country possesses differentiated elements. Central America, and especially Honduras, has specialized in knit fabrics and intimate apparel. The Dominican Republic focuses on more elaborate garments such as pants and jackets, which are products with much higher added value.
The next step will be to eliminate the income taxes paid by non-free zone apparel manufacturers, and the exchange commission paid on exports. In the international arena, the great challenge is getting the WTO (World Trade Organization) to extend the Agreement on Subsidies and Compensatory Measures (Acuerdo de Subvenciones y Medidas Compensatorias), which expires in2007. Another challenge is the elimination of quotas, such as those that affect the garments made in our country with fabric imported from Asian countries.

Not everything is rosy, however. For example, the cost of labor in the Dominican Republic is the second highest in the region, topped only by Costa Rica, and electricity prices are also quite high (approximately US$0.12 per kilowatt, compared to the 0.02-0.05 cents per kilowatt prices in the United States), although the privatization process is complete. With regard to infrastructure, the Dominican economy has been growing at an annual rate of approximately 7.8 percent, and this represents another challenge for the Dominican Government.
The area that has most developed its textile and apparel industries is Santiago, a city located some 90 kilometers north of the country's capital of Santo Domingo. This growth has been fueled largely by the free zones that exist both in and around the city. The Santiago Industrial Free Zone, founded in 1971, is currently the largest in the country, with more than 80 companies employing some 50,000 workers. Of these companies, over 70% are occupied in the textile industry. The population in the area, which is located in the exuberant Cibao Valley, barely reaches one million inhabitants, which further highlights the importance of the textile-apparel industry in the region. Best sales prospects for fabrics

H.S. Number/ Product
50071000 Woven Fabrics of Noil Silk
50079000 Woven Fabrics of Silk or Silk Waste - Other Nesoi
52041900 Cotton Sewing Thread, not retail
52042000 Cotton Sewing Thread, for retail
52082990 Other Woven Cotton Fabric
52083140 Popln/Brdclth, Dyed
52083300 3 or 4- Thread Twill dyed
52114900 Woven Cot Fabric Lt 85% 54011000 Sewing Thread Synthetic
54077100 Woven Fabric if Synthetic Fil
54081000 Woven Fabric of Viscose Rayon
55081000 Sew Thread Mmf Fib
A. Statistical Data
Data Table - Textile Industry in the Dominican Republic Fabrics & yarns and manufactured textile products. USD Billions
1998 1999 2000 2001 (e)
a. Total market size 1.60 (e) 1.76
1.85 1.99
c. Total imports 1.60 (e) 1.76 1.85 1.99 d. Local Production (*) - - - -
e. Imports from the US 1.21 (e) 1.33 1.58 1.70
f. Exports to the US 2.30 2.33 2.51 2.52
g. Exchange rates 14.65
15.55 16.65 17.20 (e)
h. Total exports made up textile 2.85
2.40 2.57 2.65 products (apparel)

Note: Total Market equals Imports plus Local Production minus Exports.
The above statistics were provided by the Central Bank of the Dominican Republic.

(*) There is not local production of yarns and fabrics in the Dominican Republic.
Textile Exports to U.S. - CBI Region USD Million Country Amount Percentage
Dominican Republic 1,821 26
Honduras 1,736 24
El Salvador 1,178 17
Guatemala 1,108 16
Costa Rica 603 8
Nicaragua 249 3
Jamaica 209 3
Haiti 185 2
Others 39 1
B.Competition
The Dominican market for imported textile fabrics has grown considerably. The import of textiles for domestic consumption and manufacture in the free trade zone industries was USD $1.760 billion in 1999 with an increase to USD $87 million in 2000. Total imports were USD $1.847 billion in 2000 and are expected to increase in 2001 to USD $2.0 billion.

The U.S. represents 85% of the Dominican textile imports, but also the country imports fabrics and yarns from a number of countries like Taiwan, China, Hong Kong, Mexico, and South Korea. The main importers of textile fabrics are garment manufacturers operating as Free Trade industries, and distributors for retail fabric stores.
The Dominican Republic is expected to continue importing fabric from various countries, primarily from the U.S. Fabrics made in the United States that have a high level of recognition and acceptance among manufacturers. The CBPTA has been a key factor increasing considerably the U.S. textile exports to the Dominican Republic.
Key competitive factors for U.S. exporters are price, quality, and delivery times.

The Dominican market is price sensitive. The majority of the apparel manufacturers prefer to use good quality materials but at the lowest price possible. The CBTPA contributes to encourage local manufacturers to use U.S. fabrics and yarns. After interviewing textile industries for this report, we learnt from several manufacturers and contractors that in some cases their operational costs are lower when buying materials in other markets (i.e. Taiwan, China, Hong Kong), than using the benefits granted by the CBPTA; prices of U.S. materials some times are not competitive enough. Fabrics Import Market Share for 1999:
United States 75.53%
Taiwan 11.00%
South Korea 3.87%
Mexico 2.95%
China 1.07%
Hong Kong 0.62%
Others 4.96%

Fabrics Import Market Share for 2000:
United States 85.47%
Taiwan 1.87%
South Korea 3.06%
Mexico 0.28%
China 1.73%
Hong Kong 1.16%
Others 6.43%
C. End Users

End users of textile products in Dominican Republic are garment manufacturers, mainly operating as free trade zone industries, retail stores, seamstresses, and tailors.

There are 481 free trade zone industries operating in the Dominican Republic as of December 2000, and 277 of them dedicated to the textile activity (57.2%), and about 87,000 independent seamstresses and tailors. Textiles retail stores exist everywhere in Dominican Republic. Due to their large number, these shops consume considerable quantities of fabrics. D. Market Access
The Government welcomes foreign investment. Foreign investors are generally afforded national treatment and joint ventures are encouraged, though most foreign firms operate as locally incorporated subsidiaries.

There are no restrictions on converting or transferring funds associated with an investment into a freely usable currency (USD) at a legal market-clearing rate. US dollars are freely available and easy to obtain within the Dominican banking system.
Distribution
Dominican Republic is a bureaucratic country with many rules and regulations. When selecting a distributor, it is important to appoint one who can handle all permitting and customs issues as part of its service to its customers.

Developing relationships with small to medium apparel manufacturers could be a good place to begin, since many are looking for reliable ways to source needed fabrics. U.S. textile fabric suppliers may want to use a local representative and a bonded warehouse to service smaller producers.
An important element in selling successfully to Dominican Republic is appointing a good distributor. Generally speaking, the more pre-sales marketing and after-sales support and service that a product requires, the more important it is to have a local agent or distributor.

One of the most important decisions a U.S. company will make in the Dominican Republic will be the selection of a qualified and competitive sales representative and/or distributor. A distributor with well-positioned sales outlets in the major industrial parks and commercial centers will greatly enhance chances of capturing a large share of the market. English language capability, while important, should not be over-emphasized as a decision factor when selecting an agent or distributor. Reputation, product and industry knowledge, track record, enthusiasm, and commitment should also be weighed heavily. Dominican Republic can be a great place from which to enter the larger Caribbean market.

In deciding with whom to work, U.S. firms should take the time to get to know the people they are considering, both in business and social settings (i.e., visit their offices, request trade references). Properly trained, Dominican workers are eager to provide quality service. We suggest selecting a distributor who provides continuous on-going training, including both job-specific and secondary education elements. Trade Promotion
Participating in trade shows, such as the one organized by the Foreign Commercial Service of the American Embassy in September called "Expo USA", is advantageous for market exposure. Companies in the Dominican Republic are interested in meeting companies offering U.S. products and services. This is a great networking opportunity.

Additional information:

Trade Shows:
Event Dates Organizer
Expo USA 2001 September 20-22, 2001 U.S. Commercial Service
American Embassy, Santo Domingo Contact: Mrs. Sheila de Andujar, Event Coordinator
Tel. 809/ 227-2121 ext. 222, fax 809/ 920-0267
Services Available through the U.S. Commercial Service
The Commercial Service of the U.S. Department of Commerce offers several programs to help find suitable agent/distributor candidates, including the Gold Key Service (GKS) and International Partner Search (IPS). These programs are available in Dominican Republic and other Caribbean posts.

The "GOLD KEY" service provides a U.S. company with an in-depth introduction to the Dominican market. U.S. Commercial Service staff arrange four to six appointments per day with potential agents, distributors, representatives, and/or end-users. The service is designed to make the most efficient use of an executive's visit to Dominican Republic.
The Commercial Service of the U.S. Department of Commerce prepares market research reports, such as this one, on the most important sub-sectors of the Dominican market. These reports are entitled Industry Sector Analysis (ISA) reports and are available through the Commercial Service's District Offices in the U.S., and are in the National Trade Bank. Call 1-800-USA-Trade for details. Key Contact: U.S. Department of Commerce
Office of Textiles and Apparel (OTEXA)
Market Expansion Division (MED)
14th & Constitution Av. NW, Room 3100
Washington DC 20230
Tel: (202) 482-5153 Fax: (202) 482-2859
Web page: http://www.ita.doc.gov/industry/textiles
http://otexa.ita.doc.gov

DISCLAIMER
Information in this report relies on sources including Government Publications, Opinions of industry experts and other public sources. Infomat can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof. All prices subject to change without notice.

$3500 USD
For the 2008 Edition

Published: 2006 August
Market: Mens Womens Childrens
Region: Dominican Republic
Industry: Textiles
Pages: 45
Delivery: 7-12 Business Days
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