Disaster in Haiti: Impact on U.S. Apparel Imports

Haitian Garment workerThe earthquake that ravaged Haiti on Jan. 12 disrupted the island?s crucial apparel industry, crippling the livelihood of thousands of Haitians and curtailing a substantial chunk of the island?s exports to the United States.

Apparel and textile products make up more than 75 percent of Haiti?s exports to the United States. According to the American Apparel and Footwear Association, Haiti is the 17th-largest supplier by volume of apparel products to the United States. Kevin M. Burke, the association?s president and CEO, said the group is assisting members whose operations in Haiti were affected, such as Hanesbrands Inc.?????

?With news of this earthquake, AAFA immediately began reaching out to members who are active in Haiti and has maintained communication with them throughout the day. At this time, our members are focusing on the safety of their workers and supporting rescue and relief operations to help the people of Haiti,? Burke said on Jan. 13.

Hanesbrands said three of the four sewing operations it contracts with to make its men’s casual wear and underwear T-shirts were affected by the earthquake. Two of the contractors reported little to no damage, with the other reporting some structural damage.

The garment industry is the single largest sector of the Haitian economy, employing 21,000 workers in 30 factories and accounting for 8 percent of the country?s total formal sector employment. U.S. industry analysts say apparel production has fallen 50 percent to 70 percent since the 7.0 magnitude earthquake struck the country on Jan. 12 and that it will take at least three months for most of it to resume.

Under the Haitian Hemispheric Opportunity through Partnership Engagement Act of 2006 (the HOPE Act), certain Haitian-made apparel and other articles are allowed to enter the United States duty-free. The HOPE II Act of 2008 extended the apparel preferences to 2018. U.S. lawmakers say the program is intended to foster stability and economic development in Haiti by encouraging U.S. companies to invest in the island?s textile and apparel industry.?

Prior to the earthquake, the program appeared to be working as manufacturers? — mainly from the United States, Canada and South Korea — closed plants elsewhere to take advantage of Haiti?s low labor costs and preferential access to U.S. markets. Typically, U.S. companies ship raw materials, pre-cut fabric and equipment to Haiti for apparel assembly and Haitian firms provide labor on a contractual basis. Clothing and other textile exports from Haiti to the United States totaled $424 million between January and October of 2009, a 22 percent increase from the same period in 2008.
Even so, the industry was still struggling to reach its potential, hampered by high electricity costs, frequent blackouts, limited access to water, transportation snags and a lack of adequate factory space, investors say. The earthquake has exacerbated those conditions, with new damage to roads, bridges, port infrastructure and power systems.
Some apparel companies are already shifting gears. Hanesbrands said its contractor that did not suffer damage is located near the Dominican Republic border and will use ports in that country to transport its goods. Hanesbrands also said it will increase production at its existing plants and contractors in the Dominican Republic, Central America and Asia to minimize the disruption in Haiti.