Report of the Committee for the Implementation of Textile Agreements:

Approval of 8 Requests for Certain Woven Fabrics

From the Government of the Dominican Republic under

The CAFTA-DR Commercial Availability Provisions

On June 18, 2008, the Chairman of the Committee for the Implementation of Textile Agreements (“CITA”) received 8Requests for commercial availability determinations(“Requests”) under the CAFTA-DR from the Government of the Dominican Republic (“GDR”). The record of theseRequests, Responses with Offers to Supply, and Rebuttal submissions are found at under the following reference numbers:

70.2008.06.18.Fabric.GovofDominicanRepublic

71.2008.06.18.Fabric.GovofDominicanRepublic

72.2008.06.18.Fabric.GovofDominicanRepublic

73.2008.06.18.Fabric.GovofDominicanRepublic

74.2008.06.18.Fabric.GovofDominicanRepublic

75.2008.06.18.Fabric.GovofDominicanRepublic

76.2008.06.18.Fabric.GovofDominicanRepublic

77.2008.06.18.Fabric.GovofDominicanRepublic

On June 19, 2008, in accordance with CITA’s procedures (72 FR 13256 (March 26, 2007)) (“procedures”), CITA notified interested parties of each of the Requests and asked that Responses with Offers to Supply (“Responses”) be submitted by July 2, 2008 and any Rebuttals be submitted by July 9, 2008.

The Chairman of CITA received Responses from Monte Textil S.A. (“Monte”) to each of the eight Requests. Rebuttals to each of these Responses were submitted by the GDR, claiming that Monte had not followed CITA’s procedures in its submissionsand had provided no evidence that the company could provide the requested quantities of the subject fabrics in a timely manner.

In accordance with Section 203(o)(4) of the CAFTA-DR Implementation Act, Article 3.25 of the CAFTA-DR Agreement, and section 8(c)(4) of CITA’s procedures, because there was insufficient information to make a determination on the eight Requests within 30 days, CITA extended the period of making its determinations by 14 U.S. business days.

The Requests, the Responses and the Rebuttals

Requests by the GDR - In the Requestssubmitted on June 18, 2008, the GDR asked that CITA determine that the eight different fabrics were not commercially available in the CAFTA-DR countries. The GDR provided a quantity and specifications for each fabric, including yarn size, thread count, fabric weight and width, and finishing. The GDR stated in each of its Requests that the subject fabric had been included in a previous Request by the GDR for 29 fabrics, submitted on June 18, 2007, reference number: 23.2007.06.18.Fabric.GovernmentoftheDominicanRepublic (“the 2007 case”). The GDR also argued that its efforts to conduct due diligence were based on the information on the record of the 2007 case. That is, as Monte and Liztex Guatemala (“Liztex”) had been the only CAFTA-DR suppliers to submit Responses to the Requests in that case, the GDR explained that it limited its inquiries to those two companies. In its Requests, the GDR noted that it had tried for a total of 17 months (since before its previous Request in 2007) to source the fabric from Monte and Liztex. In its request, the GDR summarized its exchange with both companies. With respect to Monte, Grupo M, a textile and apparel manufacturer in the Dominican Republic, had contacted the company directly, provided detailed information regarding the subject fabrics, and requested samples. The GDR noted that because Monte had described its standard business practice with respect to the development of new fabrics, Grupo M followed those procedures and provided detailed information and samples to Monte and negotiated a price. However, the GDR stated that after the GDR provided all the requisite information, Monte demanded that Grupo M submit a purchase order for 100 yards to produce a sample of fabric. Grupo M explained to Monte that its standard business practice was not to pay for samples. Once Grupo M stated its practice, the GDR asserted that Monte failed to respond to any of Grupo M’s later inquiries. As a result, the GDR argued that Monte had not demonstrated that it was capable of supplying commercial quantities of the subject fabric in a timely manner.

Responses by Monte - In its Responses to the GDR’s Requests, Monte stated its ability to supply the subject fabrics, and provided some detailed information regarding its production capability: that it was a totally integrated mill; that it spun yarn, printed, dyed and finished fabrics; that it manufactured open end and ring spun yarns of cotton, polyester, and blends of cotton and polyester; and that it could produce fabrics in a range of weights, widths, constructions and finishes. Monte also explained that for product development, its standard practice was to charge a nominal fee to produce a sample, and that such fees were credited back to the customer should it place a subsequent order. Monte asserted that the fact that they charge for product development is not an indication that it cannot make the fabric. Monte further noted that the reason it charged for samples was because it had developed many fabrics for potential customers that did not result in subsequent orders. Monte states that sample fabrics can easily be produced for review if the product development fee is provided by the prospective customer.

Rebuttals by the GDR - In its Rebuttals to Monte’s Responses, the GDR argued that Monte had failed to demonstrate that it has the capability to make the fabrics in question and did not include sufficient information as required by CITA’s procedures under Section 6(b)(3). The GDR noted that not only had Monte not provided samples, in its Responses, the company provided only a “broad recitation of its general production capabilities,” and did not provide sufficient information on its capabilities to produce the subject fabrics and does not make any representations regarding supplying a substitutable fabric. The GDR asserts that production of a sample is a normal and standard business practice and no customer could be expected to issue a purchase order.

The July 21, 2008 Meeting

In reviewing the submissions on the records of the proceedings, CITA determined that Monte’s Responses had provided some detailed information on its production capability, sufficient to accept the Responses under CITA’s procedures. However, CITA also determined that the information submitted on the record was insufficient in order for CITA to make its determinations. Therefore, in accordance with Section 203(o)(4) of the CAFTA-DR Implementation Act and section 8(c)(4) of CITA’s procedures, because there was insufficient information to make a determination after 30 business days, CITA extended the period of making a determination by 14 business days. In its notice of the meeting, CITA noted that the purpose of the meeting was to allow the interested entities to provide additional evidence to support their claims and information previously submitted to CITA, given that the requestor and respondent disagreed on the respondent’s abilities to supply the subject products. Seeprocedures at section 8(c)(4)(i).

CITA held a public meeting on July 21, 2008 with representatives of the GDR, Grupo M, and Monte. In the meeting, Grupo M stated that discussions with Monte have been going on for some time but that Grupo M has yet to see any fabrics that meet the exact specifications outlined in the Requests. Grupo M also stated its objection to Monte’s demand for payment for samples of the fabrics in question because it felt that the standard commercial practice was to provide samples free of charge. In Grupo M’s experience, most mills around the world provide free samples of approximately 5 yards so that a garment can be produced for customer approval. As a vertically integrated manufacturer of knits, Grupo M understood the need to absorb some development charges in-house because not every potential customer places an order. Grupo M noted that it could not accept hand-loomed samples as it required a production sample that utilized different finishes that may change the look or feel of the fabric. Most of the company’s current regional suppliers are willing to provide these samples for free in an effort to keep business in the Western Hemisphere.

In its opening remarks, Monte stated that it began charging for samples because there were too many companies that asked for a fabric to be developed but never placed production orders. Developing a single fabric usually costs between $2,000 and $5,000 depending on whether Monte’s internally-produced yarn can be used or if yarn must be ordered from another company. Monte submitted a copy of an invoice from a U.S. yarn company to show that it spent more than $2,000 to purchase yarn for a fabric it developed for another customer.

Monte expressed its concern that if it did develop the fabrics with no charge to Grupo M, it would absorb the total cost for development, should Grupo M subsequently decide not to place an order. Monte stated that it does have the necessary equipment to produce fabrics that meet the specifications outlined in the Requests, but, for one of the fabrics specified, it will have to purchase yarn from other companies. Monte is not willing to spend more than $15,000 to develop the 8 subject fabrics without a purchase order for samples. Also, it is unusual for Monte to develop so many fabrics at once because the process is sometimes long. However, Monte reiterated that it can provide samples of a fabric, made to Grupo M’s exact specifications, within 2 weeks of Grupo M placing a purchase order for the sample.

Grupo M responded that Monte should be able to provide samples that meet the specifications of at least two or three of the GDR’s Requests because it produces yarns up to 40 denier in-house, so they would not be required to invest in purchasing yarn from other sources. Also, Grupo M reiterated that before its customers would commit to a contract, they want to see the exact fabrics they would be buying as well as how the finished garment would look and feel. Grupo M argued that sample books containing fabrics that, while similar, do not meet exact specifications are not helpful for Grupo M’s retail customers.

Monte stated that more than 40% of its customers request newly developed fabrics and Monte does not start the process without a purchase order for 100 yards. The cost for that amount would be $300 to $400. Monte claimed it was charging only a nominal fee, charged only as an indication of a manufacturer’s serious interest in purchasing the fabric, and not requiring payment for the entire development cost, which ranged between $2,000 and $5,000 per fabric.

Monte asked Grupo M why they were not willing to issue purchase orders to start the fabric development process if demand for the fabrics is strong. Monte also noted that payment of samples is not addressed in CITA’s procedures, and, therefore, should not be an issue in determining its capability to produce the subject fabrics. Monte further emphasized that CITA’s procedures do not require that it provide samples at all. Monte stated it had proof it could produce the fabrics, referring to invoices it had for the relevant production machinery.

CITA asked Grupo M for an idea of the annual sales volume for one of the subject fabrics. Grupo M responded that depending on the fabric and customer, orders could be between 200,000 and 300,000 yards per year. CITA stated that it seemed as if Monte had a viable market opportunity given that the fabrics have been in demand for more than a year. CITA asked Monte if it had considered developing one line to prove its ability to produce the subject fabrics. Monte responded that it was only interested in developing actual business, and that it did not want to make the investment if there would be no orders. Monte stated that its policy was to charge a fee for samples where there are no existing programs using the fabric being developed. CITA asked Grupo M if there were any circumstances in which it would be willing to purchase samples. Grupo M explained that it cannot guarantee orders due to the nature of the retail business, and that it would have been easier for Grupo M to make a decision if Monte had provided at least one or two fabrics with the requested specifications.

Commercial Quantities in a Timely Manner

Sufficiency of Monte’s Responses:

Under Section 6 of CITA’s procedures, a CAFTA-DR supplier must include in the Response its objection to the Request and information regarding the responder’s production capability, including information on its current ability to make the subject product. In its Rebuttals, the GDR argued that Monte’s Responses did not meet CITA’s requirements, in that they did not include offers to supply the subject products, nor did they include sufficiently detailed information regarding Monte’s current ability to make the subject product. CITA notes that the Responses included a statement objecting to the Request, as well as an offer to supply the subject fabric. Moreover, Monte’s Responses also provided some detailed information with regard to the company’s production capability to supply the subject fabrics. Therefore, CITA notes that Monte’s Responses met its requirements under Section 6 of its procedures.

The Commercial Availability of the Subject Products:

CITA notes that these casesare unique in that it represents the first Requests under CAFTA-DR commercial availability provisions that include the subject product of a previously denied Request, in this instance, the 2007 case. In that proceeding, Monte had offered to supply the same eight fabrics that are the subject of the pending cases.

CITA’s procedures require both requesters and responders to provide information to substantiate their claims regarding the commercial availability of the subject product. Section 4(b)(3) of CITA’s procedures requires requesters to show that they have made reasonable efforts to obtain the subject product from CAFTA-DR suppliers and section 6(b)(3) requires responders to demonstrate that they have the capability to make the subject product. Under the CAFTA-DR commercial availability provisions, CITA does not investigate claims made by requesters and responders, but relies on the information provided in their submissions.

The 2007 Case:

As the pending Requests follow up to a previously denied Request involving the same subject fabrics, as well as both the GDR and Monte, CITA determined that is relevant to examine the facts on the record and CITA’s analysis in the 2007 case. In its due diligence reported in the 2007 case, the GDR engaged in relatively little communication with Monte in order to source the fabrics: DR manufacturers’ did not engage directly with Monte, the manufacturers did not provide samples in response to Monte’s request, and did not request any additional information with respect to Monte’s production capability. In the course of the 2007 proceeding, Monte presented sufficiently detailed information, both in its Response and at the public meeting, regarding its production capability in terms of the equipment it utilized and its capacity. Monte also described in detail its standard business practice with respect to the development of new fabrics: it would first negotiate a price with the potential customer, request samples of any existing fabrics meeting the customer’s specifications, and within 1 to 2 weeks, produce a sample for the customer’s review. Because CITA found that Monte provided sufficient information to demonstrate that it was capable of producing the fabrics, and the GDR had not made reasonable efforts to source the fabrics from Monte, CITA found that the fabrics Monte offered to supply were commercially available. However, CITA also noted that it would continue to monitor the developments in business practice that were illustrated in the 2007 case.

The Pending Requests:

Due Diligence - In the pending Requests, the GDR described its efforts in the course of its due diligence to source the fabrics from Monte. Following CITA’s determination in the 2007 case, a specific manufacturer in the Dominican Republic, Grupo M, engaged in extensive communications with Monte regarding the specifications of the fabrics and described what it required from Monte to present its own customers with samples for review. Grupo M reached an agreement with Monte on prices and provided samples from which Monte could begin to develop the product. However, after these exchanges of information, wherein Grupo M adhered to Monte’s described business practice to develop new products, Monte then informed Grupo M that it would only develop the fabric and provide samples after Grupo M paid for the development of those samples by issuing a purchase order for 100-yard samples for each of the 8 subject fabrics. According to the information supplied to CITA, this was the first time that Monte revealed that it required payment for samples, either in the 2007 case, or in subsequent communications with Grupo M. When Grupo M responded to Monte that it was not its standard business practice to pay for samples, Monte apparently ceased communications with Grupo M, and did not respond to any of Grupo M’s subsequent attempts to contact the company.

Information Submitted to CITA -

Inits Requests, the GDR argued that its efforts in due diligence substantiated its claim that, even after Grupo M had made substantial efforts over a 9 month period to source the fabrics, Monte had not provided sufficient information to demonstrate that it could supply the fabrics in commercial quantities in a timely manner. Monte’s Responses provided some detailed information regarding Monte’s ability to supply the subject fabrics, described its business practice with regard to samples, and its requirement for payment for samples meeting exact specifications. Because there was insufficient information on the records of the proceedings, CITA extended its deadline to make its determinations, and invited interested entities to a public meeting. The July 21, 2008 public meeting was conducted to provide an opportunity for the interested entities to submit additional information to substantiate the claims and information contained in the Requests, Responses and the Rebuttals. In the public meeting, both the GDR and Monte focused their remarks on the issue of the provision of samples. Monte conceded that after it advised Grupo M that it required payment for samples in November 2007, it did not respond to Grupo M’s subsequent inquiries, including Grupo M’s last attempt to communicate with Monte in April of 2008. However, Monte did not submit additional detailed information to substantiate its claim that it has the capability to supply the subject fabrics.