MARKET ACCESS UNDER AFRICAN GROWTH OPPORTUNITY ACCESS (AGOA)
The African Growth Opportunity Act (AGOA) is the United States trade and Development Act of 2000. It provides most liberal trade opportunity for eligible sub-Saharan African countries export products to enter to US market under duty free quota free treatment. The imitative works towards the development of Africa’s trade integration to US market
AGOA was based on the existing US Generalized System of Preferences (GSP), which used in the international trade regime since 1971. While the current “normal” US GSP program contains several limitations in terms of product coverage, AGOA amends the GSP program by providing duty-free treatment for a wider range of products coverage.
A major thrust of AGOA has been to support the ability of African economies to use the textile and apparel sectors as potential engines of economic growth, in much the same way as historically happened in South and South East Asia.
A “special rule" named Third Country Fabric Provision (TCFP) permits lesser developed AGOA beneficiary countries like Ethiopia to utilize fabric manufactured anywhere in the world.
This publication, How to export under African Growth Opportunity Act (AGOA), is intended to provide general information to all ACCSSA members and business communities at large on the trade benefits available under AGOA which is administered by U.S.A. and Ethiopian Customs.
That information is based on “AGOA Implementation Guide” (October 2000) see http://www.ustr.gov/regions/africa/agoaguides.html.
2. AGOA SUMMARY
A summary of AGOA’s evolution is provided below. It includes key provisions of AGOA since its inception includes:
Provided beneficiary countries in Sub-Saharan Africa with the most liberal market access (duty free quota free) to the U.S. market available to any country or region with which the U.S. does not have a free trade agreement
Botswana/Namibia included as Lesser Developed Countries (LDCs); additional textile provisions
Extended AGOA until Sept. 2015 and the Third Country Fabric Provision until Sept. 2007; increased emphasis on U.S. technical assistance in agriculture; Mauritius also included as an LDC
Extended Third Country Fabric Provision until 2012 and adds abundant supply provisions
Extended Third Country Fabric Provision until September 2015 and adds South Sudan an eligible country
3. COUNTRY ELIGIBILITY AND LIST OF SUB-SAHARAN AFRICAN COUNTRIES
Only Sub-Saharan African countries are considered for eligibility, AGOA beneficiary status have been awarded to approximately 40 countries (this number changes from time to time). Ethiopia is eligible since January 2001.
Countries eligible for AGOA in general and third country fabric provision in particular
Republic of Guinea-Bissau**
São Tomé and Principe
Republic of Madagascar**
All in bold and * are countries eligible for Third Country Apparel Provision (TCAP)
** Countries declared ineligible
2.1. PRODUCT ELIGIBILITY
The list of products adds under AGOA on regular GSP products (approximately 4,650) are 1800. Hence, the total duty free products tariff line items available under GSP+ AGOA are more than 6400. The most important items included under AGOA are footwear, handbags, luggage, textiles and apparel, flat goods, work gloves, leather wearing apparel, semi-manufactured and manufactured glass products, watches, electronic articles and steel articles. All AGOA eligible Ethiopian export products may enter to United States free of import duty if it qualify the origin and related rules.
The list of AGOA eligible products is available for downloading and may be found at http://www.agoa.gov.
2.2. HOW DOES AN EXPORTED PRODUCT QUALIFY FOR AGOA DUTY FREE TREATMENT?
AGOA product eligibility implies that a product, when produced in Ethiopia, may enter the United States free of import duty, if it complies with the requirements of the basic GSP origin and related rules, AGOA specific additional rules and US customs requirements. The basics GSP + AGOA rules of origin requirements are
2.3. WHAT DO CUSTOMS MEAN BY APPRASIED VALUE?
This is taken to mean the Transaction Value which includes;
The above costs are in addition to the direct cost of processing. These include all costs, whether directly incurred in or those that can be reasonably allocated to the growth, production, manufacture, or assembly of the merchandise in question. These include:
The costs that may NOT be included in the direct costs of processing are those are not “costs” of manufacturing. These include: profit and general expenses and business overhead such as administrative salaries; casualty and liability insurance; advertising; and sales representative’s salaries, commissions or expenses.
In general, shipping and other costs related to transporting the articles from the port of export to the U.S. are included neither in the value of the article nor in the value-added calculation.
2.4. WHO ADMINISTER AGOA?
The administration of AGOA program can be divided into two distinct areas. AGOA origin rule and other related rules administered by Ethiopian Revenues and Customs Authority. The office perform pre and post export verification, issues GSP certificate of origin and visa for textiles and apparel exports. From US side, the application of duty free treatment is the primary responsibility of the United States Customs Service. Therefore, the two customs co-operate each other to administer the program.
While the trade policy issues of AGOA are theoretically decided by the President of the United States, on the basis of advice provided by the Office of the United States Trade Representative (USTR).
2.5. WHAT ARE THE PROCEDURES TO GET CERTIFICATE OF ORIGIN?
If an export intends to get duty-free benefit under AGOA eligible goods in U.S, it must get certificate of origin document. The document is issues by ERCA, its procedures are
2.6. RECORD KEEPING
After the goods exported the exporters should maintain the followings records for a period of 5 years from the date of export.
3.1. TEXTILE AND APPAREL PRODUCTS
AGOA provides duty free preferential tariff treatment for imports of certain textile and apparel products from Ethiopia, provided that these products have original visa on commercial invoice to prevent illegal transshipment and the use of counterfeit documents.
3.2. WHAT ARE TEXTILES AND APPREL VISA REQUIREMENTS UNDER AGOA?
AGOA eligibility does not automatically imply eligibility under the textile and apparel provisions, which require the implementation of an effective visa system and an enforcement mechanism to prevent illegal transshipment.
To claim duty free preferential treatment of textile and apparel products under the Act, a shipment must obtain AGOA visa. The procedures to get visa for textiles and apparel products are
3.3. WHAT ARE APPAREL PROVISIONS AND RELATED RULES OF ORIGIN?
For the purpose of AGOA textiles and apparel eligibility, product grouped into the following apparel provisions, it determines how product meets the production process requirements to get duty free treatment when it enters to US.
Visa grouping 1-A:
Apparel assembled from U.S. fabrics and/or knit-to-shape components, from U.S. yarns. All fabric must be cut in the United States.
Visa grouping 2-B:
Apparel assembled from U.S. fabrics and/or knit-to-shape components, from U.S. yarns. All fabric must be cut in the United States. After assembly, the apparel is embroidered or subject to stone-washing, enzyme-washing, acid acid washing, perma-pressing, oven-baking, bleaching, garment-dyeing, screen printing, or other similar processes.
Visa grouping 3-C:
Apparel assembled from U.S. fabrics and/or U.S. and/or beneficiary countries knit-to-shape components, from U.S. yarns and sewing thread. The U.S fabric may be cut in beneficiary country, or in beneficiary countries and U.S.
Apparel assembled from beneficiary country fabrics and/or knit-to-shape components, from yarns originated in the U.S. and/or one or more beneficiary countries.
Visa grouping 5-E:
Apparel assembled, or knit-to-shape and wholly assembled, or both, in one or more lesser developed beneficiary countries regardless of the country of origin of the fabric or the yarn used to make such articles.. This preference grouping has limitations on benefits and is currently extended until September 30, 2015.
Visa grouping 6-F:
Kite-to-shape sweaters in chief weight cashmere.
Visa grouping 7-G:
Knit-to-shape sweaters 50 percent or more by weight or wool measuring 21.5 microns in diameter or finer.
· Visa grouping 8-H:
Apparel assembled from fabrics or yarns considered in short supply in the North Atlantic Free Trade Agreement (NAFTA), or designated as not available in commercial quantities in the US.
·Visa grouping 9-I:
Handloomed fabrics, handmade articles made of handloomed fabrics, or textile folklore articles- as defined in bilateral consultations: Ethnic printed fabric.
Visa grouping O-J:
Textile products of a lesser developed beneficiary country classifiable under chapter 50 through 60, or 63, that are wholly formed in one or more such countries from fibers, yarns, fabrics, fabric components or components knit-to-shape that are also the product of one or more such countries.
3.4. WHAT DEFINITIONS ARE USED?
For purposes of textiles provisions, Customs use the following definitions:
Apparel articles means goods classifiable in Chapters 61 and 62 and headings 6501, 6502, 6503,and 6504 and subheadings 6406.99 and 6505.90 of the HTSUS.
Assembled in one or more beneficiary countries when used in the context of a textile or apparel article has reference to a joining together of two or more components that occurred in one or more beneficiary countries, whether or not a prior joining operation was performed on the article or any of its components in the United States.
Cut in one or more beneficiary countries when used with reference to apparel articles means that all fabric components used in the assembly of the article were cut from fabric in one or more beneficiary countries.
Knit-to-shape articles means any apparel article of which 50 percent or more of the exterior surface area is formed by major parts that have been knitted or crocheted directly to the shape used in the apparel article, with no consideration being given to patch pockets, appliques, or the like. Minor cutting, trimming, or sewing of those major parts will not affect the determination of whether an apparel article is “knit-to-shape.”
Knit-to-shape components when used with reference to textile components, means components that are knitted or crocheted from a yarn directly to a specific shape containing a self-start edge. Minor cutting or trimming will not affect the determination of whether a component is “knit-to shape.”
Major parts means integral components of an apparel article including Non AGOA produced collars, cuffs, waistbands, plackets, pockets, linings, paddings, trim, accessories, or similar parts or components.
Originating means having the country of origin determined by application of the AGOA textiles and apparel rules of origin
Wholly assembled in. When used with reference to a textile or apparel article in the context of one or more beneficiary countries or one or more lesser developed beneficiary countries, the expression “wholly assembled in” means that all of the components of the textile or apparel article (including thread, decorative embellishments, buttons, zippers, or similar components) were joined together in one or more beneficiary countries or one or more lesser developed beneficiary countries.
Wholly formed fabrics. “Wholly formed, “ when used with reference to fabric(s), means that all of the production processes, starting with polymers, fibers, filaments, textile strips, yarns, twine, cordage, rope, or strips of fabric and ending with a fabric by a weaving, knitting, needling, tufting, felting, entangling or other process, took place in the United States or in one or more beneficiary countries.
Wholly formed on seamless knitting machines. “Wholly formed on seamless knitting machines,” when used to describe apparel articles, has reference to a process that created a knit-to-shape apparel article by feeding yarn(s) into a knitting machine to result in that article. When taken from the knitting machine, an apparel article created by this process either is in its final form or requires only minor cutting or trimming or the addition of minor components or parts such as patch pockets, appliques, capping, or elastic strip.
Wholly formed yarns. “Wholly formed,” when used with reference to yarns, means that all of the production processes, starting with the extrusion of filament, strip, film, or sheet and including slitting a film or sheet into strip, or the spinning of all fibers into yarn, or both, and ending with a yarn or plied yarn, took place in a single country.
3.5. WHAT SPECIAL RULES APPLY?
Special rules set for purposes of determining the eligibility of articles for preferential treatment. These special rules are as follows;
3.6. FINDINGS AND TRIMMINGS
As a general rule, an article otherwise eligible for preferential treatment under section 112 will not be ineligible for that treatment because the article contains findings or trimmings of foreign origin, if the value of those foreign findings and trimmings does not exceed 25 percent of the cost of the components of the assembled article. This provision specifies the following as examples of findings and trimmings:
However, as an exception to the general rule, sewing thread will not be treated as findings or trimmings in the case of an article for which assembly by U.S. thread is a requirement for eligibility for preferential treatment.
3.7. SPECIAL INTERLINGS
This is, a chest type plate, a “hymo” piece, or “sleeve header,” of woven or weft-inserted warp knit construction and of course animal hair or man-made filaments. Under this rule, an article otherwise eligible for preferential treatment under section 112 will not be ineligible for that treatment because the article contains interlinings of foreign origin, if the value of those interlinings (and any findings and trimmings) does not exceed 25 percent of the cost of the components of the assembled article.
3.8. DE MINIMIS (TOLERANCE) RULE
There is a de minims rule which provides that an article otherwise eligible for preferential treatment will not be ineligible for that treatment because the article contains fibers or yarns not wholly formed in the United States or one or more beneficiary sub-Saharan African countries if the total weight of all those fibers and yarns is not more than 10 percent of the total weight of the article.
3.9 DIRECT IMPORT REQUIREMENT
As previously stated, in order to claim preferential treatment, the articles must be imported directly into the Customs territory of the United States from a beneficiary sub-Saharan African country.
For purposes of this provision, the words “imported directly” mean:
3.10. VERIFICATION AND JUSTIFICATION OF CLAIM FOR PREFERNTIAL TREATEMENT
A claim for preferential treatment, including any statements or other information contained on a Certificate of Origin or visa submitted to US Customs, is subject to verification by US Customs Service.
All records required to be made, kept, and made available to Customs by the exporter are;
If the President determines, based on sufficient evidence, that an exporter has engaged in transshipment with respect to all AGOA eligible products in general and textile and apparel articles in particular, the President shall deny all benefits of the AGOA to such exporter, any successor of such exporter, and any other entity owned or operated by the principal of the exporter.