MARKET ACCESS UNDER AFRICAN GROWTH OPPORTUNITY ACCESS (AGOA)

SECTION I

1. BACKGROUND

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:

Date AGOA act Summary
2000 AGOA I 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
2002 AGOA II Botswana/Namibia included as Lesser Developed Countries (LDCs); additional textile provisions
2004 AGOA III 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
2006 AGOA IV Extended Third Country Fabric Provision until 2012 and adds abundant supply provisions
2012 AGOA V 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

Angola

Benin*

Botswana*

Burkina Faso*

Burundi

Cameroon*

Cape Verde*

Chad*

Comoros

Congo (Republic)

Congo (DRC)

Cote de’Ivoire

Djibouti

Ethiopia*

Gabon

Gambia*

Ghana*

Guinea

Republic of Guinea-Bissau**

Kenya*

Lesotho

Malawi*

Mali**

Mauritania

Mauritius*

Mozambique*

Namibia*

Niger*

Nigeria*

Rwanda*

São Tomé and Principe

Senegal*

Seychelles

Sierra Leone*

South Africa

South Sudan

Swaziland*

Tanzania*

Togo

Uganda*

Zambia*

Republic of Madagascar**

NOTE:

All in bold and * are countries eligible for Third Country Apparel Provision (TCAP)

**   Countries declared ineligible

SECTION II

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

  1. The product must be imported into the United States directly from Ethiopia or pass through another country in a sealed container and addressed to a location in the United States,
  2. The product must be the growth, product, or manufacture of Ethiopia, by fulfilling the relevant Rules of Origin requirements for general or apparel items respectively,
  3. If foreign materials are imported into Ethiopia first, to be used in the production of an AGOA-eligible product, the sum of the cost of the materials produced in the Ethiopia, plus the costs of processing, must equal at least 35 percent of the product’s appraisal value when the product is sold for export into the United States,
  4. In the case of clothing/apparel, the 35% rule does not apply directly, instead, the goods need to comply with the respective textiles Rules of Origin requirements;
  5. The cost or value of the materials used that are produced in Ethiopia or more beneficiary sub-Saharan African countries shall be counted towards the 35 percent requirement (cumulation among AGOA-designated countries).

2.3.  WHAT DO CUSTOMS MEAN BY APPRASIED VALUE?

This is taken to mean the Transaction Value which includes;

  • Packing costs incurred by the buyer
  • Selling commission incurred by the buyer
  • Value of any assistance provided to the producer free of charge by the buyer
  • Royalty or license fee that the buyer is required to pay as a condition of the sale
  • Proceeds accruing to the seller of any subsequent resale, disposal, or use of the imported merchandise

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:

  • Actual labor, fringe benefits, and on-the-job training costs,
  • Engineering, supervisory, quality control, and similar personnel costs,
  • Dies, molds, and tooling costs, as well as depreciation of machinery and equipment and
  • Research, development, design, blue prints and engineering, and inspection and testing costs.

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

  • The exporter must apply to ERCA to get certificate of origin for GSP eligible products,
  • Prior to export of goods Customs verify the production process to confirm the satisfaction of the origin rule and other related rules for each product.
  • GSP Form A issues for GSP eligible products and visa for textiles and apparel products if the origin rules satisfied.

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.

  • Records that demonstrate that the article qualifies for duty-free treatment because it is the growth, product or manufacture of Ethiopia, Such as a record of receipt from a  farmer whose crops are grown Ethiopia,
  • If the exporter is claiming that the article is the product of, or the manufacture of, a Ethiopia, the exporter must have records that indicate that the manufacturing or processing operations reflected in or applied to the article meet the country of origin requirements. A properly completed GSP Form A Certificate in the prescribed format is one example of a record that would serve this purpose,
  • Shipping document that show how the article moved from the Ethiopia to the United States. If the exported article was shipped through a country other than Ethiopia and  the invoices and other documents do not show the United States as the final destination, the Exporter also must have documentation that demonstrates that the conditions set forth in the regulations were met,
  • Records that demonstrate the cost or value of the materials produced in Ethiopia and  the direct costs of processing operations incurred that were relied upon by the exporter to determine that the article met the 35 percent value,
  • Establish and implement internal record keeping system that provide for the periodic  review of the accuracy of the records which establish that an article is the growth,  product or manufacture of Ethiopia,
  • The exporter must be prepared to produce the required records within 30 days of a   request from Customs and
  • Be prepared to explain how those records and the internal controls referred to above  justify benefiting duty-free treatment.

SECTION III

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

  • Exporter should apply to ERCA by submitting self-declared AGOA certificate of origin, Original invoices, shipping documents and bank documents.
  • Shipment shall be visaed by stamping an original circular visa in blue ink only on the front of the original commercial invoice by ERCA.
  • The original visa shall not be stamped on duplicate copies of the invoice. The original of the invoice with the original visa stamp shall be send to importer in US in order to claim preferential tariff treatment,
  • Duplicates of the invoice and/or visa may not be used for this purpose,
  • Each visa stamp shall include  the visa number, the preferential groupings the apparels qualify for, a country code, and a numerical serial number identifying the shipment;  ERCA officials signature and the quantity of goods being shipped.
  • A visa shall not be accepted and preferential tariff treatment shall not be permitted if the visa number, date of issuance, authorized signature, correct grouping, quantity or the unit of quantity is missing, incorrect or illegible, or has been crossed out or altered in any way.
  • If the visa is not acceptable, a new visa must be obtained before preferential tariff treatment can be claimed. Waivers are not permitted,
  • If the visaed invoice is deemed invalid, the United States Customs Service will not return the original document after entry, but will provide a certified copy of it for use in obtaining a new correct original visaed invoice.

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.

Visa grouping 4-D:

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:

  • sewing thread,
  • hooks and eyes,
  • snaps, buttons,
  • “bow buds,”
  • decorative lace trim,
  • elastic strips (but only if they are each less than 1 inch in width and used in the
  • production of brassieres),
  • zippers (including zipper tapes), and
  • labels.

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:

  • Direct shipment from Ethiopia to the United States without passing through the territory of any non-beneficiary country,
  • If the shipment is from Ethiopia to the United States through the territory of any non-beneficiary country, the articles in the shipment do not enter into the commerce of any non-beneficiary country while en route to the United States and the invoices, bills of lading, and other shipping documents show the United States as the final destination; or
  • If the shipment is Ethiopia to the United States through the territory of any non-beneficiary country, and the invoices and other documents do not show the United States as the final destination, the articles in the shipment upon arrival in the United States are imported directly only if they:
  • Remained under the control of the Customs authority of the intermediate country;
  • Did not enter into the commerce of the intermediate country except for the purpose of sale other than at retail, and the port director is satisfied that the importation results from the original commercial transaction between the importer and the producer or the producer’s sales agent; and
  • Were not subjected to operations other than loading or unloading, and other activities necessary to preserve the articles in good condition.

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;

  • Documentation and other information in Ethiopia regarding the country of origin of an article and its constituent materials, including, but not limited to, production records, information relating to the place of production, the number and identification of the types of machinery used in production, and the number of workers employed in production; and
  • Evidence or document for the use of U.S. materials in the production of the article in question, such as purchase orders, invoices, bills of lading and other shipping documents, and Customs import and clearance documents.

3.11.   Penalties

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.

 

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