Ambassador Zoellick hails passage of Agoa III legislation
After intense lobbying from various stakeholder groups, AGOA III has finally been passed by both the US House of Representatives and the Senate. US President George Bush, who had on various occasions expressed his desire to extend the trade preferences offered to Africa, subsequently wrote the latest amendments into law on 13 July 2004.
Despite wide bi-partisan support among US lawmakers, it took almost a year for these amendments to be passed. Earlier versions of the proposed AGOA III legislation, including H.R. 3572 and S. 1900, were previously introduced in Congress in November 2003, but it was a somewhat watered-down version in H.R.4103 that finally made it through Congress.
Central to the AGOA III legislation is an extension to the waiver from normal Rules of Origin (RoO) for wearing apparel as applicable to so-called “Lesser Developed Beneficiary Countries” (LDBCs). This time-bound waiver allowed LDBCs the use of third country fabrics, i.e. fabrics produced in countries not falling under AGOA. In practice, this meant that garment producers in LDBCs were not constrained by local and regional shortages of fabrics and yarns, and could utilise foreign-produced fabrics in the production of AGOA-compliant wearing apparel. Besides Mauritius and South Africa, all AGOA-eligible countries having complied with the wearing apparel provisions were deemed to be LDBCs for this purpose.
While the third-country fabric provision was set to expire in September 2004, four years after the inception of AGOA, the new legislation extends this deadline by a further three years subject to certain conditions. Firstly, quantitative restrictions (the quota cap) – based on a percentage of the previous year’s total imports of apparel into the US – continue to apply. Secondly, this quota cap will be reduced by half in the third year after the expiry of the original deadline in 2004. This reduction may well play a role, since quota utilisation under the LDBC rule for the year ended September 2003 stood at 62%, and eight months into the current quota period (to May 2004) stands at 43%.
AGOA III also extends the Act’s original date of expiry from 2008 to 2015, something that is likely to have a positive impact on trade and investment in Africa. While the apparel preferences are likewise extended to 2015 (this does not apply to the time-bound waiver on the use of third country fabrics discussed above), the African apparel exports under AGOA continue to be subject to the same tariff quota levels. This cap, which increases from 3% of total US apparel imports in year 1 (2001) to 7% in the final year, continues unchanged. Between 2008 and 2015 the cap will therefore remain the same, based in each year on the previous period’s volume of apparel imports.
Other provisions in AGOA III relate to technical assistance for Africa, and are aimed at assisting African producers especially with issues relating to compliance with US agricultural standards. Technical amendments relate to “collars and cuffs”, whereby AGOA-eligible apparel exports will no longer lose their eligibility status when using foreign-produced collars and cuffs. Ethnic printed fabrics are also added to the Category 9 “folklore and handmade” categories.
Summary of Key Features (and omissions) of AGOA III (H.R. 4103)
- AGOA extended from 2008 to 1015
- Apparel provisions for LDBCs extended from September 2004 to September 2007. The applicable quota is set at 2.3571% of total US imports of apparel in the previous period, but drops by half to 1.1785% in the third year (October 2006 – September 2007).
- Normal apparel quota remains unchanged, increasing in equal increments to 7% by 2008. Between 2008 and 2015, it will remain at 7%.H.R. 3572 had proposed an increase of the quota to 10% by 2015, while S. 1900 proposed removing it altogether
- Foreign collars and cuffs may be used in the production of AGOA-eligible garments
- Ethnic printed fabrics now AGOA-eligible, provided they contain selvedge on both edges, are less than 50 inches wide, are classifiable under HTS 5208.52.30 or 5208.52.40 of the Harmonised Tariff System of the United States, contain African designs and symbols, of a type normally produced for and sold on African markets, and are printed and waxed in one or more eligible country from yarn originating in the US or a beneficiary country
- Where beneficiary countries migrate to a FTA with the US, other beneficiary countries will not be disadvantaged as such countries will still be regarded as AGOA beneficiaries for cumulation purposes (e.g. for purposes of sourcing regionally produced fabrics)
- AGOA III does not remove the import sensitivity test requirement, as envisaged by earlier versions of AGOA III
- Does not allow the US Congress to prohibit the President from terminating the eligibility of an AGOA beneficiary country
- Does not extend duty-free treatment to certain statutorily excluded agricultural products, as envisaged by H.R. 3572
- Does not remove the prohibition on the Overseas private Investment Corporation (OPIC) on investment in sensitive US industries, as envisaged by H.R. 3572
- Does not allow the US President to extend the LDBC rule for apparel beyond 2007 to countries that lack sufficient domestic fabric-making capacity, as envisaged by H.R. 3572.
[Source: Eckart Naumann]