TRALAC - Trade Law Centre

Changes to AGOA passed by US House of Representatives

Tuesday, 30 September 2008

Source: Ways and Means Committee (US Government)

Earlier today, the U.S. House of Representatives approved, by unanimous consent, critical trade legislation to extend trade expiring trade preference programs that have played an important role in the nation’s trade and development efforts for decades. The legislation, H.R. 7222, would extend the Generalized System of Preferences and the Andean Trade Preferences Act for one year. The bill makes important changes to the U.S. trade preference program with the African countries (the African Growth and Opportunity Act). H.R. 7222 also creates an important new textile and apparel program that benefits both U.S. textile producers and Dominican Republic apparel producers. The legislation now moves to the U.S. Senate for approval.

“This legislation would prevent these valuable trade preferences from expiring,” said Chairman Rangel. “This bill received unanimous support in the House and it is now up to the U.S. Senate to act immediately so that these benefits remain in place.”

Summary of provisions included in H.R. 7222:

One Year Extension of GSP and ATPA

The Generalized System of Preferences (GSP), in effect since 1976, is the basis for all U.S. trade preference programs. The program provides preferential treatment for 4,650 products from 144 developing countries, including 43 least-developed countries. GSP currently expires on December 31, 2008.

First enacted in 1991, the Andean Trade Preferences Act (ATPA) provides duty-free treatment to certain exports from Colombia, Peru, Ecuador and Bolivia. ATPA currently expires on December 31, 2008.

Changes to the African Growth and Opportunity Act

H.R. 7222 makes critical, time-sensitive changes to the African Growth and Opportunity Act (AGOA). These changes are needed to preserve existing jobs in AGOA countries and preserve sourcing options for U.S. importers. These changes do not negatively impact U.S. textile and apparel producers or exports.

Abundant Supply. H.R. 7222 repeals an “abundant supply” requirement that restricts least-developed AGOA countries’ ability to use AGOA’s flexible “third country fabric” rule (which provides duty-free treatment to apparel assembled in a least-developed AGOA country regardless of the source of the fabric). The “abundant supply” provision was originally intended to encourage vertical integration in Africa. However, in practice, the denim restriction and the potential for additional restrictions have created uncertainty for AGOA apparel producers and U.S. retailers, resulting in lost jobs, trade and investment in AGOA countries.

Mauritius. H.R. 7222 reinstates Mauritius’ eligibility to use the program’s “third-country fabric” provisions. Mauritius’ designation lapsed in September 2005, leading to a dramatic decline in apparel exports to the U.S. from Mauritius, as many garment factories shut down operations in Mauritius and moved to Asia.

Dominican Republic “2 for 1” Program

H.R. 7222 establishes a “2 for 1" textile and apparel allowance program to be developed and administered by the Secretary of Commerce. Under the program, when producers purchase a certain quantity of qualifying U.S. fabric (2 square meter equivalents or “SMEs”) for apparel production in the Dominican Republic, they will receive a credit (equivalent to 1 SME). This credit can then be used to ship a corresponding quantity of eligible apparel (pants and other bottoms) from the Dominican Republic to the United States duty-free regardless of the origin of the fabric from which the apparel product is made. This provision has the broad support of U.S. textile manufacturers and Dominican Republic apparel producers.

Technical Corrections and Cost

The bill also makes several of non-controversial, technical corrections to AGOA and the Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2008.

The bill’s total cost is $1.088 billion. These costs are paid for by shifting corporate estimated taxes, extending Customs’ user fees and repealing the Customs’ user fee prepayment provisions in the 2008 Farm Bill.

The Bill can be downloaded from AGOA.info’s archives here.