Sub Saharan gets Another 10 Years for Duty Access to US Market

The US Senate passed legislation on 14 May to extend duty-free access to the US for Sub-Saharan African countries through the African Growth and Opportunity Act (AGOA) for another decade.

AGOA expands upon the US Generalized System of Preferences (GSP), a set of formal exceptions from the WTO’s most-favoured nation (MFN) principle that allows Washington to offer developing countries preferential treatment on specific goods. The current version of AGOA is due to expire on 30 September, unless re-authorised beforehand.

The bill, passed last week by a margin of 97 votes to 1, includes the renewal of several trade preference programmes: the GSP, expired since July 2013, will now be renewed through 31 December 2017; AGOA, including the third-country fabric (TCF) provision and preferential duty treatment programme for Haiti, will be extended until 30 September 2025.

The legislation will still require approval by the House of Representatives and President Barack Obama before it can become law.

New features

The general rule of origin under the new AGOA retains a value-added requirement of 35 percent.

This provision entails that products may integrate materials sourced from outside countries – in other words, non-AGOA-beneficiaries – provided that the “direct costs of processing” undertaken in one or more designated AGOA-beneficiary countries equal at least 35 percent of the product’s appraised value.

The new version also includes language on the promotion of the role of women in social and economic development in Sub-Saharan Africa as part of the eligibility criteria of the scheme.

The bill gives the US President the authority to designate “certain cotton articles” as eligible articles for least developed countries under the GSP programme. A Senate Finance Committee report associated with the legislation links this undertaking to the WTO implementation commitments on duty-free quota-free (DFQF) treatment for certain cotton products originating from LDCs.

South Africa subject to “out of cycle” review

Although South Africa remains eligible for AGOA under the new legislation, the bill specifies that some concerns have been raised about the country’s compliance with certain provisions of the Act. An “out-of-cycle” review of South Africa will therefore be undertaken 30 days after AGOA’s enactment.

In the context of this review, if the President determines that South Africa does not meet certain requirements, the country’s eligibility could either be withdrawn, suspended, or limited.

Earlier talks over AGOA’s renewal had move slowly due to a dispute between Pretoria and Washington on poultry trade, following South Africa’s decision to impose anti-dumping duties on certain imported US poultry products. (See Bridges Weekly, 29 January 2015)

Additionally, according to a report by the US Senate Finance Committee, South Africa recently indicated its intention to renegotiate its commitments under the WTO’s General Agreement on Trade in Services (GATS) requiring foreign-owned companies to relinquish 51 percent ownership to South Africans.

The country has also developed proposals for policy changes with regard to intellectual property rights legislation that could result in several “shortcomings.” These issues will be taken into account during the review of South Africa’s eligibility, the report says.