The future of the African Growth and Opportunity Act remains unclear less than two years before its scheduled expiration as some urge a straight reauthorization of the trade preference program while others push for it to be modernized.
AGOA – first enacted in 2000 and currently in effect through Sept. 30, 2025 – grants duty-free access to products imported from qualifying sub-Saharan Africa countries (click here for most recent update on country eligibility). About 85 percent of all tariff lines are eligible for duty-free access to the U.S. if imported from any AGOA beneficiary, a figure that increases to about 97 percent for beneficiaries with full textile and apparel product benefits (which in 2022 included 24 of 36 countries). At least 35 percent of a product’s value must be grown, produced, or manufactured in the AGOA-eligible country, and exports must be directly shipped to the U.S. Different rules of origin apply concerning the sourcing of inputs for textile and apparel products.
An annual AGOA forum was held earlier this month in South Africa, prompting a number of actions and reactions regarding the program’s future. In a statement issued at the outset of the forum, President Biden said AGOA “has formed a bedrock for U.S. trade with sub-Saharan Africa for more than two decades” and called on Congress “to reauthorize AGOA in a timely fashion and to modernize this important Act for the economic opportunities of the coming decade.”
U.S. Trade Representative Katherine Tai said modernizing AGOA to make it “stronger and more effective” was a key issue of conversation during the forum. According to Inside US Trade, Tai said the U.S. is particularly interested in ensuring that AGOA reflects the new African Continental Free Trade Area, increasing utilization of the program, and determining how to maintain close trade ties with African countries after they graduate from AGOA. Earlier this year House Ways and Means Committee Ranking Member Richard Neal, D-Mass., also said that increasing AGOA utilization rates is one of the improvements Congress should seek to make to the program.
However, others want the U.S. to renew the program as it is to avoid potential interruptions that could accompany reform efforts. According to a Reuters article, African Union trade commissioner Albert Muchanga said AGOA should be extended for 10 to 20 years to avoid “uncertainty” in the business community. South African President Cyril Ramaphosa echoed that concern in calling for a “sufficiently lengthy” extension of the program, though he expressed support for changes “that will add more products and will make it easier for small and medium-sized businesses to use it.”
There is bipartisan support in the U.S. Congress for extending AGOA. For example, House Foreign Affairs Committee Chairman Michael McCaul, R-Texas, and Ranking Member Gregory Meeks, D-N.Y., said this week that while improving AGOA is important, “the principal consideration must be ensuring a successful and timely reauthorization” before September 2025. The two lawmakers asserted that with Africa “on the precipice of an unprecedented demographic boom,” AGOA can play an important role in not only “strengthening the trade and economic production capacities of African countries” but also “advancing U.S. foreign policy goals across sub-Saharan Africa.”
A draft bill announced Nov. 6 by Sen. Chris Coons, D-Del., would both continue and reform AGOA. It would extend the program until 2041, which Coons said would not only increase predictability for businesses seeking to invest in the region as an alternative to China but also “supports regional economic growth and development and strengthens the United States’ position on the continent.” The bill also includes changes such as (1) modifying rules of origin to allow inputs from North African members of the AfCFTA, (2) ease the transition of high-income countries out of AGOA, (3) reduce the frequency of country eligibility reviews, (4) eliminate requirements for textile visas, and (5) end the requirement for at least four product verification team visits each year.
For more information on AGOA, including country eligibility and how to utilize available tariff preferences, please contact Nicole Bivens Collinson at (202) 730-4956 or via email.
Copyright © 2023 Sandler, Travis & Rosenberg, P.A.; WorldTrade Interactive, Inc. All rights reserved.