The African Growth and Opportunity Act (AGOA) was passed by Congress in 2000. It was intended to boost the global competitiveness of sub-Saharan African nations by giving them duty-free access to the U.S. market for all goods covered under the Generalized System of Preferences, plus an additional 4,000 items. Fifteen years later, however, we haven’t seen huge imports from any of the AGOA countries. Why is that?

The reasons are numerous and include constant fear of program expiration and uncertainty about its extension, the expiration of the longstanding quota system on apparel imports from all countries, and low levels of good governance, logistics management and operational certainty that could entice early investors.

Today, wage and other manufacturing cost increases in competing nations are improving the attractiveness of sub-Saharan African countries as a destination for manufacturing. However, the manner in which the U.S. Congress extends and improves AGOA, which will expire Sept. 30, will dictate whether these countries become merely assembly facilities or whether the large investments necessary to build upstream inputs are made.

There have been no substantive enhancements to AGOA since 2000. Meanwhile, the rest of the world has advanced. Do you still have the same phone you had 15 years ago? The same TV? The same computer? The same car? Thus, I propose the following five changes to AGOA if we want to have a consequential impact on the economic independence of beneficiary countries:

  • Extend the program through 2025
  • Remove the requirement for textile and apparel visas
  • Allow sufficient time for companies to adjust to any loss of benefits
  • Require a report making recommendations on program improvements or changes
  • Provide for regional integration of inputs if a country is graduated from the program

Extend AGOA Through 2025

AGOA has been in effect for 15 years but there have been minimal increases in exports under the program, with the exception of extractable goods such as oil and gas. A ten-year extension of AGOA could help remedy that problem.

When AGOA was enacted, apparel manufacturing was seen as an industry that could attract a lot of investment and produce large volumes for the U.S. market. However, apparel factories did not go to AGOA countries as hoped. AGOA was enacted in 2000, only five years before the expiration of the quota system for apparel goods from all countries opened up a wealth of new sourcing opportunities. As a result, apparel makers stuck it out for a few more years with the “devil they knew” rather than investing in sub-Saharan African countries.

Moreover, short-term extensions of AGOA prevented any significant investment. Apparel manufacturing requires only $1 to 5 million in investment and is easily started and easily moved, but apparel makers have experienced many problems from setting up just apparel assembly operations. Africa presents an opportunity to encourage secondary and tertiary investments – in fabric making, yarn spinning and even cotton growing – but these require a minimum of $20 to 80 million, which takes eight to ten years at least to recoup. AGOA extensions, on the other hand, have always been much shorter than that.

A longer extension will thus not only help boost exports but will also further promote the reforms AGOA was designed to encourage to help beneficiaries become more independent and reduce their reliance on other countries. Under the current pattern of short-term extensions, a beneficiary country that loses eligibility is not motivated to regain it because once the program expires competitor beneficiaries will lose their benefits too. If a long-term extension is in place, however, a country that loses eligibility early on will have more incentive to comply with worker rights and other requirements so as to quickly reinstate itself and maintain its competitiveness with its neighbors for investment dollars.

Remove Textile And Apparel Visa Requirement

Only apparel shipments destined for the U.S. under AGOA (and a similar program for Haiti) still need a visa stamp for entry, a requirement that is out of date by ten years.

AGOA was drafted to mimic the U.S. quota system for apparel imports under which U.S. Customs required a visa, complete with a valid stamp, signature and number that stated the quantity and category of the goods, to be presented upon entry of the shipment into the U.S. There are costs for AGOA governments to acquire the technology needed to meet this requirement and costs to exporters to obtain the visas. The requirement to obtain a visa before exporting to the U.S. also provides an opportunity for corruption at each phase of the process. Further, imports can be denied if a visa is absent or incorrect or delayed if human error causes the visa number to be mistyped.

In The Spotlight

However, the apparel quota system expired in 2005, and there is no longer any need for a visa, electronic or paper, under the AGOA of 2015. U.S. Customs uses sophisticated software to control goods subject to quotas, tariff preference levels and other quantitative restrictions, including those established under bilateral and regional free trade agreements with more restrictive rules of origin than those under AGOA.

Any possible challenge to an entry claiming duty-free treatment under an FTA is investigated post-entry, with consequences for any importers that falsely claim benefits. U.S. commitments to streamline the import process under the single window expected to come fully online in November 2016, and by implementing the World Trade Organization’s Trade Facilitation Agreement, also dictate against retaining an unnecessary nine-digit number for apparel shipments.

Allow Sufficient Time For Companies To Adjust To Loss Of Benefits

AGOA benefits for specific beneficiary countries have been withdrawn for various reasons over the past 15 years, but the manner in which such loss of benefits has been carried out has injured U.S. businesses and tremendously harmed the people in the affected countries rather than their governments.

Under GSP, of which AGOA is an extension, an annual review is conducted and completed in July of each year. If the review determines that a country should lose its GSP benefits, those benefits are revoked the following July. This one-year lag gives companies time to unwind business relationships and/or time for the offensive action to be corrected by beneficiary country governments.

Under AGOA, however, the annual review has historically been conducted in December, with the results being announced as late as Dec. 27 and the effective date of any removal of benefits being January of the following year. In several instances, goods that were AGOA eligible when they left Africa have arrived in the U.S. subject to duties.

Businesses cannot operate in such an unpredictable environment.

Businesses cannot operate in such an unpredictable environment, which can cause apparel makers (who only have $1 to 5 million invested in each plant and may have already received a return on their investment because it only takes one to three years to turn a profit) to pack up their sewing machines and move within days to a different AGOA country that has maintained its eligibility. Most of the damage is done not to the beneficiary country government but to the apparel factory workers who suddenly lose their jobs, the very people AGOA was designed to help.

A one-year lag time for changes in AGOA beneficiaries would minimize this harm. It would also allow time for potential correction of any offending actions that have prompted the removal of AGOA benefits. Larger investments mean that stakeholders have more at stake and will in turn put appropriate pressure on the governments to protect their investments and find a means to comply with AGOA requirements.

Require Report With Recommendations On Program Changes

There is concern about extending AGOA for 10 to 15 years without some sort of review process to make sure it is functioning as it should. As a result, the International Trade Commission should be required to report annually on the effectiveness of the program, the level of development of each beneficiary country (if, for example, it moves from a low-income country to a middle-income or high-income country) and the need for such countries to remain full participants in the program. This report should also recommend changes that would increase trade under AGOA and how such changes should be phrased.

The report should be given to the president (specifically, the Office of the U.S. Trade Representative) and the congressional committees of jurisdiction (House Ways and Means and Senate Finance). Any positive recommended changes would then be subject to congressional recommendation to the president, who would have the authority to implement the changes being recommended. Such changes would not require full congressional approval but could not be undertaken without the express recommendation by the committees of jurisdiction to the president.

This process would allow Congress to maintain oversight and input into the administration of AGOA while using an independent agency to conduct the review. It would also make the program more dynamic and able to reflect changes in global manufacturing.

Provide For Regional Integration Of Inputs From Graduated Countries

If it is determined pursuant to the USITC report that a country should be graduated from AGOA, inputs from that country should still be allowed to be included in the manufacture of goods in other AGOA eligible countries.

For example, if South Africa is graduated from AGOA, the incorporation of South African inputs (which could no longer be counted in reaching the regional value content requirement) into goods made in a country like Zimbabwe or Kenya could exclude those products from duty-free treatment under AGOA. To avoid such a negative impact on downstream countries, inputs from former AGOA eligible countries should still be allowed to be used and counted in the RVC calculation.

Similarly, there is a requirement that AGOA-eligible goods be exported directly to the U.S. or transit in-bond from an eligible country. If a country such as South Africa is graduated but goods from other eligible AGOA countries need to transit that country or undergo processing there that does not transform them (e.g., repackaging or sorting) prior to being exported, those goods should not lose their eligibility for AGOA benefits because they were exported from a graduated AGOA country.

All of these changes should be considered in extending AGOA. We need to build a solid, vertically integrated manufacturing platform to create independence and set the stage for future deeper ties with these countries through free trade agreements. If these changes are implemented, the next ten years will likely see a vast increase in exports from beneficiary countries under AGOA.


Nicole Bivens Collinson
About The Author Nicole Bivens Collinson
Nicole Bivens Collinson is a well-known international trade authority in Washington, DC and has over 25 years of experience in government, public affairs and lobbying. She leads Sandler, Travis & Rosenberg’s international trade and government relations practice.

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