LETHABO SITHOLE: Key provisions of the US’s Agoa improvement act

The office of the US trade representative has been leading the 2024 US-Sub-Saharan Africa Trade & Economic Co-operation African Growth & Opportunity Act (Agoa) Forum in Washington this week.

Convening under the theme “Beyond 2025: Reimagining Agoa for an Inclusive, Sustainable and Prosperous Tomorrow”, the forum brings together senior government officials from the US and Agoa-eligible countries, as well as representatives from regional economic organisations, labour, civil society and the private sector. 

In anticipation of this significant event, it is timely to delve into the key elements of Senate Bill S.4110 — Agoa Renewal & Improvement Act of 2024, which has been introduced in Congress and referred to the Senate’s committee on finance for initial consideration. 

The new act extends the Agoa preference sunset clause from September 2025 to September 2041, offering a 16-year extension. This long-term extension will provide greater stability and predictability for trade relations between the US and Agoa-eligible countries. 

Eligibility criteria

According to independent economist and Trade Law Centre (Tralac) associate Eckart Naumann, the eligibility criteria for Agoa benefits will become more specific, with new references to published annual reports or US legislation, such as the Child Soldiers Prevention Act and the state department’s Country Reports on Human Rights Practices.

Countries listed in these reports may risk losing Agoa eligibility, emphasising the importance of adherence to human rights, anti-corruption and religious freedom standards.

At present, countries graduate from Agoa on reaching high-income status. Under the new act, graduation will occur only after maintaining a high-income status for five consecutive years. In addition, graduation may be delayed by up to five years if the US is negotiating a free trade agreement with the country concerned. 

Writing in a recent Tralac Trade Brief, Naumann noted that the current annual review process for Agoa eligibility will shift to a biennial review, with out-of-cycle reviews possible at any time. Congress now has the power to initiate out-of-cycle reviews through relevant committees.

He says an adverse review finding does not automatically result in a suspension of preferences if the president determines that it is in the national interest to maintain them. Such decisions must be justified to Congress.

Textile provisions 

The act extends the favourable third-country fabric rule for “lesser developed countries” by 16 years, allowing them to continue benefiting from Agoa’s textile provisions. Importantly, the special Agoa apparel visa system is abolished, reducing administrative burdens on importers and exporters.

Verification visits by US customs will now occur on an “as needed” basis, rather than annually, involving four beneficiary countries, Naumann says. Notably, a critical new provision mandates scrutiny of the textile sourcing supply chain.

An example provided by Naumann is that the sourcing of goods from the Xinjiang Uyghur Autonomous Region of China, where forced labour is prevalent, is prohibited under the Uyghur Forced Labour Prevention Act. This measure aims to ensure ethical sourcing in the production of Agoa apparel. 

Expanded coverage

The legislation introduces a facility to review and potentially expand Agoa product coverage. While only about 3% of tariff lines remain dutiable under Agoa and most-favoured nation zero duty trade, this review aims to further liberalise trade. 

The act appropriates  $10m through USAID for the fiscal year 2025 to assist Agoa beneficiaries in implementing their utilisation strategies. This support includes:

• Export promotion activities: funding for activities that enhance export competitiveness and market access;
• Trade capacity building: resources for training, technical assistance, and infrastructure development; and 
• Improving customs operations: investments in customs modernisation and trade facilitation. 

Links with the AfCFTA 

Agoa and the African Continental Free Trade Area (AfCFTA) can complement each other by enhancing market access, strengthening regional value chains, supporting trade policy objectives, fostering investment and promoting policy alignment.

By leveraging both frameworks, African countries can maximise their trade and development potential, benefiting from preferential access to the US market while also enjoying greater integration within the continental market. 

US senator Chris Coons has urged Congress to consider modifying Agoa’s rules of origin to include inputs from North African AfCFTA countries — now excluded from Agoa — in meeting the requirement that 35% of a product’s value originate in the region.

The US has supported this idea, and the new act reflects this by expanding the rules of origin cumulation provisions. This change allows content from AfCFTA member states to count as local content for Agoa beneficiaries, aiming to support African value chains and reduce the rules of origin burden.

Naumann points out that though North African countries do not gain Agoa eligibility, their content can be included under specific conditions. 

Update: August 6 2024
This article has been updated to acknowledge analysis by economist Eckart Naumann contained in a Trade Brief published by the Trade Law Centre.  

• Sithole, a legal practitioner and consultant in international business, trade and investment law, is managing partner at Amila Africa.