African Apparel Exporters, Tesla, Express Shippers and Ag Tell USTR What Kenya FTA Should Include

Although the hearing scheduled for input on a Kenya Free Trade deal was canceled, comments continue to come in for what the U.S. trade representative's priorities should be.

Tesla, which exports lithium-ion battery storage products to Kenya used in connection with solar or wind energy, asked the negotiators to seek an elimination of the 25% tariff on these batteries. Its Powerpack, Powerwall and Megapack products have been used at off-the-grid lodges, water desalination plants, and tea farming and processing plants, and for village electrification. “This [tariff] currently puts Tesla’s advanced energy storage systems at a significant disadvantage to diesel and lead acid batteries when used for electrical energy applications,” the company said in a comment posted April 20.

The Express Association of America submitted a detailed list of changes it wants to see for customs facilitation in Kenya, including a higher de minimis level for both taxes and duties, with expedited clearance of those shipments for small packages coming from all countries, not just the U.S. “The current de minimis level is $20, which was reduced from $50 without any legislative or documented process being employed,” Mike Mullen wrote, in a comment posted April 20.

Mullen said that the Kenya Revenue Authority is adopting automated manifest clearances, but they should move to electronic customs forms, with electronic signatures and online payments. Currently, he said, three officials have to approve a clearance.

He asked that Kenya separate the physical release of goods from the duty and tax collection process. “Kenya’s current process results in high volumes of shipments sitting in bonded warehouses because the importer must pay all duties and fees before the goods can be released, unless the importer has a deferment account. Carriers must hold the goods until the importer pays the duties and fees to ensure they do not incur the liability for this bill,” he said.

He asked for immediate release of express shipments if advance data has been provided. “Obtaining 'immediate' release in Kenya currently requires driving from the airport to downtown Nairobi to obtain the ministry’s stamp on a form, a roundtrip that can take six hours,” he said. The association also asked negotiators to get Kenya to agree not to use courier service profits to subsidize non-competitive mail delivery. The African Coalition for Trade, which includes Kenyan interests as well as other African Growth and Opportunity Act countries, said that the apparel imports are the greatest success in AGOA, as most other AGOA-covered exports are commodities that aren't helping the continent's development. It said that the U.S. imported $1.5 billion in apparel under AGOA.

“The key to the success of the AGOA apparel program has been AGOA’s generous rules of origin, including in particular the so-called 'third-country fabric' rule of origin that permits less developed AGOA beneficiaries to utilize yarn and fabric from any origin,” the group said, and said that 97% of apparel imported under AGOA used third-country fabric. So a new trade deal should use that same standard, it said.

Mauritius also submitted a comment, saying it would like to negotiate an FTA. It said that the Kenya FTA should retain the duty-free status and rules of origin for apparel, and that rules of origin should be more flexible for fish, processed fruits and vegetables and other manufactured goods than is currently the case in AGOA. “The FTA should a priori cover all AGOA 7200 product lines and cover other products of interest to both parties,” Mauritius said. “Since both economies are not at the same level of development, there should be a limited list of sensitive products for Kenya.”

The Secondary Materials and Recycled Textiles Association said Kenya is an important export destination for U.S. used clothing and used shoes (HTS 6309), and that about 9 million kilograms are sent each year. The trade group said they don't expect these exports to be duty free, at least not immediately, but said that 35% duties are too high. “With that in mind, SMART proposes that Kenya phase-out its duties, beginning with a 20% reduction in duty beginning upon implementation of the trade deal and 5-10% reductions of the remaining duties annually over the subsequent years,” the comment said.

The group also asked for a prohibition on an import ban of secondhand clothing. Kenya just imposed such a ban, saying that the coronavirus pandemic made it necessary. Kenya also doubled its duties on used clothing in June 2016, with an eye toward an eventual ban. “While SMART was able to successfully push back against this ban by invoking the African Growth and Opportunity Act (AGOA) and through the tireless behind-the-scenes negotiations by USTR and other trade policy colleagues, SMART remains fearful that these countries will again attempt to impose a ban at any opportunity they have or seek to impose restrictions that amount to an effective ban secondhand clothing and shoes.”

Commodity exporters also asked that USTR open the Kenyan market. The rice farmers' trade group said that Kenya's tariff and logistical barriers prevent Kenya from being a profitable market for U.S. rice, and that USTR should aim for no quotas or tariffs on imported U.S. rice.

Soybean growers complained that a ban on genetically modified food ended soybean exports to Kenya, and said that if that ban were rescinded, “U.S. soy would be competitive with suppliers from the East African region in terms of quality, reliability and even price, in particular if the 10% import tariff is removed.”