AGOA 16-Year Renewal Bill Could Make Eligibility Reviews Less Punitive

A new bill from the Senate Foreign Relations Committee's top Republican and a Democratic member would renew the African Growth and Opportunity Act trade preference program for 16 years, offer more flexibility on country eligibility reviews, and soften the high-income graduation rules.

Sens. Jim Risch, R-Idaho, and Chris Coons, D-Del., said a 16-year renewal, from its expiration date in 2025 to 2041, would align with the USMCA sunset clause and give businesses long-term certainty. The current renewal is 10 years.

In an explainer, the senators note that AGOA requires that the president eject from the program countries that don't meet eligibility criteria. "This bill would provide the President with a menu of options for enforcement, including: (1) full termination of benefits, (2) termination of benefits for certain products, (3) issuance of a warning letter providing notice that benefits will be terminated in the following year without corrective action, and (4) the option to take no action, if U.S. interests are best served by taking no action."

Ethiopia, which had exported almost $210 million worth of apparel covered by AGOA in 2019, according to the Office of the U.S. Trade Representative, a tenfold increase from four years earlier, was ejected in 2022 because of human rights abuses during an internal uprising. However, its apparel exports continued to climb in its first year out of the program, according to the International Trade Administration, reaching $349 million in 2022. If it were still in the program, it would be among the top three countries for manufactured exports. (Oil accounts for roughly half of AGOA exports).

Beth Hughes, who leads on trade and customs for the American Apparel and Footwear Association, said that while AAFA feels it's important for countries to adhere to eligibility, she likes that the administration could weigh whether a warning could be warranted, asking: "Well, are we going to do more harm than good kicking them out? Are whole industries maybe going to disappear?"

Hughes said in a phone interview that her group had been pushing for a 10-year renewal but would be excited for 16 years. She said investing in yarn spinning or fabric weaving mills is expensive, and those are needed to improve vertical integration in apparel in Africa.

She said AAFA also really likes the way countries are treated as they become more prosperous. For instance, Mauritius, which exported $74 million worth of goods covered by AGOA in 2022, mostly apparel, was "graduated" from the program but then its per capita GDP fell below the threshold again and returned. Hughes said if manufacturers lose contracts because their products would no longer receive duty-free status, that alone can cause an economic decline in developing countries.

"This bill would ensure that countries do not lose eligibility until they have maintained 'high-income'” status for five consecutive years. Further, the president may extend a country’s eligibility for up to an additional five years to allow time for the negotiation of a free trade agreement," the explainer said. Hughes said Kenya might cross the income threshold, and it's critical that it continues to qualify until a free trade agreement can be reached. Kenya was the second-largest exporter of manufactured goods under AGOA in 2022.

“Over the past 24 years, AGOA has created jobs and economic growth in one of the fastest-growing regions of the world and created investment opportunities for American businesses,” Coons said in the news release announcing the bill. “The AGOA Renewal and Improvement Act is necessary to support continued economic development on the continent while further strengthening ties between the United States and partners in sub-Saharan Africa.”

The bill proposes that the USTR's annual eligibility reviews be changed to biennial but provides that if the chair and ranking member of either the House Ways and Means Committee or the Senate Finance Committee send a joint letter calling for an out-of-cycle review, the administration must carry it out immediately.

Hughes said such a review could be either direction -- asking that a country be considered for removal for violations, or asking that a country might return earlier than the every-other-year review would allow.

Risch noted that, saying in the release, "This legislation will bolster Congress’ involvement in the eligibility process and oversight, demonstrating a strong commitment to AGOA."

Although the Senate Foreign Relations and the House Foreign Affairs committees are interested in African policy, it's Ways and Means that must move the bill first, and Finance that will handle it in the Senate. Hughes said AAFA has found trade staffers on those committees generally positive about the bill, though they do have questions about whether allowing AGOA countries to import fabric or yarn from North African countries, and count those inputs toward the 35% rule-of-origin, could harm development in sub-Saharan Africa.

"We’re hoping that the next step would be a hearing in the Ways and Means Committee," Hughes said, and then a vote on a text. She said her members are pushing for a vote on the bill in both chambers before the August recess. Although the current AGOA doesn't expire until Oct. 1, 2025, Hughes said apparel orders already have been placed for past that date. Importers are nervous because the Generalized System of Preferences benefits program, which doesn't cover apparel but does cover some consumer goods, has been expired for a record length of time, more than three years.

The bill also would loosen mandates for CBP product verification; currently the agency must visit at least four beneficiary countries each year to monitor rules of origin compliance. "This requires CBP to devote disproportionate enforcement resources to sub-Saharan Africa," the explainer said, and the new bill would say CBP would go on visits "'as necessary to verify compliance' with AGOA."

The bill was introduced April 11. AAFA CEO Steve Lamar said in the news release announcing its introduction: "As companies work to diversify out of China today more than ever, immediate and long-term renewal of AGOA for a 16-year period would be incredibly impactful and timely."