Guide to Exporting to the US under the African Growth and Opportunity Act (AGOA)

Author :
Category :


Introduction

The Guide to Exporting to the US under the African Growth and Opportunity Act (AGOA) is part of the International Economics Consulting’s work with the United Nations Development Programme (UNDP) and Ministry of Investment, Trade and Industry (MITI) of Botswana. The guide comprises two major sections. The first section aims to demystify rules contained in the US AGOA legislation in terms digestible by exporters, as well as pinpointing the untapped potential opportunities in the US market for the private sector in Botswana. The second section lays out the requirements and sources of information to the realization of the potential product exports to the US market.

US-Botswana Bilateral trade

With a consumer base of 330 million, the US market is comparable in size to that of the whole SADC. The US is the world’s largest economy in terms of annual gross domestic product (GDP), and also one of the world’s largest producers, accounting for over 20% of the world’s products. This indicates the potential to trade with the U.S. in all product categories, from raw and intermediary goods as inputs for manufacturing, to final consumption goods.

The US was Botswana’s tenth-largest trading partner in 2019, with exports amounting to USD 78.4 million, or 1.5% of Botswana’s total exports. Botswana’s export basket to the US mainly comprises diamonds or precious stones, which accounted for around 99 percent of the country’s total exports to the US in 2019. Meanwhile, the US mainly exported vehicles and machinery to Botswana.

The US market represents untapped potential for Botswana exports besides precious stones. Export potential analysis shows that the US holds immense potential for exports of light manufacturing, garments and textiles, as well as meat and meat products. Botswana should seize the opportunity to increase exports to the US, as currently only a minor share of the country’s exports benefits from the duty-free access to the US market under the AGOA scheme.

The US AGOA

The AGOA is the cornerstone of the U.S. commercial relationship in trade and investment with Africa. The AGOA legislation was initially enacted on May 18, 2000, and has been extended a number of times since then, most recently to 2025. The AGOA builds on the existing US Generalised System of Preferences (GSP) program to a number of African countries. Dubbed the “super GSP”, AGOA removes several limitations on product coverage and provides duty-free treatment for a wider range of products compared to GSP. Duty-free access to the US market under the combined AGOA/GSP program stands at approximately 6,500 product tariff lines, which represents around 65% of all products that could be imported by the US. Specifically, AGOA expands the GSP by removing tariffs on certain textile and apparel articles, watches, electronic articles, steel articles, footwear, handbags, luggage, flat goods, work gloves and leather wearing apparel, and semi-manufactured and manufactured glass products. According to the USTR, the most common products imported by the U.S. through AGOA include Crude Oil, Textiles and Apparel, Agricultural Products, Minerals and Metals, Transportation Equipment, and Chemicals and Related Products.

AGOA offers a significant competitive advantage to Botswana’s products by eliminating the tariffs to eligible imports, meaning that Botswana’s products can be cheaper than those products originating from countries with which the US does not have a trade agreement. Botswana exports to the U.S. are exempted from Most-Favoured-Nation (MFN) rates, giving exporters from Botswana a significant tariff advantage of up to 5.1% (plastic products).

The AGOA General Rules of Origin (RoO) require that a product must be wholly obtained or substantially transformed in a beneficiary country with a minimum local content (local materials plus direct processing cost) of 35 percent. This RoO allows for cumulation of origin from more than one AGOA beneficiary. In addition to the general rules, specific rules apply to footwear and non-textile travel goods. An effective Visa System with relevant procedures to prevent illegal transshipment and the use of counterfeit documents is also required for Apparel and Textile exports under AGOA.

The way forward

The guide was prepared to add momentum towards Botswana’s trade promotion initiatives by enhancing the business community’s understanding of trade opportunities through the EU-SADC EPA. While the guide has not been able to cover all possibly traded products, it provides a methodological approach in manageable steps so that trade public officials and private sectors can replicate in evaluating the trade potential and accessing reliable sources of information to strengthen their preparedness for exporting to the US market under the AGOA.

The Guide can be downloaded from the UNDP’s website.