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Public Hearing concerning out-of-cycle review of Rwanda, Tanzania, and Uganda eligibility for benefits under AGOA: Comments received


Public Hearing concerning out-of-cycle review of Rwanda, Tanzania, and Uganda eligibility for benefits under AGOA: Comments received

Public Hearing concerning out-of-cycle review of Rwanda, Tanzania, and Uganda eligibility for benefits under AGOA: Comments received

The Office of the United States Trade Representative (USTR), in consultation with the Trade Policy Staff Committee (TPSC), has announced the initiation of an out-of-cycle review of the eligibility of the Republic of Rwanda, United Republic of Tanzania, and Republic of Uganda to receive benefits under the African Growth and Opportunity Act (AGOA) in response to a petition.

The AGOA Subcommittee of the TPSC has sought public comments in connection with this out-of-cycle review of the AGOA eligibility of the Republic of Rwanda, United Republic of Tanzania, and Republic of Uganda. The Subcommittee will consider the written comments, written testimony, and oral testimony in developing recommendations for the President as to whether Rwanda, Tanzania, and Uganda are meeting the AGOA eligibility criteria.

A public hearing by the USTR is scheduled for 13th July 2017.

The Petition

On March 21, 2017, the Secondary Materials and Recycled Textiles Association (SMART) submitted a petition to USTR requesting an out-of-cycle review to determine whether the Republic of Kenya, Republic of Rwanda, United Republic of Tanzania, and Republic of Uganda are meeting the AGOA eligibility criteria. The SMART petition asserts that a March 2016 decision by the East African Community (EAC), which includes the Republic of Kenya, Republic of Rwanda, United Republic of Tanzania, and Republic of Uganda, to phase in a ban on imports of used clothing and footwear is imposing significant economic hardship on the U.S. used clothing industry, and is in violation of the AGOA statutory eligibility criteria to make continual progress toward establishing a market based economy and eliminating barriers to U.S. trade and investment.

In response to the SMART petition, USTR has determined, in consultation with the TPSC, that there are exceptional circumstances warranting an out-of-cycle review of the AGOA eligibility of the Republic of Rwanda, United Republic of Tanzania, and Republic of Uganda. With respect to the Republic of Kenya, USTR has determined that an out-of-cycle review of Kenya’s AGOA eligibility is not warranted at this time, due to recent actions Kenya has taken, including reversing tariff increases, effective July 1, 2017, and committing not to ban imports of used clothing through policy measures that are more trade-restrictive than necessary to protect human health. USTR will continue to monitor Kenya’s actions to ensure that Kenya follows through on its commitments. The USTR has consulted with Congress about these determinations.

Section 506A of the 1974 Act requires the President to terminate the designation of a country as a beneficiary sub-Saharan African country if he determines that the beneficiary country is not making continual progress in meeting the eligibility requirements. As amended by the TPEA, the President may withdraw, suspend, or limit the application of duty-free treatment with respect to articles from the country if he determines that it would be more effective in promoting compliance with AGOA-eligibility requirements than terminating the designation of the country as a beneficiary sub-Saharan African country.

Further information is contained in the full Federal Notice and Petition from SMART, available here.

The full list of Comments/Submissions received is available on regulations.gov.

EAC response to the petition by SMART for an out-of-cycle AGOA eligibility review for Rwanda, Tanzania and Uganda

The EAC is a regional integration bloc comprising of six Partner States of which the four countries indicated in the petition are active members. Since 2005 and 2010 the EAC has been implementing a Customs Union and Common Market respectively, whereby the trade policies and regimes have been harmonized. Given the common trade implementation framework that is engrained in the common EAC Protocols and laws, the EAC Secretariat feels obliged as a key stakeholder to provide a response and clarification to the petition as required in the notice for public hearing.

Response to the petition by SMART

As earlier indicated, the EAC finds it imperative to provide a submission clarifying on the issues raised in the petition. This stems from the fact that EAC as an integrated regional body pursues and implements harmonized trade regimes under the Customs Union which is being consolidated into a Single Customs Territory. Secondly, EAC has been galvanizing its industrialization development agenda through common programs and strategies to promote our industrial sector, export promotion and value chain development. The response also arises from the fact that the petition has been sparked off by a collective decision made by EAC Heads of State in relation to promotion of textile and footwear manufacturing, which touches on importation of used clothing. The response is therefore as follows:

  1. EAC Heads of State Summit which is comprised of the Presidents of the six Partner States is the apex organ of the EAC which gives direction and impetus to the integration process of the EAC. One of the fundamental goals under the EAC Treaty is to promote industrialization in the EAC in order to attain a competitive position in global trade. Textile and footwear manufacturing among others was identified as a priority sector where EAC should put focus. The decision of the Heads of State in March 2016 was to revamp the textile sector and the whole value chain which had once been one of the vibrant sectors in the 1960s and 70s. Indeed EAC countries were among the major producers of cotton, lint and fabrics in Africa. The decision did not slap a ban on the importation of textiles but is an initiative to promote the textile and footwear industry while progressively phasing out used textiles on a gradual basis.

  2. The EAC has a tariff structure that was exhaustively negotiated by EAC Partner States before the coming into force of the Customs Union in 2005. After comprehensive analysis of the EAC economic environment, a simple and moderate three-band structure of 0% for raw materials, 10% for intermediate goods, and 25% for finished goods was agreed upon. Fifty Six (56) products including worn clothes/footwear and cotton fabrics were placed under a sensitive list based on a clearly defined criteria and their rates were above 25%.

  3. The Common External Tariff is compliant with the WTO requirements in regard to tariff binding and the two trade policy reviews undertaken by the WTO in 2006 and 2012 fully endorsed the EAC trade regime as satisfactory and compatible with WTO.

  4. In 2003/2004 while negotiating the EAC tariff it was decided to protect the textile industry in EAC, hence worn clothing were give a duty rate of 50% or $ 0.75 per kg (whichever is higher) based on the international researched values at that time. Likewise 15 products of cotton fabrics and garments were also given a sensitive rate of 50%. However, the sensitive rates of worn clothing were revised downwards to 35% or $0.20 (whichever is higher) immediately thereafter in July 2015 after realizing that the abrupt rise of the rate in some partner states would negatively impact on the used garment sector in the region. It should be noted that the adoption of specific rate alternately with the ad valorem rate was to address the challenges of valuation of used clothing. The specific threshold of $0.20 per kg was derived by applying the 35% on average CIF prices of the used clothing once landed at the first port of entry such as Mombasa and Dar es Salaam.

  5. The review of the specific duty threshold from $0.20 to $0.40 per kg while maintaining the 35% was not a tariff increment but a realignment made after 11 years to reflect the realistic landing price of used clothing to be compatible with the ad valorem rate of 35%. This was done through a comprehensive analysis. From the [analysis] the $0.20 per kg had become redundant because the base CIF values used in Partner States would yield higher taxes if 35% is applied compared to $0.20 per Kg since the principle of “whichever is higher” would apply.

  6. It suffices to note that the review of the specific rate does not isolate worn clothing but covered all sensitive goods including rice and sugar. Sugar was revised from 100% or $200 per MT to 100% or $450 per MT while rice changed from 75% or $200 per MT to 75% or $345 per MT. Other items such as cement, crown corks and match boxes were dropped from the sensitive list.

  7. The sensitive rate on worn clothing is not discriminatory to imports from USA but applies to all imports of used clothing from any country. Preliminary data indicates that most used clothes imported in EAC Partner States originate from China, Canada and USA. Likewise new cotton fabrics and garments are also subjected to 50% import duty and the leading exporter of cotton fabrics and fabrics of cotton mixed with synthetic materials originate from the Far East and China. It should be noted that the rest of fabrics of textiles and garments not under the sensitive list attract the maximum rate of 25%. It is therefore not realistic to assume that textiles are not subjected to high taxes when imported from China and other countries.

  8. The EAC is highly cognizant of the levels of employment by the used clothing industry in the U.S. and EAC. Equally EAC is desirous of job creation that will arise from revamping its textile and footwear manufacturing value chain and income growth of the people involved in cotton growing, ginning, weaving, garment manufacturing, leather tanning, shoe making and retail business.

  9. The fear of environmental impact caused by the discarding of used clothing in US is equally a concern of EAC since eventually the used clothes would also be discarded after use in EAC. It should be noted that EAC both at regional and national level are aggressively developing environmental protection laws and interventions particularly the littering of plastic materials and bags. Used and discarded clothing are equally menace.

  10. EAC has adopted a deliberate program to promote exports through Export schemes. These schemes are explicitly catered for in the Protocol Establishing the Customs Union, the EAC Customs Management Act and the EAC Regulations. Recently the Council of Ministers decided to establish Special Economic Zones in EAC through the Customs Union Protocol. These schemes which enjoy a wide range of tax incentives have been a vehicle for the apparel and garment manufacturing for AGOA. Presently EAC is considering opening up the Export Scheme products to the local market to boost access to fairly priced garments. Kenya and Rwanda have commenced this program and the results are very positive. Once the textile mills are operationalized in the region, EAC will access fairly priced new apparel similar to that the EAC is exporting to USA under AGOA.

  11. Development of the local textile industry will not undermine the market based economy stipulated under AGOA as it will boost more production for export and local market that will see EAC countries enhance its export volumes to the U.S. This will break the current vicious circle of minimal value addition in the region that leads to low income and low investment.

  12. Related to the above, it should be noted that EAC trade with U.S. has been in-creasing progressively since 2005. Apart from worn clothing, EAC countries import significantly from U.S. capital goods, plant and machinery, agro chemicals, aircrafts and parts, furnishing materials, petroleum equipment. It should also be noted that nearly all these products do not attract any duty under the EAC tariff. The EAC has for a long time been registering trade deficits in its trade with USA.

  13. All EAC countries have established open market-based economies as provided in the Treaty. A number of U.S. companies have established in EAC in the service and manufacturing sector because of the opportunities created by the EAC integration. The areas include banking, insurance, health, shipping, fast food and manufacturing.

  14. The sanitary requirement on used clothing has been in place for a long time now and it is an international standards normal practice. EAC has progressively been developing a harmonized quality standards program and is currently looking at the used clothing standards so that there are no variations in quality requirements across all the Partner States. All countries in the world have quality standards requirements imposed on both local and imported goods to protect its people and environment. The prohibition of the used undergarments is a hygiene requirements to prevent spread of infectious diseases. This position of EAC to prohibit used undergarments is a position of principle which cannot be varied.

  15. The EAC is aware that the business environment is dynamic and the tariff setting cannot be static. Currently a comprehensive review is being undertaken on the tariff structure and rates in response to the trading environment. This review which will end in September 2017 will cover all products in the Tariff Book including used clothing. Realistic considerations will be made based on agreed criteria and empirical data collected. Teams are already in the field collecting quantitative and qualitative data to inform this process. Stakeholders are being consulted including those involved in the trade of used clothing.

  16. Currently there are ongoing discussions under the EAC-U.S. Trade and Investment Partnership which will establish a practical working arrangement between the two parties. Progress has been achieved in a number of areas such as the conclusion of the Cooperation Agreement on Trade Facilitation, Sanitary and Phyto Sanitary measures (SPS) and Technical Barriers to Trade (TBT). EAC is determined to ensure all areas of cooperation are concluded and implemented and this will create a platform on which to discuss such issues without reaching such level. EAC has planned to continue the engagements as agreed and will revive the discussions immediately after this public hearing.


EAC wishes to reaffirm that the eligibility to AGOA by its Partner States is of great benefit to the people of EAC and U.S. The need to attract more investment is still high on the agenda. EAC has been recognized as the fastest integrating region in Africa having transformed into a Customs Union and Common market in a short time. Collective policy decisions are made to realize the objectives of economic, social, political and cultural cooperation and development. Eligibility to AGOA is therefore a critical vehicle to boost it industrialization and promote exports. The tariff regime is a tool used to manage trade, collect revenue and protect the people and environment. Continuous review will be undertaken to ensure EAC integration is on track without disadvantaging any party.

The EAC is committed to the ongoing Trade and Investment Partnership, where such matters should be discussed and resolved. EAC will immediately engage USTR to progress the Partnership. More information will be provided during the post hearing period.

Intent to testify: Comment from Peter Bogard, Secondary Materials and Recycled Textiles Association (SMART)

Lawrence Bogard, on behalf of the Secondary Materials and Recycled Textiles Association (“SMART”) will testify as to the following:

  • SMART is the trade association that represents mostly small- and medium-sized companies (non-profit and for-profit) that are involved in using, converting, and recycling pre- and post- consumer textiles – otherwise known as used or second-hand clothing.

  • SMART requested this out-of-cycle review because in March 2016, Kenya, Rwanda, Tanzania, and Uganda issued a Joint Communique in which they announced a ban on the importation of used clothing into its member countries. The first phases of the ban have come into effect. These tariff increases are so high that they amount to a de facto ban on second-hand clothing imports.

  • SMART is aware of news reports that Kenya has recently announced that it will impose “minimum tariffs” on containers of “used goods.” Depending on how the Kenyan government interprets the term “used goods” this action threatens to negate Kenya’s announced roll back of its tariffs on imported used clothing. For this reason, SMART requests that Kenya also be included in this out-of-cycle review.

  • Banning the importation of second-hand clothing in order to a local industry conflicts with the statutory requirement that AGOA beneficiaries work toward developing market-based economies.

  • Banning the importation of second-hand clothing contravenes the statute’s requirement that AGOA beneficiaries work toward eliminating barriers to U.S. trade and investment.

  • The proposed import ban already has had negative effects on the second-hand clothing industry in the United States.

  • Banning the importation of second hand clothing also contravenes the statute’s requirement that a beneficiary country “has established or is making continual progress toward establishing... economic policies to reduce poverty.”

  • Banning the importation of second-hand clothing would clearly contravene the requirement that AGOA beneficiaries work toward eliminating barriers to U.S. trade and investment, with dramatic negative impacts on the second-hand clothing industry and its employment and crushing effects on SMART’s charitable and for-profit stakeholders that supply the industry. It would also create greater poverty in the East African nations by eliminating hundreds of thousands of jobs in the East African Community and making any available clothing far less affordable.

  • SMART therefore requests that the Trade Policy Staff Committee recommend suspending duty-free access to the United States under AGOA for all currently eligible apparel imports from Kenya, Tanzania, Rwanda, and Uganda until such time as those countries roll back all increased import duties on used clothing and commit not to implement their proposed ban on imports of used clothing.

Comment from Amelia Kyambadde, Ministry of Trade, Industry and Cooperatives, Uganda

We reject the assertion that there are exceptional circumstances warranting the out-of-cycle review of the AGOA eligibility for the Republic of Uganda and, indeed, the other EAC Partner States, namely the United Republic of Tanzania and the Republic of Rwanda, for the reasons provided below:

  1. There is no ban on importation of used clothes to Uganda and indeed to the EAC region.

  2. There are sanitary concerns that have been raised by different stakeholders hence the need to protect the health of the peoples in Uganda and East Africa

  3. Imports of used clothes to the EAC region and to Uganda have been minimal and declining over the years. Imports of used clothes from the USA to Uganda was US $7.2 million in 2015. This is 0.72% of the used items sales.

  4. The specific tariff was increased in order to align it to the ad valorem rates. The application of this tariff is not discriminatory and is not targeted at the USA. The tariff is in accordance with the EAC Customs Union Protocol and compliant to our commitments at the WTO.

  5. Uganda operates a market based economy that promotes fair competition.

  6. USA investment in Uganda is not hindered by any undue policy. The USA originating businesses currently operating in Uganda are Citibank, Coca-Cola, Pizza Hut, KFC, NCR, Balton, Mantrac among others.

  7. The USA exports to Uganda are far beyond the used clothes. The volume of trade bilaterally is US$143.294 million. Data for 2016 indicates that Uganda imported from the USA a total of US$89.327 million. Uganda exports to the USA in 2016 on the other hand amount to US$53.967 million. For the year 2016 the trade balance is US$35.36 million in favor of the USA. The USA has over the last few decades posited a favorable trade balance in her trade relations with Uganda. Uganda is committed to AGOA, and to the broad bilateral cooperation with the USA.

The performance of Uganda has not been significant owing to some structural bottlenecks AGOA remains one of our focus market access programs for which we have been planning a number of initiatives. These initiatives include the following:

  1. Revitalization of the textile industry. This has started with establishment of 3 textile mills in the last two years two in Jinja and one due to be set up in Gulu. We are rehabilitating and expanding two garment factories in Kampala, one of which is already supplying to the USA. The textile industry will in the medium term provide employment for 50,000 people before we consider the downstream smallholder farmers

  2. A program for the expansion of cotton production to feed the textile mills, covering the northern, eastern and western parts of the country. Note that the northern and eastern parts of Uganda are recovering from a debilitating war that was led by the infamous Kony.

  3. Expansion of the dairy processing capacity in the country some of which are already supplying the US market under AGOA

  4. The expansion of the floriculture industry

  5. Aggressive coffee production, value addition and export drive under the 2020 roadmap which has been partly supported by the USAID

  6. The resuscitation of the fisheries sector. As you will appreciate, Uganda is one of the countries hosting the largest fresh water lake in Africa and a number of other lakes, rivers and wetlands. As such the fisheries resources are significant.

  7. We are reviving the Uganda Airlines to boost our industries, trade and tourism, through the improvement of domestic, regional and international air connections. We believe that the purchase of aircraft and aircraft parts will go up significantly.

  8. We have just completed the drafting of Uganda’s AGOA National Response Strategy with support from the US Trade and Investment Hub in East Africa. We will be implementing this strategy.

These programs will all be in jeopardy if we are excluded from the AGOA initiative. You may wish to note that the unemployment rate in Uganda is currently standing at 65.2%. This rate of unemployment is not sustainable in the long run. This will not enable us to fulfill the UN Sustainable Development Goals and Agenda 2030.

As we implement the infrastructure development and industrialization programme for Uganda, we will create more jobs for the USA and the countries in the north through the purchase of services, capital goods, IT equipment, earth moving equipment, oil and gas extraction equipment, etc.

With this in mind, there is no justifiable reason for the out-of-cycle review. The eligibility of the Republic of Uganda for AGOA should not be in question. The USA and Uganda should collectively look ahead to more harmonious trade and investment partnerships to exploit the opportunities in Uganda, in the great lakes region and in the USA.

Uganda is committed to providing any other additional information that you may wish to receive in the resolution of this matter.

Intent to testify: Comment from Bonny Musefano, Embassy of the Republic of Rwanda

Rwanda and the USA enjoy long-standing commercial ties. The USA and Rwanda have a trade and investment framework agreement and a Bilateral Trade and Investment treaty signed in 2012. The USA was a substantial investor in Rwanda in 2012-2016, with a number of high value investment projects in education, energy and manufacturing following the implementation of the above bilateral framework starting in 2012.

Overall exports to the US have been growing steadily over the past 10 years, with an annual average growth rate of 21%. However, exports under AGOA are only a very small fraction of total exports. In 2015, they accounted for only 0, 95% of total exports to US.

The average exports under AGOA in the last three years are 2%. This is minimal value compared to other Rwanda’s exports under MFN tariff which accounts 96% in the same period. Rwanda’s largest export to the USA is coffee, with just over $23 million in exports. Other export products are minerals ($17.8 million), pyrethrum ($2.1 million) and a range of smaller value exports, mainly in tea and the handicrafts and apparel sectors. The top two export products made up 87% of Rwanda’s exports to the USA, demonstrating the challenge of limited diversification in Rwanda’s exports. However, an increase in exports of certain items such as handbags, jewelry and textiles show promise for the future.

On the other hand, Rwanda imports a wide range of products from US, including vaccines, machinery, 2nd hand clothes, vehicles, aircraft parts and medical equipment.

Looking at the figures, Rwanda has not yet reaped much from AGOA arrangement. In response to such a situation, Rwanda with the support of USAID East Africa Trade and Investment Hub finalized her AGOA strategy in April 2016 and the strategy focuses on three key sectors: textiles and apparel, specialty foods and home décor and fashion by which its implementation would require the support of the USA government and other stakeholders.

Any decision to challenge the eligibility of Rwanda to AGOA market access preferences will compromise the current momentum and discourage the ongoing dialogue to enhance trade and investment partnership between the USA and Rwanda.

Intent to Testify: Adolf F Mkenda, Permanent Secretary – Ministry of Industry, Trade and Investment, United Republic of Tanzania

  1. The EAC Decision on clothing is a legitimate decision meant to industrialize the region by using abundant raw materials [cotton, textile] as one of the top priorities in the region. The Decision takes into account the EAC industrialization policy approved by the EAC Summit in November 2011 which aims at transforming the region into modern industrial economies through high value addition industries an increase in manufactured exports, thereby promoting employment and purchasing power, product diversification and increased linkages with other economic sectors.

  2. The EAC Decision is yet to be implemented. Therefore, there is no scientific proof that changes in the trade pattern and other macroeconomic variable [jobs, trade patterns, shipping etc] were caused by the EAC decision to phase out importation of second hand clothing and leather as pointed out in the petition and therefore the claim cannot be justified.

  3. In Tanzania, the question of increase or decrease tax, duties, fees is a fiscal decision which has been implemented as part of annual fiscal measure during budget submission and it is a sovereign legitimate budget decision.

  4. The EAC and Tanzania budget decisions are non-discriminatory to the rest of the world and in no ways they are targeted to United States, therefore it is WTO compatible.

  5. There are strong trade ties between US and EAC/URT beyond AGOA such as pharmaceuticals, machinery and equipments, agriculture, automobiles etc. Trade on used clothes form just a small part of the entire balance of trade between the US and EAC/URT.

  6. The US investors may explore the possibilities to invest in the EAC region in textile and leather sector to further enhances trade and diplomatic ties between the EAC/URT.

Joint comment from US apparel, footwear and retail associations

American Apparel & Footwear Assoc., National Retail Fed, Retail Industry Leaders Assoc., and US Fashion Industry Assoc.

On behalf of the joint associations representing apparel brands and retailers, we are writing to offer pre‐hearing comments regarding the review of AGOA eligibility for Rwanda, Tanzania, and Uganda.

It is our recommendation that this out of cycle review NOT lead to the suspension or termination of AGOA benefits for these three countries.

The AGOA program was recently renewed for a ten‐year period. These countries are now at the beginning stage of undertaking the necessary steps to maximize utilization of the AGOA and to foster sustainable economic growth. Withdrawing benefits now would undermine those initiatives, including those fostering market based economies or leading to the elimination of barriers to U.S. trade and investment. Even the threat of withdrawal induces uncertainty that puts progress toward those reforms in jeopardy.

We acknowledge the concerns that have been raised by the Secondary Materials and Recycled Textiles (SMART) organization. We believe the issues can be resolved without terminating benefits for the named countries.

It is indeed disconcerting when countries – either AGOA beneficiary countries or others – are contemplating policies that would restrict trade through high tariffs or bans. It is our strong hope that the United States and the three countries that are subject to this Out of Cycle review can work together so that this issue can be quickly resolved.


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