AGOA GSP Provisions

1. AGOA GSP Provisions December 8, 2003

2. Overview • Title 1 of the Trade & Development Act of 2000 is the African Growth and Opportunity Act (AGOA) • The Act provides for the duty-free treatment of certain non-textile articles previously ineligible for preferential treatment under the Generalized System of Preferences (GSP) (19 U.S.C. 2461 et seq.) • GSP benefits are in addition to the AGOA duty-free and quota-free treatment of certain textile and apparel articles.

3. AGOA Beneficiary Countries for GSP Articles • The President Has Designated 38 Countries As Beneficiary Sub-Saharan African Countries (SSA) • ALL of These Countries Are Eligible for GSP (Non-textile) Benefits.

4. AGOA Beneficiary Countries for GSP Articles • GSP is extended to SSA countries until September 30, 2008 • GSP benefits for the rest of the world expire on December 31, 2006 • For SSA, President allowed all 4,600 items on standard GSP product list • PLUS for SSA an additional 1,800 tariff line items not part of GSP product list which were considered import sensitive • Currently, a Pending Bill would Extend AGOA benefits until 2015

5. Examples of Articles previously ineligible for GSP treatment which can now be entered duty free under AGOA if made in a SSA country: Watches Electronic Articles Footwear, Handbags, Luggage, Flat Goods, Work Gloves, and Leather Apparel Certain Semi-Manufactured and Manufactured Glass Products Other Miscellaneous Articles “Import Sensitive” Articles

6. GSP Articles Under AGOA • 2001: Total Value of US Imports From SSA Under the GSP and AGOA = US $7.5 Billion • 2002: Total Value of US Imports From SSA Under the GSP and AGOA = US $8.3 Billion • 2003, January through September: Total Value of US Imports From SSA Under the GSP and AGOA = US $9.6 Billion

7. GSP Articles Under AGOA Value of US Imports from Sub-Saharan Africa Source: US ITC/Dept. of Commerce

8. GSP Articles Under AGOA Value of US Imports from Sub-Saharan Africa

9. Requirements for Duty Free Entry of GSP Articles Product of SSA Beneficiary Country 35% Value Requirement Imported Directly into US 19 CFR 10.175; 10.176; 10.178a GSP Requirements Under AGOA

10. GSP Requirements Under AGOA “Product of” Requirement • The Article Must be the Growth, Product, or Manufacture of the Beneficiary Sub-Saharan African Country • Article Must Either be Made Entirely of Materials Which Originate in 1 or More SSA, or • If Made of Materials imported into SSA from 1 or more Non-Beneficiary Country, Those Materials Must be Substantially Transformed into a New and Different Article of Commerce

11. GSP Requirements Under AGOA Substantial Transformation For “Product of” Requirement • Foreign Materials Must Undergo A Single Substantial Transformation In Order to Qualify for the “Product of” Requirement • Substantial Transformation Results When a New or Different Article Emerges with a New Name, Character or Use

12. GSP Requirements Under AGOA Substantial Transformation for “Product of” Requirement • Example 1 • Leather made in Argentina is imported into RSA • In RSA, leather is cut, sewn and assembled • Metal buckles made in RSA added to produce finished belts • The processing in RSA results in a single substantial transformation of the imported leather into a new and different article of commerce—the finished belt, which is a “product of” South Africa

13. GSP Requirements Under AGOA Substantial Transformation for “Product of” Requirement • Example 2 • Raw rubber made in India is imported into Mauritius • In Mauritius, rubber is melted and formed by a mold into a finished rubber boot • Producing the finished boot results in a single substantial transformation of the imported rubber into a “product of” Mauritius

14. GSP Requirements Under AGOA Double Substantial Transformation for Foreign Materials • Foreign Materials Must Undergo A Double Substantial Transformation In Order To Qualify To Be Counted Toward The 35% Value Requirement • There Must Be A Finding That There Is An Intermediate Article In Order For A Double Substantial Transformation To Occur

15. GSP Requirements Under AGOA Double Substantial Transformation • Example 1 • Leather from Korea is imported into Tanzania • In Tanzania, leather is cut to shape to create 6 components comprising the outer surface of a travel bag • The components are assembled with 20 other metal, plastic and vinyl components to create the finished bag

16. GSP Requirements Under AGOA Double Substantial Transformation Example 1 (Cont.) • Cutting the leather to shape to create bag components substantially transforms the leather into intermediate materials which are substantially transformed a second time when assembled into the finished bag. Because the leather is substantially transformed twice in Tanzania, its cost or value may be counted toward satisfying the 35% value-content requirement

17. GSP Requirements Under AGOA Double Substantial Transformation • Example 2 • 50 fabricated components from China, including resistors, capacitors, diodes, transistors, and integrated circuits, are imported into Kenya • In Kenya, they inserted into and soldered to a Chinese printed circuit board • The finished printed circuit board assembly (PCBA) is then assembled with numerous other components to produce a printer for a personal computer

18. GSP Requirements Under AGOA Double Substantial Transformation Example 2 (Cont.) • Producing the PCBA results in one substantial transformation, and the subsequent assembly of the PCBA with other components to create the printer results in a second substantial transformation of the Chinese PCBA components

19. GSP Requirements Under AGOA Value-Content Requirement • At Least 35% of the Full Appraised Value of the Article Must be Attributed to: • The Cost or Value of Materials Produced in One or More Beneficiary Sub-Saharan African Countries; plus • The Direct Costs of Processing Operations Performed in a Beneficiary Sub-Saharan African country

20. GSP Requirements Under AGOA Value-Content Requirement (Cont.) • For purposes of determining compliance with the 35% value content requirement, an amount not to exceed 15% of the full appraised value may be attributed to the cost or value of materials produced in the US

21. GSP Requirements Under AGOA • Example • 50% of Value Is Attributed to Leather Imported From Argentina • 30% of Value Is Attributed to Metal Imported From US • 20% of Value Is Attributed to Processing and Assembly in Mauritius

22. GSP Requirements Under AGOA Direct Cost of Processing • Costs Either Directly Incurred or Reasonably Allocated to the Growth, Production, Manufacture, or Assembly of Article • Actual Labor Costs • Such as Fringe Benefit; On the Job Training; Cost of Engineering; First Line Supervisory; Quality Control • Dies, Molds, and Tooling • Research and Development • Cost of Inspecting and Testing (19 CFR 10.178)

23. GSP Requirements Under AGOA Imported Directly Requirement • The Article Must be Imported Directly from a SSA country to the US • Three definitions of “Imported Directly”

24. GSP Requirements Under AGOA Imported Directly: • Direct Shipment from SSA to US without passing through the Territory of any Non-Beneficiary Country • Shipment from SSA to US through a Non-Beneficiary Country • May not enter commerce and US is Final Destination • Shipment from SSA to US through a Non-Beneficiary Country and US is not Final Destination on Documents • May not enter commerce and must remain under Customs Authority

25. GSP Requirements Under AGOA “Imported Directly: • Direct shipment from SSA to US without passing through the Territory of Any Non-beneficiary Country • No limitation to the Number of SSA Countries which may “Contribute” to Production of a Product • Merchandise can undergo operations such as sorting, grading, testing, packing, affixing labels, preservation, etc. in any SSA country

26. GSP Requirements Under AGOA Imported Directly • Example • Oranges Grown in Uganda • Oranges Sent to Tanzania Where They Are Sorted and Packed • Oranges Are Sent Through Mozambique to South Africa • Oranges Shipped Directly From South Africa to the US

27. GSP Requirements Under AGOA Imported Directly • Shipment from SSA to US through a Non-Beneficiary Country only if: • The merchandise does not enter into the commerce of any Non-Beneficiary Country, and • Invoice, Bills of Lading, and other Shipping Documents show US as the Final Destination

28. GSP Requirements Under AGOA Imported Directly • Example • Lemons Grown in Ethiopia • Lemons Sent to Kenya Where They Are Loaded on a Ship Going to France • In France the Lemons Are Transferred to a Ship Going to the US • The Invoice and Bill of Lading Accompanying the Shipment From Ethiopia Show US As the Final Destination

29. GSP Requirements Under AGOA “Imported Directly” • Shipment From a SSA to US Through a Non-beneficiary Country and the Invoices and Other Documents Do Not Show US As the Final Destination Only If: • Goods Remained Under the Control of the Customs Authority of the Intermediate Country • Goods Did Not Enter the Commerce of That Intermediate Country

30. GSP Requirements Under AGOA “Imported Directly” (Cont.) • Shipment From a SSA to US Through a Non-beneficiary Country and the Invoices and Other Documents Do Not Show US As the Final Destination Only If: • The Transaction That Causes the Goods to Be Imported Into the US Must Be Between the US Importer and the Producer or the Producer’s Agent • Goods Were Not Subjected to Operations Other Than Loading and Unloading or Preservation

31. GSP Requirements Under AGOA • Example • A Producer of Baskets in Lesotho Ships Baskets to Hamburg, Germany for Storage in a Bonded Warehouse • Shipping Documents Do Not Show U.S. As the Final Destination and The Baskets Are Only Loaded and Unloaded • Orders Are Received by the Producer’s Agent in Germany From Buyers From Various Countries, Including the US • Baskets Are Shipped From Germany to the U.S. • Does This Transaction Qualify?

32. GSP Requirements Under AGOA • Answer • The Baskets Are Considered “Imported Directly” Under the Third Definition • Because the Baskets Are Stored in a Bonded Warehouse, They Are Considered to Be Under the Control of Customs in Germany • The Baskets Did Not Enter the Commerce of Germany Except for a Sale Other Than at Retail • The Transaction Which Caused the Merchandise to Be Imported Was Between the U.S. Importer and the Producer’s Agent?

33. Electronic Ruling Requests • Determine Applicability of Trade Programs • Must Concern Prospective Shipments • Excludes Requests Requiring a Sample • Legally Binding • Provides for Uniformity Across Ports

34. Electronic Ruling Requests • eRuling Request Procedures • binding.ruling@dhs.gov • Follow Up Questions Referred to (646) 733-3056/3063