House of Representatives (H.R.) Bill 6406 was on 08 December 2006 passed by a narrow 212-184 majority vote [52% of Republican Party representatives voted Yes, and 46% of Democrats voted Yes - a result that may have been different in the next sitting of Congress when the recently elected representatives take office. See graphic presentation on voting pattern on right]. The Bill makes a number of amendments to the current AGOA legislation, which will undoubtedly have an impact on Sub-Saharan beneficiary countries.
HR 6406 was introduced by Rep. Bill Thomas, the Chairman of the House Committee on Ways and Means, a key legislative body that deals with trade-related legislation. The Ways and Means Committee comprises a number of sub-committees, including one on trade, whose jurisdiction includes “matters relating to bilateral trade relations including trade with developing countries” and “commodity agreements and reciprocal trade agreements including multilateral and bilateral trade negotiations and implementation of agreements involving tariff and non-tariff trade barriers to and distortions of international trade”.
HR 6406 follows a number of earlier proposed pieces of legislation, including HR 6142, HR 6076, HR 5070 and HR 5480. In relation to AGOA, a key issue that has emerged over the past year has been the pending expiry of the apparel provisions as they relate to so-called Lesser Developed Beneficiary Countries (LDBCs). AGOA III, as the last major set of legislative amendments became known as, extended the third country fabric sourcing allowance to September 2007, with a halving of the applicable quota in the October 2006 – September 2007 quota period. Experience since 2001 has shown that these apparel provisions have been vital in supporting the African apparel sector, and is credited with creating tens of thousands of jobs in some of Africa’s poorest countries. During the annual AGOA Forum held most recently early July 2006 in Washington D.C., representatives from major US retail organisations cautioned that unless this legislation is extended by year end, US buyers would abandon Africa and look for alternative sources of supply. HR 6406 seeks to extend some of the market access privileges applicable to LDBCs which are due to expire in 2007. It should however be noted that the passing of HR 6406 – by the US House of Representatives – is an important but not the final step in the legislative process of writing these changes into legislation. Proposed legislation has to be passed by both the House of Representatives and the Senate before it is submitted to the President for signature.
On 09 December 2006, the U.S. Senate approved the legislation by a 79-9 vote. The bill was signed into law by U.S. President George Bush on 20 December 2006.
Provisions of Bill HR 6406
Hr 6406 contains a large number of provisions, and deals with trade preferences for AGOA beneficiaries, Haiti, Andean countries, the Generalised System of Preferences (GSP), a extending normal tariff relations to Vietnam, and other trade issues. With respect to AGOA, the relevant provisions are summarised below:
Extension of third country fabric provisions
HR 6406 extends the use of third country fabrics by countries classified as LDBCs to 2012. The third country fabric provision will lapse at the end of September 2007 unless HR 6406 is signed into law.
In addition, HR 6406 increases the volume cap on garments made by and shipped under AGOA to 3.5% of total US imports, thereby removing the reduced quota for the 2006/2007 year.
HR 6406 also introduces rules regarding the availability of locally produced fabric. An annual determination is made that may stipulate that certain locally-produced fabrics are available, in certain quantities, for use by LDBCs. This would require LDBCs to use such local fabrics prior to the use of foreign fabric, in the year following that when such a determination is made. Already, denim (of HTS code 5209.42.00) is determined to be in abundant supply at 30,000,000 Square Meter Equivalents (SMEs) per annum.
If fabric is determined to be in abundant supply but not used for two successive periods, then such garments will be prevented from utilising preferential market access in subsequent periods unless such fabric (available to LDBCs) has already been used by non-LDBCs in the manufacture of preference-receiving garment exports.
Extension of duty-free access to garments and textiles
HR 6406 introduces a new “Rule of Origin” category, applicable only to LDBCs (currently, two such rules or categories include the use of third country fabrics by lesser developed countries, the use of regional fabrics, etc.). The additional category would extend preferential market access under AGOA to all goods falling into chapters 50-63 (essentially textiles and garments) that are wholly produced in AGOA LDBCs. This means that all materials must be originating in lesser developed AGOA beneficiaries.
Extension of the GSP
The U.S. Generalised System of Preferences (GSP) was set to expire at the end of 2006, and HR 6406 extends it by a further two years to the end of 2008. The rules governing competitive needs limitations are set to be tightened after 6 months, with the President given the discretion to end waivers that constitute 150% of the competitive need limit of 75% of total U.S. imports of that product.
The full text of HR 6406 can be downloaded from AGOA.info’s legal documents archives.
21 AGOA FORUM 2013: Ethiopia will host the 2013 US-Africa AGOA Forum. AGOA.info has been informed that the Forum will not take place as envisaged on 28 June - 1 July, but at a later date yet to be determined. The theme for this year’s Forum is “Trade and Technology for sustained change”“
21 December 2012: Guinea-Bissau and Mali lose AGOA eligibility
APRIL 2013: Monthly data has been updated to include February 2013 data, quarterly includes full year 2012 data.
New US strategy towards Africa: White House Factsheet on new strategy towards Africa, plus overview of past US engagement with Africa. Click here for the file and this link for a summary article.
02 August 2012: Bill to extend third country fabric provision passes Congress Download the House of Reps. Bill at this link
South Sudan declared AGOA-eligible on 26 March 2012. Earlier, Cote d'Ivoire, Niger and Gambia declared AGOA eligible on 25 October 2011. See news item, presidential declaration and trade overview at this link (S Sudan) and here (others).
US GSP extended and GSP benefits to be applied retrospectively for the year 2011 since expiry of previous GSP. See AGOA.info legal documents section at the following link.
AGOA at 10: Reflections on US-Africa trade with a focus on SACU: Tralac Working Paper that can be downloaded at this
December 2010: The Democratic Republic of Congo loses its AGOA eligibility status. See proclamation here (pdf download available at this link
ITC investigation of textiles and apparel: Further details at this link
AGOA IV – Changes to AGOA explained
For disaggregated trade data covering each AGOA country, follow the relevant link in the Country Sections (left column) or click here.
For detailed AGOA maps click here