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
Import Sensitive Articles

• 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

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
GSP Requirements Under AGOA

• 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

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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
  commercethe 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

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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

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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

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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

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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

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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

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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

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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)

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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

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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

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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

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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

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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

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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

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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

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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 Producers Agent
• Goods Were Not Subjected to Operations Other Than
  Loading and Unloading or Preservation

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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 Producers Agent in
  Germany From Buyers From Various Countries,
  Including the US
• Baskets Are Shipped From Germany to the U.S.
• Does This Transaction Qualify?

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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
  Producers Agent?

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Electronic Ruling Requests

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

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Electronic Ruling Requests

• eRuling Request Procedures
• binding.ruling_at_dhs.gov
• Follow Up Questions Referred to (646)
  733-3056/3063

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