Customs News Bulletin

	29 April 2015

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AGOA 2.0: WHAT WILL CHANGE?

The African Growth and Opportunity Act (AGOA) is an American act that was signed into law on May 18, 2000 as Title 1 of The Trade and Development Act of 2000.

The purpose of AGOA is to assist the economies of sub-Saharan Africa (SSA) and to improve economic relations between the United States and the region.

AGOA is similar to a Generalized System of Preferences (GSP), which are preferential trade programmes in terms of which developed countries provide preferential treatment to imports from developing countries.  AGOA, however, covers more products and includes additional eligibility criteria beyond those in GSP. Additionally, AGOA includes trade and development provisions beyond its duty-free preferences.

AGOA expires on 30 September 2015, and new bills to amend the act were introduced in the United States House and Senate on 17 and 20 April 2015.

The renewal of the AGOA is very important to South Africa as we benefit from exports to the USA under the act.

 U.S. apparel imports typically face relatively high tariffs and are excluded from duty-free treatment in GSP, but are included in the AGOA preferences, giving AGOA countries a competitive advantage over other apparel producers. Lesotho, Kenya, and Mauritius are the main beneficiaries that make significant use of the apparel benefits. South Africa accounts for the bulk of U.S. imports under AGOA. South Africa also exports a much more diverse range of manufactured goods than other AGOA countries; vehicles in particular have become a major South African export under AGOA.  It includes more than 40 000 BMW’s that are built in South Africa and exported to the USA per annum. 

Proposed changes under AGOA 2.0

1. Key issues addressed in the bills include:

2. A ten (10) year renewal of the overall program including the regional apparel article program and the third-country fabric provision;
3. Amendments to the rules of origin allowing for the “direct costs of processing operations” to count toward a product’s required regional value content to qualify for duty-free treatment;
4. Modifications to the eligibility review process administered by the President, including a required 60-day notification to Congress before termination of preferential treatment for beneficiary countries, a requirement to seek public comments and hold a public hearing on eligibility reviews as well as establish a public petition process open at all times, authorization of an out-of-cycle review process and a sense of Congress that the President should initiate such a review of South Africa within 30 days of enactment, and the ability to withdrawal, suspend, or limit preferential treatment rather than full termination;

5. Sense of Congress that beneficiary countries should develop utilization strategies together with U.S. trade capacity building agencies;

6. Policy statement to expand trade and investment by negotiating trade and investment framework agreements (TIFAs), bilateral investment treaties (BITs), FTAs with beneficiary countries and through accession to the World Trade Organization (WTO) agreements for beneficiary countries;

7. A biennial report on U.S. trade and investment relations with the region, eligibility status, regional integration efforts, and trade capacity building efforts; and

8. A report one year after enactment and five years thereafter that discusses the status of negotiating FTA’s with sub-Saharan African (SSA) countries.

Read the United States Congressional Research Service (CRS) Report titled African Growth and Opportunity Act (AGOA): Background and Reauthorization for more information.  The report is dated 22 April 2015 and can be downloaded at at https://www.fas.org/sgp/crs/row/R43173.pdf

ANIMAL DISEASES ACT: IMPORT REQUIREMENTS FOR CATTLE, SHEEP AND GOATS FROM BOTSWANA, LESOTHO, NAMIBIA AND SWAZILAND: AMENDMENT (Comments due by 17 May 2015)

Please refer to the Customs News Bulletin of 22 April 2015 for the full details of this article. This is also downloadable on www.jacobsens.co.za

Customs Tariff Applications: List 04/2015

The International Trade Administration Commission (ITAC) is responsible for tariff investigations, amendments, and trade remedies in South Africa and on behalf of SACU. Tariff investigations include: Increases in the customs duty rates in Schedule No. 1 Part 1 of Jacobsens. These applications apply to all the SACU Countries, and, if amended, thus have the potential to affect the import duty rates in Botswana, Lesotho, Namibia, Swaziland and South Africa. Reductions in the customs duty rates in Schedule No. 1 Part 1. These applications apply to all the SACU Countries, and, if amended, thus have the potential to affect the import duty rates in Botswana, Lesotho, Namibia, Swaziland and South Africa. Rebates of duty on products, available in the Southern African Customs Union (SACU), for use in the manufacture of goods, as published in Schedule No. 3 Part 1, and in Schedule No. 4 of Jacobsens. Schedule No. 3 Part 1 and Schedule No. 4, are identical in all the SACU Countries. Rebates of duty on inputs used in the manufacture of goods for export, as published in Schedule No. 3 Part 2 and in item 470.00. These provisions apply to all the SACU Countries. Refunds of duties and drawbacks of duties as provided for in Schedule No. 5. These provisions are identical in the all the SACU Countries. Trade remedies include: Anti-dumping duties (in Schedule No. 2 Part 1 of Jacobsens), countervailing duties to counteract subsidisation in foreign countries (in Schedule No. 2 Part 2), and safeguard duties (Schedule No. 2 Part 3), which are imposed as measures when a surge of imports is threatening to overwhelm a domestic producer, in accordance with domestic law and regulations and consistent with WTO rules. Dumping is defined as a situation where imported goods are being sold at prices lower than in the country of origin, and also causing financial injury to domestic producers of such goods. In other words, there should be a demonstrated causal link between the dumping and the injury experienced. To remedy such unfair pricing, ITAC may, at times, recommend the imposition of substantial duties on imports or duties that are equivalent to the dumping margin (or to the margin of injury, if this margin is lower). Countervailing investigations are conducted to determine whether to impose countervailing duties to protect a domestic industry against the unfair trade practice of proven subsidised imports from foreign competitors that cause material injury to a domestic producer. Safeguard measures, can be introduced to protect a domestic industry against unforeseen and overwhelming foreign competition and not necessarily against unfair trade, like the previous two instruments.

In the WTO system, a member may take a safeguard action, which is, restricting imports temporarily in the face of a sustained increase in imports that is causing serious injury to the domestic producer of like products. Safeguard measures are universally applied to all countries, unlike anti-dumping and countervailing duties that are aimed at a specific firm or country. Schedule No. 2 is identical in all the SACU Countries. ITAC received and published the following application to amend the tariff: The notice was published in Government Gazette 38707 of 24 April 2015. It relates to an application to increase the general rate of customs duty on: Large bore welded steel pipes classifiable under tariff headings 73.03, 73.04, 73.05, and 73.06, from free of duty and 10% ad valorem to 15% ad valorem. ITAC Ref. 11/2014. Enquiries: Ms Lufuno Maliaga Tel: (012) 394 3835 E-mail:  lmaliaga@itac.org.za Mr Pfarelo Phaswana Tel: (012) 394 3628 E-mail  pphaswana@itac.org.za Refer to Notice Government Notice R. 369 of 2015, published in Government Gazette 38707 dated 24 April 2015. Comments are due by 22 May 2015.

Customs Tariff Amendments

With the exception of certain parts of Schedule No. 1, such as Schedule No. 1 Part 2 (excise duties), Schedule No. 1 Part 3 (environmental levies) Schedule No. 1 Part 5 (fuel and road accident fund levies), the other parts of the tariff is amended by SARS based on recommendations made by ITAC resulting from the investigations relating to Customs Tariff Applications received by them. The ITAC then investigates and makes recommendations to the Minister of Trade and Industry, who requests the Minister of Finance to amend the Tariff in line with the ITAC’s recommendations. SARS is responsible for drafting the notices to amend the tariff, as well as for arranging for the publication of the notices in Government Gazettes. During the annual budget speech by the Minister of Finance in February, it was determined that parts of the tariff that are not amended resulting from ITAC recommendations, must be amended through proposals that are tabled by the Minister of Finance. Once a year big tariff amendments are published by SARS, which is in line with the commitments of South Africa and SACU under international trade agreements. Under these amendments, which are either published in November or early in December, the import duties on goods are reduced under South Africa’s international trade commitments under existing trade agreements.

There were no tariff amendments at time of publication. The latest tariff amendments were published in Government Gazette 38681 on 10 April 2015. The rate of customs duty on lithium batteries classifiable in tariff subheading 8506.50.25 is reduced from 10% to free as recommended in ITAC Report 493. Government Gazette 38681, R. 307, 10.04.2015, A1/1/1515 Tariff subheading 8507.10 is amended by the creation of two eight digit subheadings (8507.10.05 and 8507.10.10) to give effect to ITAC’s recommendation in Report No 491 to increase the rate of customs duty on lead acid batteries of a kind used for starting piston engines from 5% to 15%. Government Gazette 38681, R. 308, 10.04.2015, A1/1/1516  The tariff amendments were sent to subscribers under cover of Supplement 1047. Download the latest Customs Watch to have access to the latest tariff amendments.

Customs Rule Amendments

The Customs and Excise Act is amended by the Minister of Finance. Certain provisions of the Act are supported by Customs and Excise Rules, which are prescribed by the Commission of SARS. These provisions are numbered in accordance with the sections of the Act. The rules are more user-friendly than the Act, and help to define provisions which would otherwise be unclear and difficult to interpret. Forms are also prescribed by rule, and are published in the Schedule to the Rules.

Forms are also prescribed by rule, and are published in the Schedule to the Rules.  There were no Rule amendments at time of publication. The last rule amendment (DAR/144) was published on 27 March 2015 in Government Gazette 38603 under Notice R. 246. Download the latest Customs Watch to have access to the latest tariff and rule amendments.

Contact Information:	Contact the Author:
Mayuri Govender Jacobsens Editor Tel: 031-268 3273 e-mail to: jacobsen@lexisnexis.co.za	Leon Marais Independent Customs Consultant Tel: 053-203 0727 e-mail to: leon.marais@intekom.co.za

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