Details of Recently Enacted Trade Bill on GSP and ATPA/ATPDEA Extensions, Vietnam PNTR, AGOA Apparel, Haiti Benefits, Chapter 99, Etc. (Part III - AGOA)

This is Part III of a multi-part series of summaries of P.L. 109-432 and highlights various amendments to the African Growth and Opportunity Act (AGOA) to (i) extend and increase the Tariff Preference Level (TPL) sublimit for certain apparel made in lesser developed beneficiary AGOA countries (LDBCs) from "third country" fabric or yarn, (ii) provide incentives for fabric and yarn production in AGOA countries, (iii) provide duty-free benefits for wholly AGOA textiles and textile articles, (iv) etc. See future issues of ITT for summaries on additional summaries.

AGOA TPL Sublimit for Apparel Made with "Third Country" Fabric/Yarn Extended, Increased

P.L. 109-432 adds a new subsection (c) to 19 USC 3721, which extends to September 30, 2012 (from September 30, 2007) the duty-free TPL sublimit for apparel made in LDBCs from "third country" fabric or yarn, and more than doubles its size (to 3.5%(from 1.6071%) of the aggregate square meter equivalents (SMEs) of all apparel articles imported into the U.S. in the preceding 12-month period for which data are available).

(This annual TPL sublimit runs from October 1 - September 30, and is for apparel articles wholly assembled or knit-to-shape and wholly assembled, or both, in one or more lesser developed AGOA beneficiary countries, regardless of the country of origin of the fabric or the yarn used to make such articles.)

Possible Exclusions from Duty-Free TPL Sublimit if Fabric/Yarn in "Abundant Supply" in AGOA Countries is Not Used

New subsection (c) to 19 USC 3721 also provides incentives ("special rules") for the use of AGOA produced fabric or yarn, as follows:

(The below information is based on BP's understanding of this provision. It may be interpreted differently by others, or implemented differently than it reads; see P.L. 109-432 for complete details.)

Process to determine if AGOA fabric/yarn is in "abundant supply" but is not used. P.L. 109-432 creates a process whereby interested parties (which may include a foreign manufacturer) can petition the International Trade Commission (ITC) to determine whether a fabric or yarn produced in an AGOA beneficiary country(s) is available in commercial quantities for use by LDBCs (i.e., in "abundant supply").

If the determination is affirmative, the ITC will then determine the quantity of such fabric or yarn that will be so available for the 1-year period following the determination. The ITC will also determine before the end of that 1-year period whether the fabric or yarn will be in abundant supply in the succeeding year; and if so, at what quantity.

The ITC will also determine to what extent this quantity of "abundant supply" fabric/yarn was used in the production of TPL sublimit apparel entered during that 1-year period. Any portion that is not used would be added to the next year's quantity.

(P.L. 109-432 also establishes procedures for the removal of a fabric or yarn's abundant supply determination.)

Denim already deemed to be in "abundant supply." P.L. 109-432 states that denim articles in HTS 5209.42.00 will be deemed to be in abundant supply in an amount of 30,000,000 SMEs for the 1-year period beginning October 1, 2006.

According to a House Ways and Means Committee summary, denim is deemed to be in abundant supply because of known production in Lesotho.

Ineligibility for TPL sublimit if abundant supply quantity not used. (1) P.L. 109-432 states that, subject to paragraph (2) below, the President may proclaim that apparel articles otherwise eligible for duty-free benefits under the TPL sublimit, that contain a fabric or yarn determined to be in abundant supply, may not receive such preferential treatment in an applicable 1-year period unless:

a. the fabric or yarn in such articles was produced in one or more AGOA beneficiary countries; or

b. the ITC determines that the abundant supply quantity has already been exhausted.

(2) According to P.L. 109-432, an ineligibility determination is mandatory if the abundant supply quantity is not used during two-consecutive 1-year periods, unless the ITC determines that the quantity has already been used in the production of apparel articles receiving third country fabric/yarn benefits.

Wholly AGOA Textiles and Textile Products Eligible for Duty-Free Entry

P.L. 109-432 adds a new paragraph (8) to 19 USC 3721(b) so that textiles and textile articles classified in HTS Chapters 50 through 60 or Chapter 63 that are products of an LDBC and are wholly formed in one or more such countries from fibers, yarns, fabrics, fabric components, or components knit-to-shape that are the product of one of more of such countries are eligible for AGOA duty- and quota-free preferential treatment.

AGOA Technical Amendments

P.L. 109-432 also amends 19 USC 3721 by adding a definition of "enter" and "entered" to 19 USC 3721(f).

In addition, P.L. 109-432 extends the expiration date for AGOA textile and apparel benefits in 19 USC 3721 to September 30, 2015 (from September 30, 2008).

(Congressional sources refer to this change as a "technical correction" as it should have been included in the changes made by the AGOA Acceleration Act (AGOA III).

AGOA III extended the aggregate duty-free cap for AGOA apparel (HTS 9819.11.09 and 9819.11.12), as well as standard Generalized System of Preferences (GSP) and AGOA-GSP for AGOA beneficiary countries through September 30, 2015. See ITT's Online Archives or 07/14/04 news, 04071405, for BP summary on AGOA III.)

(See ITT's Online Archives or 01/30/07 news, 07013010 for BP summary of CITA notice increasing the AGOA TPL sublimit for apparel made with 'third country' fabric/yarn.)

(See ITT's Online Archives or 12/20/06 and 12/27/06 news, 06122005 and 06122710, for Parts I and II.)

P.L. 109-432 available at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=109_cong_bills&docid=f:h6111enr.txt.pdf.