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South Africa Remains Eligible for Benefits under AGOA

South Africa has narrowly avoided suspension from the African Growth and Opportunity Act (“AGOA”). On 14 March 2016 President Obama issued a proclamation revoking South Africa’s impending suspension from AGOA.

This comes on the back of a proclamation signed by President Obama on 11 January 2016 requiring the entry of U.S. poultry into South Africa before 15 March 2016, failing which South African agricultural products would be suspended from the benefits under AGOA.

AGOA is a unilateral programme providing for the duty-free access of thousands of products from designated African countries into the US market. It was first signed into law in 2000 and initially covered a period of eight years, but it was subsequently extended in 2004 until 2015. The most recent renewal extended the programme for a further 10 years. AGOA expands the (duty-free) benefits previously available only under the US Generalised System of Preferences (GSP) programme to qualifying African countries, ensuring duty-free access to the US market for approximately 7 000 product tariff lines. This includes products such as clothing and textiles, wine, motor vehicles and components, various agricultural products, platinum and diamonds, iron and steel products and many others. AGOA is very important for South African exporters. According to the Department of Trade and Industry, South Africa’s exports under AGOA was worth $3.6bn in 2014.

The extension of AGOA beyond 2015 has therefore been a very important issue for South Africa. Various US lobbying groups, however, have opposed the inclusion of South Africa under the extension of AGOA. The main opposition to South Africa’s continued inclusion has been the US poultry industry, which has been unhappy with the anti-dumping duties imposed by South Africa on chicken imports from the US.

The extension of AGOA, however, provided the US poultry industry with a very powerful bargaining chip for ensuring better market access into South Africa. South Africa eventually had to agree to extend an import quota for US chicken of 65 000 tonnes a year in order to ensure that it can continue to benefit under AGOA.

While the agreement between the US and South Africa is welcome news for many exporters under AGOA, South Africa is still not absolutely guaranteed to benefit from AGOA for its full 10 years. Special provisions have been inserted in the renewed AGOA text providing for a special review mechanism for South Africa’s continued participation. Many US lobbying groups feel that South Africa as a more advanced African economy should be graduated from AGOA. Importantly, as AGOA is a unilateral programme, the US attaches various conditions to countries’ continued participation. At a time when the US has expressed concern about a number of South Africa’s policies, such as its proposed restriction of foreign ownership in the private security industry, South Africa might yet face further challenges to its inclusion under AGOA in the near future.

The US wanted South Africa to remove barriers to its exports of beef and pork products as well as provide it with an allowance for poultry products which would be free from anti-dumping duties normally imposed by South Africa in order for South Africa to continue to benefit under AGOA. The two countries managed to reach an agreement on the treatment of these US products, but due to slow progress on the side of the South African Department of Trade and Industry and Department of Agriculture, the US announced that South Africa would have only until 15 March 2016 to show that the agreement reached will in fact be implemented. Customs and veterinary officials from both countries had to negotiate new protocols and amend existing regulations to ensure that US beef, pork and poultry landed on South African shores are treated as per the agreement between the two countries.

South Africa’s agricultural exports to the US which benefit under AGOA amount to more than R2bn. It was therefore very important that South Africa amend its food safety regime before the deadline set by the US in order for South Africa to continue to benefit from AGOA was reached. On the evening of 14 March 2016 President Obama announced that SA had adhered to the US demands, and that South African agricultural exporters may continue to export AGOA eligible products duty free and quota free to the US market.

Rian Geldenhuys and Niel Joubert

 

Niel Joubert

Niel has a BCom LLB LLM (International Trade Law) from the University of Stellenbosch, a Master of International Law and Economics (MILE) (Switzerland) and an International Legal Studies Certificate (Amsterdam). Niel was admitted as an attorney in 2009 after completing his articles at Bowman Gilfillan, whereafter he co-founded Trade Law Chambers, specialising in international trade and investment law.

Rian Geldenhuys

Rian has a BA LLB LLM (International Trade) Hons B (B and A) and MBA from the University of Stellenbosch as well as an International Legal Studies Certificate (Antwerp). Rian was admitted as an attorney in 2005 after completing his articles at DLA Cliffe Dekker Hofmeyr. He subsequently co-founded Trade Law Chambers, specialising in international trade and investment law.

 

 

 

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