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AGOA GSP Provisions. December 8, 2003. Overview. Title 1 of the Trade & Development Act of 2000 is the African Growth and Opportunity Act (AGOA)

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agoa gsp provisions

AGOA GSP Provisions

December 8, 2003

slide2

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.
slide3

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.
slide4

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
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

“Import Sensitive” Articles
slide6

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
gsp articles under agoa
GSP Articles Under AGOA

Value of US Imports from Sub-Saharan Africa

Source: US ITC/Dept. of Commerce

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GSP Articles Under AGOA

Value of US Imports from Sub-Saharan Africa

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

GSP Requirements Under AGOA
gsp requirements under agoa10
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
gsp requirements under agoa11
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
gsp requirements under agoa12
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 commerce—the finished belt, which is a “product of” South Africa
gsp requirements under agoa13
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
gsp requirements under agoa14
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
gsp requirements under agoa15
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
gsp requirements under agoa16
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
gsp requirements under agoa17
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
gsp requirements under agoa18
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
gsp requirements under agoa19
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
gsp requirements under agoa20
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
gsp requirements under agoa21
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
gsp requirements under agoa22
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)
gsp requirements under agoa23
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
gsp requirements under agoa26
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
gsp requirements under agoa27
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
gsp requirements under agoa28
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
gsp requirements under agoa29
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
gsp requirements under agoa30
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 Producer’s Agent
    • Goods Were Not Subjected to Operations Other Than Loading and Unloading or Preservation
gsp requirements under agoa31
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 Producer’s Agent in Germany From Buyers From Various Countries, Including the US
    • Baskets Are Shipped From Germany to the U.S.
    • Does This Transaction Qualify?
gsp requirements under agoa32
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 Producer’s Agent?
electronic ruling requests
Electronic Ruling Requests
  • Determine Applicability of Trade Programs
  • Must Concern Prospective Shipments
  • Excludes Requests Requiring a Sample
  • Legally Binding
  • Provides for Uniformity Across Ports
electronic ruling requests34
Electronic Ruling Requests
  • eRuling Request Procedures
    • binding.ruling@dhs.gov
    • Follow Up Questions Referred to (646) 733-3056/3063