Uganda risks United States sanctions over ‘Mivumba’ ban

Uganda risks United States sanctions over 'Mivumba' ban
Bales of imported second hand clothes. Courtesy Photo.

The Office of the United States (US) Trade Representative has initiated an out-of-cycle review of the eligibility of Uganda, Rwanda and Tanzania to receive benefits under the African Growth and Opportunity Act (AGOA).

The review is in response to a petition filed by the Secondary Materials and Recycled Textiles Association (SMART), an association of textile companies from the United States, asserting that the decision by the East African Community to ban imports of used clothing and footwear is imposing significant economic hardship on the United States’ used clothing industry.

The petitioners argue that the ban directly contradicts requirements that African Growth and Opportunity Act (AGOA) beneficiaries work towards eliminating ‘barriers to United States trade and investment’ and promote ‘economic policies to reduce poverty’.

EAC member countries resolved to outlaw the importation of used clothes and shoes across the East African Region by 2019. The resolution is part of the industrialization policy fostered by the various East African Heads of State to transform the manufacturing sector in member states. It will also restrict importation of used motor vehicles.

To effect the move, the Tanzanian legislature voted in June 2016, to approve a budget that doubled import duties on secondhand clothing, increasing the tariffs from USD 0.2 per kilogram to USD 0.4 per kilogram. During the same month, Kenya and Uganda announced tariff increases on used clothing imports similar to those announced by Tanzania while Rwanda raised import duties on secondhand clothing by from USD 0.2 per kilogram to USD 2.5 per kilogram.

The petitioners observe that the tariff increases are so high that they amount to a de facto ban second hand clothes and make clear that EAC member states are moving full steam ahead on implementing it.

“SMART seeks the reversal of the EAC’s ban and the roll back of the recently increased duties in EAC member nations,” SMART executive director Jackie King said in the petition

Smart further estimates, in the petition that the implementation of the interim duty increases put into place by certain EAC countries led to a current loss of 5,000 jobs in the private sector of the U.S. used clothing industry and the loss of another 19,000 in the not-for-profit sector.

Through the out-of-cycle review, the U.S. Trade Representative (USTR) and trade-related agencies will assess the allegations contained within the petition and review whether Uganda Rwanda and Tanzania, are adhering to AGOA’s eligibility requirements. The countries could be terminated from the list of beneficiaries if the review detects any form of violation.

Signed into law in 2000, the African Growth and Opportunity Act promotes trade and investment in sub-Saharan Africa, including through substantial trade preferences. It designates sub-Saharan African countries as beneficiaries eligible for duty-free treatment for certain products as well as for the preferential treatment for certain textile and apparel articles.

In order to qualify for AGOA trade benefits, partner countries are required to meet certain statutory eligibility requirements, including making continual progress toward establishing market-based economies, the rule of law, political pluralism, and elimination of barriers to U.S. trade and investment, among others.

The East African Community nations are one of the most important markets for U.S. industry’s used clothing exports, with direct American exports to the EAC member countries totaling approximately USD 24 million in 2016.

U.S. AGOA imports from Uganda, Rwanda, Tanzania, totaled USD 43 million in 2016, up from USD 33 million in 2015 while U.S. exports to Uganda, Rwanda and Tanzania totaled USD 281 million in 2016, up from USD 257 million in 2015.

But a statement signed by Edward Gresser, the chairperson of the Trade Policy Staff Committee in the Office of the United States Trade Representative indicates that the agency has determined that there are exceptional circumstances warranting an out-of-cycle review of the AGOA eligibility for the three countries.

The statement added that the Republic of Kenya was excused from the review due to recent actions including reversing tariff increases, effective July 1, 2017, and committing not to ban imports of used clothing through policy measures that are more trade-restrictive than necessary to protect human health. It however adds that USTR will continue to monitor Kenya’s actions to ensure that Kenya follows through on its commitments.

Burundi, the other member of the EAC bloc is not a beneficiary of the African Growth and Opportunities Act (AGOA).

The process will start with a public hearing in Washington, DC July 13, 2017. The AGOA Subcommittee of the TPSC (Subcommittee) will also consider written comments, written testimony, and oral testimony to develop recommendations for the President as to whether Uganda, Rwanda and Tanzania are meeting the AGOA eligibility criteria.

The Act requires the President to terminate the designation of a country as a beneficiary sub-Saharan African country if he determines that the country is not making continual progress in meeting the eligibility requirements.