THE AMCHAM POST - February 23 2023 

The African Growth and Opportunity Act (AGOA) is a nonreciprocal unilateral trade preference program that grants duty-free treatment to U.S. imports of eligible products from eligible Sub-Saharan African (SSA) countries. More than 6,400 tariff lines are covered under AGOA, allowing duty-free and largely quota-free access to the United States. Enacted in 2000, the program was extended in 2015 to September 2025. Currently, 39 out of 49 Sub-Saharan African countries are AGOA eligible. Eligible countries need to take advantage of the program as optimally as possible to lock-in buyers.

Why the U.S. Market?

The United States is a large market worth taking advantage of. Madagascar is the 101st the largest goods trading partner for the United States, with the $913 million in total (two-way) goods trade in 2019. Madagascar was the 83rd largest supplier of goods imports into the U.S. market in 2019. U.S. goods imports from Madagascar totaled $846 million in 2019, up 233.9% from 2009. The top import categories in 2019 were: coffee, tea & spices (vanilla beans) ($419 million), woven apparel ($155 million), knit apparel ($90 million), other base metals (cobalt) ($57 million), and ores, slag, and ash (titanium) ($52 million). U.S. total imports of agricultural products from Madagascar totaled $430 million in 2019. Leading categories include: spices ($419 million), essential oils ($4 million), cocoa beans ($3 million), snack foods ($447 thousand), and cocoa paste & cocoa butter ($277 thousand).

AGOA product coverage and performance

Over 6,400 tariff lines are covered within AGOA. Basically, the eligible product list spreads over all sectors with the notable exclusion of man-made staple fibers; special woven fabrics, tufted textile fabrics, lace, tapestries, trimmings, embroidery; and knitted or crocheted fabrics. Other products also excluded from AGOA and GSP are: agro-processing sector products (e.g., canned peaches and peach juices); silicon; and electrolytic manganese metal powder.
Madagascar spots in the third place after South Africa and Angola at the regional performance of the total exports in 2022. The country’s total exports are roughly worth 729 million USD in 2022 (from January to October), 327 million USD of which is under AGOA.
Textiles and apparel largely top the list of the main sectors among which Madagascar operates, with 96.52% of total exports. The remaining main sectors include minerals and mineral products; agricultural products; forestry products and chemicals; and related products.

AGOA Benefits for Madagascar

Over 700 of the 6,400+ duty-free eligible products are agriculture products. Tariff exemptions increase competitiveness against products from non-AGOA countries. AGOA eligibility allows for related trade capacity building support from US Government agencies. AGOA eligibility increases potential for foreign direct investment and export growth. Increased utilization of AGOA will result in more job opportunities. Exposure to the U.S. market under the AGOA scheme creates relationships which might continue after the AGOA program ends.
The U.S. market faces growing demand for consumer goods and new technologies that require imported raw or intermediate inputs, both in agricultural and non-agricultural imports. Now that the trade via e-commerce platforms is growing, some products are showing real opportunities such as organic and natural products, tree nuts, citrus or cut flowers. Still, challenges to take on for these products are higher logistic costs, stiff competition from suppliers from other countries, higher cost of compliance with standards and lower productivity, and higher transactional cost. As for U.S. non-agricultural imports, U.S.-China trade relations create opportunities for other sourcing destinations. Home decor, footwear and leather goods and apparel are growing opportunities in the U.S. market, but the main issues for African providers are that local supplies a very small share of the U.S. market, the manufacturing productivity is low and the distance to market is far and cost of transport is very high.

Preparing for the U.S. Market

To access the U.S. market, products must comply with technical regulations and conformity assessment measures (e.g. labeling, Food Safety Modernization Act and Food Safety Certification); comply and register with U.S. Food and Drug Administration, U.S. Customs and Border Protection and U.S. Department of Agriculture; and other important federal agencies that regulate products entering the U.S. market. Products must meet private standards required by retailers and consumers. These are above and beyond national market access requirements.
While rules and AGOA regulations are complex, it is highly important for an exporter to know how the market is, who its customers are and how much its own production capabilities can fulfill an order.

Source: USAID Africa Trade and Investment
Edited by Maherintsoa Andrianiaina