Uganda risks US sanctions over used clothes ban

Wednesday June 21 2017

Used garments on sale in Mbarara, Uganda. The

Used garments on sale in Mbarara, Uganda. The business employs thousands of people.  

By Agencies

Uganda's eligibility to trade with the United States under the African Growth and Opportunity Act (AGOA) is under review over her stance on the importation of used clothing commonly known as Mivumba.

The review is in response to a petition filed by the Secondary Materials and Recycled Textiles Association (SMART), an association of textile companies in the United States of America (USA).

SMART members argue that the decision by the East African Community (EAC) to ban imports of used clothing and footwear is imposing significant economic hardship on the USA’s used clothing industry.

The petitioners argue that the ban directly contradicts requirements that AGOA beneficiaries work towards eliminating “barriers to United States trade and investment” and promote “economic policies to reduce poverty”.

The Office of the United States Trade Representative (USTR) has, as a result, initiated a review of the eligibility of Uganda, Rwanda and Tanzania to receive benefits under AGOA.

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 industrialisation policy fostered by the various East African Heads of State to transform the manufacturing sector in member states. The member states also intend restrict the importation of used motor vehicles.

To effect the move, the Tanzanian Parliament voted  in June 2016, to approve a budget that doubled import duties on second hand clothing, increasing the tariffs from 0.2 to 0.4 US dollars per kilogramme. 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 second hand clothing by from 0.2 to 2.5 US dollars per kilogramme.

The petitioners observe that the tariff increases are so high that they amount to a de facto ban on second hand clothes and makes it clear that EAC member states are moving towards banning used clothes importation.

SMART Executive Director, Jackie King says in the petition that the association seeks the reversal of the ban and the roll back of the recently increased duties in EAC member nations. The association estimates that the implementation of the interim duty increases by EAC countries led to a loss of 5,000 jobs in the private sector of the U.S. used clothing industry and the loss of another 19,000 jobs in the not-for-profit sector.

Through the review, 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, AGOA 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 totalling to approximately $24 million in 2016.

U.S. imports under AGOA from Uganda, Rwanda, Tanzania, totalled to $43 million in 2016, up from $33 million in 2015 while her exports to the three countries rose from $ 257 million in 2015 to $ 281 million in 2016, according to a statement by the Office of the U.S. Trade Representative.

The statement signed by Edward Gresser, the chairperson of the Trade Policy Staff Committee in the Office of the USTR 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.

He explained that 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 would continue to monitor Kenya's actions to follow through on its commitments.

Burundi, the other member of the EAC bloc is not a beneficiary of AGOA.

The review process will start with a public hearing in Washington, DC on July 13, 2017. The AGOA Subcommittee of the TPSC will consider written and oral comments and testimonies to develop recommendations for President Donald Trump on 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 if he determines that the country is not making continual progress in meeting the eligibility requirements.