The East African Community (EAC) is a regional bloc comprising Kenya, Uganda, Tanzania, Rwanda, Burundi, South Sudan, and the Democratic Republic of Congo (DRC). Its founding Treaty commits Partner States to progressively deepen integration through a Customs Union, a Common Market, a Monetary Union, and ultimately a Political Federation.
For businesses operating across borders — particularly within the Kenya-Uganda-Tanzania trade corridor — understanding the EAC Common Market Protocol and the wider EAC legal framework is essential to avoid unnecessary tariffs, border delays, and regulatory duplication.
The Protocol on the Establishment of the EAC Common Market was signed in November 2009 and entered into force in July 2010. It is the legal instrument through which the East African Community deepens regional integration by creating a single common market among its member states.
It builds on the earlier Customs Union and represents the most advanced stage of EAC integration currently in active implementation, ahead of the Monetary Union and the eventual Political Federation.
| Freedom Guaranteed by the EAC Common Market Protocol | Description |
| Free movement of goods | Elimination of internal tariffs, application of a common external tariff, and removal of non-tariff barriers to trade within the EAC. |
| Free movement of services | Progressive liberalisation of services across seven priority sectors: business, communications, distribution, education, financial services, tourism and travel, and transport. |
| Free movement of capital | Liberalisation of capital movements, including securities, direct investment, credit, and personal capital operations. |
| Free movement of persons and labour | Enables citizens to move and work freely within the EAC, supported by Mutual Recognition Agreements (MRAs) in professions such as accounting, engineering, architecture, and veterinary services. |
| Rights of establishment and residence | Allows nationals of Partner States to establish and manage businesses and to reside in other EAC member states in accordance with the Protocol. |
Implementation remains progressive rather than absolute. Certain Partner States maintain partial waivers, particularly on the free movement of labour. The Common Market Protocol’s ambiguities — such as the treatment of services under a positive or negative list approach — also continue to generate compliance uncertainty for cross-border businesses.
Kenya, alongside several of its EAC partners, is simultaneously a member of the Common Market for Eastern and Southern Africa (COMESA), a separate regional economic community spanning 21 member states across Eastern and Southern Africa. Businesses researching EAC vs COMESA should understand that overlapping membership creates both opportunity and complexity:
Both the EAC and COMESA are, in turn, part of the wider African Continental Free Trade Area (AfCFTA), which is intended over time to harmonise trade arrangements across Africa’s regional blocs — though this harmonisation remains a work in progress.
Non-Tariff Barriers (NTBs) are defined under EAC law as laws, regulations, and administrative or technical requirements — other than tariffs — imposed by a Partner State whose effect is to impede trade. Common examples include discriminatory taxes and levies, excessive administrative fees, non-automatic licensing, rules of origin disputes, and disguised roadblocks or weighbridge delays.
The legal obligation to eliminate NTBs is anchored in Article 13 of the EAC Customs Union Protocol, and is given further effect through the East African Community Elimination of Non-Tariff Barriers Act, 2017. The Act provides three escalating mechanisms for resolving a reported NTB:
Businesses encountering an NTB can report it through the regional online reporting platform, which is jointly administered for the EAC, COMESA, and SADC. In March 2026, the 25th EAC Ordinary Summit directed Partner States to resolve all outstanding reported NTBs by 30 June 2026, underscoring renewed political urgency — though enforcement against non-complying states remains constrained by the fact that the EAC Committee on Trade Remedies, intended to handle binding dispute settlement, is not yet operational.
A company seeking to trade or establish operations across the Kenya-Uganda-Tanzania corridor should generally plan for the following legal and procedural steps:
The Standard Gauge Railway (SGR) extension from Naivasha through Kisumu to Malaba is one of the region’s most significant current infrastructure investments, and is directly relevant to the Kenya-Uganda-Tanzania corridor and the wider Northern Corridor trade route. It is also, in effect, a live case study in how the EAC Common Market Protocol’s freedoms translate into commercial opportunity once physical connectivity catches up with the legal framework.
After more than six years of delay following China’s withdrawal from concessional lending for the Malaba extension on commercial-viability grounds, the project returned to active development in 2025–26:
Phase 2C’s terminus at Malaba is designed to connect directly with Uganda’s own 272-kilometre Kampala–Malaba SGR, which Presidents Ruto and Museveni agreed to progress jointly in March 2026. Uganda has since secured a Ksh 95 billion (€650.75 million) financing package from the Islamic Development Bank for its side of the line, putting it ahead of Kenya in reaching financial close.
Once both sides are complete, government and industry estimates suggest that container transport costs between Mombasa and Kampala could fall from around US$3,500 to roughly US$1,600 per container, with transit times potentially reduced from about five days to one. The wider East African Railways Master Plan envisages the line eventually extending toward South Sudan, Rwanda, Burundi, and the DRC, and connecting northward toward Ethiopia — positioning the corridor as the physical backbone of the EAC’s stated ambition, under its 7th Development Strategy (2026–2031), to raise intra-EAC trade from roughly 15% to 40% of total trade by 2030.
The SGR extension is not simply a domestic infrastructure project — it is a direct enabler of several of the freedoms guaranteed under the EAC Common Market Protocol, and each of those freedoms in turn shapes where the commercial opportunity sits:
Taken together, the SGR Phase 2B and 2C extension illustrates a broader point for investors: the EAC’s legal freedoms create the right to participate across borders, but it is infrastructure of this kind — alongside the Single Customs Territory and One-Stop Border Posts discussed above — that determines whether that right is commercially exercisable. Investors evaluating opportunities along the corridor should treat the rail timeline, Uganda’s parallel construction progress, and the eventual concession tender process as the key milestones to track.
What is the EAC Common Market Protocol? The EAC Common Market Protocol is the legal agreement, in force since July 2010, that guarantees free movement of goods, services, capital, and persons, and rights of establishment and residence, across the seven EAC Partner States.
What is the difference between the EAC and COMESA? The EAC is a smaller, deeper regional bloc pursuing a Common Market and eventual Monetary Union among seven states, while COMESA is a larger 21-member free trade area with its own customs union ambitions and its own court. Several countries, including Kenya, belong to both, which can create overlapping tariff and dispute-resolution rules.
How do I report a Non-Tariff Barrier (NTB) in the EAC? NTBs can be reported through the regional online NTB reporting platform, jointly run by the EAC, COMESA, and SADC, which triggers resolution through mutual agreement, the EAC’s Time-Bound Programme, or escalation to the Council of Ministers.
What are the legal steps to trade across the Kenya-Uganda-Tanzania corridor? Businesses should confirm EAC rules of origin, register for the Single Customs Territory, use One-Stop Border Posts, meet each Partner State’s local establishment and licensing requirements, and plan for residual labour-mobility restrictions.
When will the SGR Phase 2B Naivasha–Kisumu line be completed? Construction began in March 2026, with government and regional officials targeting completion of the full Naivasha–Malaba link in mid-to-late 2027, timed to align with Uganda’s parallel Kampala–Malaba SGR construction.
The EAC’s Common Market Protocol, together with complementary NTB elimination mechanisms and a fast-moving regional infrastructure agenda such as the SGR Phase 2B extension, continues to lower the practical cost of cross-border trade in East Africa. However, overlapping regional memberships, uneven implementation across Partner States, and persistent non-tariff barriers mean that businesses should undertake corridor-specific legal and logistics due diligence rather than relying on the Protocol’s freedoms in the abstract.
Considering an investment along the Kenya-Uganda-Tanzania corridor? Speak to our regional trade and investment team for a structuring review tailored to your sector.
Keywords: National Infrastructure Fund Kenya, NIF Act 2026, Kenya PPP contracts, NCA foreign contractor registration, PPADA procurement, performance bonds Kenya, parent company guarantees
President William Ruto assented to the National Infrastructure Fund Act, 2026 on 9 March 2026, creating one of the most ambitious financing vehicles in Kenya’s history — a pool targeting roughly KSh 5 trillion to co-fund roads, railways, ports, and energy infrastructure. For contractors, engineering firms, and institutional investors, the Fund represents a rare pipeline of large-ticket, PPP-structured opportunities. It also arrives wrapped in litigation, making early, informed legal positioning essential for any business considering involvement.
This guide sets out what the Fund is, why it is being challenged in court, how contracts under it will actually be procured, what foreign contractors must do to qualify, and how the security instruments — performance bonds and parent company guarantees — that clients will demand actually work.
Legal Basis and Mandate
The Fund is established under the National Infrastructure Fund Act, 2026 (Act No. 4 of 2026), sponsored by National Assembly Majority Leader Kimani Ichung’wah. Its purpose is to mobilise capital from non-traditional sources such as domestic pension funds, collective investment schemes, sovereign wealth funds, and climate finance institutions. The Act frames this as a shift away from Kenya’s traditional reliance on sovereign borrowing toward an investment-led model for delivering large national projects.
The legislation establishes a vehicle intended to mobilise over KSh 5 trillion within a decade to finance strategic infrastructure across the country. Structurally, the Fund is a body corporate capable of owning assets, entering into contracts, and investing directly in infrastructure projects, but it is explicitly barred from borrowing or leveraging debt against its own balance sheet — positioning it as an equity-driven investor rather than a lender.
The Act defines “national infrastructure” broadly to cover transport systems such as highways and railways, energy generation and transmission, ports and airports, water and irrigation infrastructure, and digital connectivity systems. Early projects already linked to the Fund include the Jomo Kenyatta International Airport expansion and grid upgrade works funded through the FY2026/2027 budget.
Governance Structure
The Act creates a two-tier governance model. A Governing Council provides overall direction, chaired by the Treasury Cabinet Secretary and including the Governor of the Central Bank of Kenya, the Attorney-General, and six non-public members appointed by the President for three-year terms. A nine-member Board — comprising the Treasury CS or a representative, a chairperson, four independent directors, two directors with development-banking experience, and the CEO — is responsible for approving funding decisions and preparing detailed investment and business plans, including feasibility studies confirming commercial viability.
Funding Sources
The Fund draws on government allocations, private-sector investment, privatisation proceeds, grants, and loans. Its early seed capital has come from asset monetisation: proceeds from the Kenya Pipeline Company IPO and the partial sale of the government’s Safaricom stake to Vodacom Group have already been earmarked for the Fund, alongside a pipeline of at least ten further state corporations lined up for privatisation.
The Fund’s rollout has been contested in the High Court almost continuously since its inception as a Cabinet proposal, and investors should treat this litigation risk as a live, evolving factor rather than a settled matter.
First Wave — Executive Fiat Challenge (December 2025–March 2026)
Before the Act was even passed, a petition filed by Nakuru-based surgeon Dr Magare Gikenyi, Eliud Matindi, and others challenged the Fund’s creation through a presidential communiqué dated 15 December 2025, arguing it amounted to executive fiat without parliamentary approval, public participation, or a clear legal framework. The petitioners relied on Article 206(1)(a) of the Constitution, which they argued permits a national public fund to be established only through an Act of Parliament or the Public Finance Management Act — not by incorporating it as a limited liability company under the Companies Act. A related case was filed by the Consumers Federation of Kenya (COFEK).
On 24 December 2025, Justice Bahati Mwamuye issued a conservatory order at the Milimani Law Courts restraining the government from establishing, incorporating, registering, operationalising, or funding the proposed entity pending determination of the case. The Treasury pushed back: Treasury CS John Mbadi told the court in a replying affidavit that the entity was a government-owned company, not a constitutional public fund under Article 206, and that it had not yet been incorporated or received any public money.
Once Parliament enacted the law in March 2026 — arguably curing the original “no legal basis” objection — High Court judges Lawrence Mugambi and Bahati Mwamuye declined to issue fresh conservatory orders halting the now-enacted law, while noting the petitions raised urgent matters warranting a prompt hearing.
Second Wave — Constitutional Challenge to the Act Itself (March 2026–ongoing)
A day after presidential assent, Katiba Institute filed a fresh petition arguing the NIF Act was enacted without properly involving the Senate, despite carving out functions that fall within county government mandates and affecting resources counties are constitutionally entitled to. The petition also contends the Act sidelines the Controller of Budget from the constitutional expenditure-oversight role, and seeks to block privatisation proceeds — including the KSh 106.3 billion raised from the Kenya Pipeline sale and roughly KSh 244 billion tied to the Safaricom divestiture — from being channelled into the Fund pending the outcome.
Katiba Institute’s core constitutional argument is that legislation enacted to defeat the Constitution cannot stand, invoking Article 2(4), and that excluding the Controller of Budget from expenditure pre-approval under Article 228 places the Fund’s borrowing and spending activity outside the constitutional fiscal-control framework entirely.
Status as of July 2026
Despite the pending litigation, the Fund is operational and being used to finance live budget lines: Treasury has allocated Sh30.9 billion from the Fund toward the FY2026/2027 electricity grid upgrade, including Sh7.5 billion for national grid works. This confirms that, absent a fresh restraining order, the Fund is proceeding with disbursements while the constitutional questions remain unresolved before the High Court. Investors and contractors should therefore treat any NIF-backed contract as carrying residual legal risk: an adverse ruling could, in principle, unwind funding arrangements or governance structures put in place in the interim. Engaging counsel to monitor the Katiba Institute petition and any consolidated hearings is a prudent, low-cost safeguard before committing capital or mobilising for a project.
Contracts funded or co-funded through the NIF that involve public procuring entities remain subject to the Public Procurement and Asset Disposal Act, 2015 (PPADA), Kenya’s general procurement statute, except to the extent the Fund’s enabling law or a specific bilateral/multilateral financing agreement displaces it.
Available Procurement Methods
PPADA recognises open tendering as the default, preferred method, with several alternative methods available where specific conditions are met: restricted tendering, direct procurement, two-stage tendering, design competitions, request for proposals, request for quotations, low-value procurement, and specially permitted procedures. Open tender is mandatory for most large-value works unless the Act’s conditions for an alternative method are satisfied.
Key Procurement Stages (Open Tender)
Local-Content and Preference Rules That Apply to Foreign Bidders
Foreign contractors bidding into NIF-linked infrastructure works should plan around several mandatory local-participation requirements built into the PPADA framework: a substantial share of procurement value is reserved for enterprises owned by women, youth, and persons with disabilities; county-level tenders reserve a share for local residents; and successful foreign bidders are typically required to transfer skills and technology to Kenyan staff, reserve the bulk of project employment for Kenyan citizens, and demonstrate an inability to source locally where local preference would otherwise apply. Bilateral or multilateral loan-financed procurement may instead follow the financier’s own procurement guidelines (for example, those of the World Bank or African Development Bank) where the financing agreement expressly displaces PPADA.
Winning an NIF-backed tender is only the first hurdle. Before a foreign contractor can lawfully mobilise on site, it must separately register with the National Construction Authority (NCA).
Timing and Category
Registration is project-specific and sequenced deliberately: a foreign contractor is required to seek NCA registration after issuance of an award letter and before signing the contract, and may only undertake works within the value limit of category NCA 1 — the Authority’s highest-value class. Because the certificate is tied to that specific contract, a foreign firm cannot “bank” a general registration for future, unrelated tenders.
Local Partnering Requirement
A foreign firm applying for registration must give a written undertaking to subcontract or enter into a joint venture with a local contractor for not less than 30% of the value of the contract work, and to transfer technical skills not otherwise available locally to a Kenyan firm or individual in a manner the Authority determines.
Documentation
Typical supporting documents for a foreign contractor’s NCA application include:
Fees and Ongoing Compliance
Registration carries a flat NCA 1 fee, payable alongside a separate one-time application charge, and the resulting certificate and practising licence are valid only for the specified project period. If the project overruns its original timeline, the contractor must apply through the NCA portal for a project extension rather than allowing the registration to lapse. Foreign contractors must also attend at least one continuous professional development training each financial year and earn 10 CPD points to remain in good standing.
Given the scale of NIF-backed works, clients — whether the Fund itself, a procuring state entity, or a special purpose vehicle — will almost invariably require layered security from the contractor beyond the PPADA tender security posted at bid stage.
Performance Bonds
A performance bond is a guarantee, typically issued by a bank or licensed insurer, undertaking to pay the client a specified sum (commonly 10% of contract value, though this varies by contract) if the contractor fails to perform its obligations to the standard and timeline agreed. It protects the client’s downside if the contractor defaults, under-delivers, or abandons the works, giving the client a readily accessible fund to complete or remedy the project without first having to litigate the underlying breach. For the contractor, arranging a performance bond requires satisfying the issuing bank or insurer of its financial standing and project capacity — the bond issuer will, in turn, usually require security or a counter-indemnity from the contractor.
Parent Company Guarantees (PCGs)
Where the contracting entity is a local subsidiary, joint-venture vehicle, or thinly capitalised special purpose company — common structures for foreign contractors satisfying the NCA’s local-partnering rules — the client will typically also require a parent company guarantee. A PCG is a direct undertaking from the contractor’s ultimate parent (often incorporated overseas) guaranteeing due performance of the local entity’s obligations under the construction contract. Unlike a performance bond, a PCG is not usually capped at a fixed percentage and is not necessarily backed by a bank instrument; it is a contractual promise resting on the parent’s own balance sheet. It matters most where the local contracting vehicle lacks the assets to satisfy a large damages claim on its own, giving the client recourse further up the corporate chain.
What Clients Look For
Clients funding projects through the NIF will typically require, at a minimum: a performance bond from a bank or insurer acceptable to the client (often requiring local licensing by the Insurance Regulatory Authority or approval by the Central Bank of Kenya); a PCG where the contracting vehicle is not the ultimate parent; advance payment guarantees if mobilisation funds are released upfront; and retention or defects-liability security covering the post-completion warranty period. Contractors should negotiate the trigger conditions, cap, and expiry of each instrument carefully at contract stage — an unconditional, “on-demand” bond exposes the contractor to a call on the guarantee even where the underlying breach is disputed, whereas a conditional bond requires the client to first establish the default.
The National Infrastructure Fund is, on paper, the most consequential financing reform in Kenya’s infrastructure sector in a generation — a genuine attempt to unlock trillions of shillings of private and institutional capital for roads, rail, ports, and energy without further straining public debt.
For contractors and investors, that scale of opportunity is real. So is the legal uncertainty surrounding it.
Businesses considering NIF-backed projects should pair commercial due diligence with active legal monitoring of the pending constitutional petitions, build procurement and NCA registration timelines with realistic buffers, and negotiate security instruments — performance bonds and parent company guarantees — with terms that reflect the scale and novelty of the Fund itself.
1. Is the National Infrastructure Fund legally operational right now?
Yes. The National Infrastructure Fund Act, 2026 was assented into law on 9 March 2026 and the Fund is actively being used to finance budget allocations, including electricity grid works in the FY2026/2027 budget. However, constitutional petitions challenging aspects of the Act remain pending before the High Court.
2. Can the courts still shut down the Fund?
It’s possible, though not guaranteed. Courts declined to freeze the Act after it was passed into law, but the underlying constitutional questions — particularly around Senate involvement and Controller of Budget oversight — have not yet been finally determined.
3. What law governs procurement of NIF-backed contracts?
Generally the Public Procurement and Asset Disposal Act, 2015, unless the specific project is financed under a bilateral or multilateral loan agreement that expressly applies the financier’s own procurement rules instead.
4. Do foreign contractors need to register with the NCA before bidding?
No — registration is sought after an award letter is issued and before the contract is signed, not as a pre-bid requirement. However, contractors should confirm project-specific pre-qualification criteria set by the procuring entity, which may reference NCA standing separately.
5. What percentage of a contract must a foreign contractor subcontract locally?
At least 30% of the contract value must go to a local contractor, either through subcontracting or a joint venture, as part of the NCA’s foreign registration undertaking.
6. What’s the difference between a performance bond and a parent company guarantee?
A performance bond is a third-party financial instrument (bank or insurer) that pays out on contractor default, usually capped at a fixed percentage of contract value. A parent company guarantee is a direct promise from the contractor’s parent entity to make good on the local subsidiary’s obligations, and is not necessarily capped or bank-backed.
7. Which NCA category can foreign contractors register under?
Foreign contractors are restricted to NCA 1, the highest-value category, and cannot register under the lower local-contractor classes (NCA 2–NCA 8).
8. Where does NIF seed funding come from?
Primarily privatisation and asset-monetisation proceeds, including the Kenya Pipeline Company IPO and the partial sale of government shares in Safaricom, alongside government allocations, grants, and private investment.
This guide is for general informational purposes and does not constitute legal advice. Given the ongoing litigation and evolving regulatory guidance around the National Infrastructure Fund, investors and contractors should obtain project-specific legal and tax advice before committing capital or mobilising resources.
Keywords: AGOA Kenya 2026, US-Kenya trade agreement, AGOA expiry, Kenya STIP negotiations, Kenya tariffs USA, AGOA renewal, rules of origin Kenya, Kenya textile exports, Kenya EPZ AGOA, US-Kenya Strategic Trade and Investment Partnership
For twenty-five years, the African Growth and Opportunity Act (AGOA) was the principal legal framework through which Kenyan exports gained preferential, duty-free access to the United States market. Its expiry on 30 September 2025, without Congressional renewal, marked a material shift in the trading environment for Kenyan exporters — and for the US companies that had invested in Kenyan manufacturing specifically to leverage the cost advantages AGOA provided.
A successor framework, the US–Kenya Strategic Trade and Investment Partnership (STIP), is in development, but the legal and commercial landscape around US-Kenya trade relations remains unsettled.
This article addresses the questions most commonly raised by investors and exporters navigating the post-AGOA trade environment: what AGOA was and who depended on it, why it lapsed, what STIP offers and where its negotiations stand, how rules of origin function as the practical gateway to preferential trade, and what steps a US manufacturer currently operating in Kenya should take to protect its market access.
AGOA was enacted by the United States Congress in 2000 with the primary objective of strengthening economic ties between the US and sub-Saharan Africa by encouraging export-led development.
It operated as a unilateral trade preference programme, granting eligible African countries duty-free access to the US market.
Under the programme, eligible countries could export over 1,800 product lines to the United States free of import duties, in addition to more than 5,000 products previously covered under the US Generalized System of Preferences (GSP), a separate preference programme that itself expired in 2020.
AGOA was extended and modified by Congress several times over its lifespan, most recently in 2015 when it was reauthorized through September 2025. Eligibility was not automatic: the US President reviewed each country’s eligibility annually against criteria including governance, rule of law, worker rights, and alignment with US foreign policy interests.
AGOA’s scope extended across a broad range of goods, though its impact on Kenya’s export economy was concentrated in a number of key sectors:
Beyond these primary sectors, AGOA covered a wide range of manufactured and processed goods, making it the central framework around which Kenya’s export diversification strategy was built.
Kenya was one of AGOA’s most prominent success stories among sub-Saharan African beneficiaries.
The country emerged as the largest exporter of textile and apparel products to the US under the programme, with exports in that sector alone exceeding USD 530 million in 2024. Total Kenyan exports to the US under AGOA ranged between USD 730 million and USD 830 million annually in the years leading up to expiry.
The employment implications were equally significant. Kenya’s textile and apparel sector, concentrated in Export Processing Zones (EPZs) across Nairobi, Mombasa, and Athi River, directly employed over 66,000 to 80,000 workers, the majority of them women.
Beyond formal employment, the programme’s agricultural and horticultural components supported the livelihoods of thousands of smallholder farmers and trading intermediaries integrated into export supply chains. The dependency was therefore not confined to large manufacturers: it extended across a broad economic ecosystem built, over twenty-five years, in reliance on sustained preferential access.
AGOA’s expiry on 30 September 2025 was not the outcome of a decisive legislative vote against the programme. It resulted from Congress failing to renew it before the statutory deadline — a failure driven by procedural constraints and shifting political priorities, rather than explicit opposition to the programme’s objectives.
Throughout the preceding Congress, both the House Ways and Means Committee and the Senate Finance Committee held hearings, and members introduced reauthorization legislation. An attempt was made to include a sixteen-year renewal in the Fiscal Year 2025 National Defence Authorization Act. Still, the provision was excluded on the grounds that it was not germane to defence legislation. With no alternative legislative vehicle available before the expiry date, AGOA lapsed as scheduled.
Following expiry, Congress moved to remedy the lapse, though not on the terms the programme’s supporters had initially sought. In January 2026, the House of Representatives passed a three-year extension through 2028, framed in part as a measure to counter Chinese influence in Africa’s critical minerals sector. The Senate, however, scaled this back to a single-year extension, tied to a modernization agenda advanced by the Trump administration.
The resulting legislation — incorporated into the Consolidated Appropriations Act, 2026 — reauthorized AGOA retroactively from its September 2025 lapse through December 2026, covering more than 6,500 product lines. The programme is therefore currently active, but on a conditional and time-limited basis.
The political environment surrounding AGOA renewal was shaped by a broader reconfiguration of US trade policy that preceded and outlasted the programme’s expiry.
In April 2025, the Trump administration imposed a universal 10 percent tariff on all imported goods, followed by further country-specific tariffs reaching significantly higher levels for a number of African states. Within that environment, preferential access arrangements for African countries attracted limited executive priority, and the administration made no public moves to negotiate bilaterally with most AGOA beneficiaries before the deadline.
More structurally, AGOA’s renewal arrived at a moment when Washington was reorienting its trade diplomacy towards reciprocal bilateral arrangements rather than unilateral preference programmes.
AGOA, by design, asked nothing from its beneficiaries in terms of market access concessions; that asymmetry became harder to defend in a political climate demanding reciprocity from trading partners. The one-year extension, rather than the three-year renewal the House had approved, reflected the administration’s preference for holding the programme’s continuation as leverage in broader trade and geopolitical negotiations.
The US–Kenya Strategic Trade and Investment Partnership was launched in 2022 under the Biden administration as a framework for deepening the bilateral economic relationship between the United States and Kenya. It was conceived as a modern trade and investment arrangement, covering a range of regulatory and facilitation areas rather than traditional market access negotiations.
It is important to note at the outset that STIP, as originally scoped, does not address tariff preferences or duty-free market access. Unlike AGOA, and unlike the bilateral trade negotiations that the first Trump administration initiated with Kenya in 2020, STIP was designed as a framework for regulatory cooperation rather than a preferential trade agreement.
Investors should therefore not treat STIP as a direct substitute for AGOA’s tariff-related benefits.
STIP negotiations have focused on improving the trade environment rather than expanding market access.
Areas under discussion have included:
However, negotiations have not progressed meaningfully under the current Trump administration, and no agreements have been concluded on market access or tariff preferences.
Likewise, no negotiating texts covering these core commercial issues have been released publicly. Although Kenya has continued high-level engagement with the US Congress and executive branch on trade, no definitive outcome has been announced.
For investors, STIP may eventually improve customs procedures and regulatory alignment, but it should not be viewed as a replacement for AGOA’s tariff preferences unless and until a negotiated agreement is concluded and ratified.
Rules of origin are the legal criteria that determine which country a product is regarded as originating from for trade purposes.
In the context of preferential trade arrangements such as AGOA, they serve as the gateway condition: a product does not automatically qualify for preferential tariff treatment simply because it is shipped from an eligible country. It must also be demonstrated to meet the applicable origin requirements.
Rules of origin typically operate through one or more of the following tests:
For most manufactured goods, including apparel, origin is not determined simply by the location of the final assembly step. The composition, sourcing, and transformation of inputs all feed into the analysis.
Rules of origin matter because they are, in practice, where preferential treatment is won or lost — often more decisively than the headline tariff rate itself.
A Kenyan manufacturer that assumes its goods qualify for AGOA duty-free treatment without verifying that its supply chain satisfies the applicable origin criteria may discover at the US border that the goods are subject to full most-favoured-nation (MFN) tariffs instead.
For Kenya’s textile and apparel sector, the critical origin rule under AGOA has been the third-country fabric provision, which allows Kenyan manufacturers to source fabric from countries outside the AGOA region — including China and India — while still qualifying finished garments for duty-free entry, provided that cutting, sewing, and assembly take place in Kenya.
Without this provision, much of Kenya’s apparel production would not have been commercially viable under AGOA, given the limited availability of qualifying fabric domestically.
The current AGOA extension preserves this provision through December 2026, but any future framework — whether a further AGOA renewal or a STIP-based successor — may carry different or more stringent origin requirements, reflecting the US administration’s interest in modernizing the programme.
Investors should also be aware that rules of origin compliance is not a one-time determination: it requires ongoing documentation, supply chain monitoring, and internal audit processes.
Changes to a company’s sourcing arrangements, even if commercially motivated, can affect origin qualification and should be assessed against the applicable rules before implementation.
The combination of AGOA’s temporary extension and the unsettled state of the STIP negotiations means that US companies manufacturing in Kenya should treat market access as a live risk management issue rather than a settled commercial assumption.
The following steps are advisable in the current environment:
The lapse and conditional renewal of AGOA has made clear that preferential US market access can no longer be treated as a fixed or permanent feature of the commercial landscape for Kenyan exporters and the US companies invested in their supply chains.
The current extension, running through December 2026, provides meaningful but temporary relief, and the modernization conditions attached to it signal that future access — whether under a further AGOA renewal or a STIP-derived framework — may come with more demanding requirements than the programme’s original terms.
Businesses currently operating in or considering investment into Kenya’s manufacturing sector should approach this period as one requiring active legal, regulatory, and commercial monitoring.
The structural advantages of operating in Kenya — its established EPZ and SEZ infrastructure, skilled workforce, strategic location, and demonstrated export capacity — remain significant. However, realizing those advantages over the medium term will require investment structures and compliance frameworks that are resilient to continued uncertainty in the bilateral trade relationship between Kenya and the United States.
Companies should obtain legal, tax, and trade advisory input specific to their circumstances before finalizing investment decisions or entering into commercial commitments that assume the continuation of current preferential conditions.
1. Is AGOA still active in 2026?
Yes. AGOA lapsed on 30 September 2025 but was reauthorized retroactively through the Consolidated Appropriations Act, 2026. The current extension runs through December 2026 and covers more than 6,500 product lines, though it remains a conditional, time-limited renewal rather than a long-term guarantee.
2. What replaced AGOA for Kenya?
No permanent replacement exists yet. AGOA itself was extended on a one-year basis. The US–Kenya Strategic Trade and Investment Partnership (STIP) is being developed as a parallel framework, but it does not currently provide tariff preferences or duty-free market access — it focuses on customs facilitation, SPS standards, technical barriers to trade, and digital trade.
3. What is the difference between AGOA and STIP?
AGOA is a unilateral US trade preference programme offering duty-free access to the US market for eligible African countries. STIP is a bilateral regulatory cooperation framework between the US and Kenya that addresses customs procedures, standards, and trade facilitation, but — as currently scoped — does not grant tariff preferences.
4. How does Kenya qualify for AGOA benefits?
Kenya’s AGOA eligibility is reviewed annually by the US President against criteria including governance, rule of law, worker rights, and alignment with US foreign policy interests. In addition to country-level eligibility, individual products must satisfy AGOA’s rules of origin to qualify for duty-free treatment.
5. What are AGOA rules of origin, and why do they matter?
Rules of origin are the criteria used to determine whether a product qualifies for preferential tariff treatment. For Kenya’s apparel sector, the key provision is the third-country fabric rule, which allows fabric sourced from China or India to be used, provided cutting, sewing, and assembly occur in Kenya. Failing to meet these criteria means goods are taxed at full MFN tariff rates instead of duty-free.
6. How many jobs in Kenya depend on AGOA?
Kenya’s textile and apparel sector, concentrated in Export Processing Zones (EPZs) in Nairobi, Mombasa, and Athi River, directly employs an estimated 66,000 to 80,000 workers, the majority of them women. Thousands more smallholder farmers and intermediaries depend indirectly on AGOA-linked agricultural and horticultural exports.
7. What products does Kenya export to the US under AGOA?
Kenya’s main AGOA-linked exports are textiles and apparel (denim and casual wear), agricultural and horticultural products (cut flowers, coffee, tea, macadamia nuts, fruits, and vegetables), and handicrafts and artisanal goods.
8. What should US companies manufacturing in Kenya do now?
US companies should monitor AGOA eligibility announcements, conduct rules-of-origin audits across their supply chains, model financial exposure to potential MFN tariffs, review their SEZ/EPZ investment structures, engage directly with Kenyan trade authorities, track STIP developments separately from AGOA, and obtain updated legal and tax advice before entering new commercial commitments.
9. Will AGOA be renewed again after December 2026?
This is not yet certain. The current one-year extension reflects the Trump administration’s preference for reciprocal bilateral trade arrangements over unilateral preference programmes, and any further renewal — or a STIP-based successor — may carry different or more stringent conditions than AGOA’s original terms.
10. Does STIP offer duty-free access to the US market?
No. As currently scoped, STIP does not address tariff preferences or duty-free market access. It is a regulatory cooperation framework covering customs facilitation, SPS measures, technical barriers to trade, anti-corruption measures, MSME support, and digital trade — not a substitute for AGOA’s tariff benefits.
This article is for general informational purposes only and does not constitute legal, tax, or trade advisory advice. Companies should seek advice specific to their circumstances before making investment or commercial decisions.