When will GSP be renewed?
By NNR USA In Insight On 12th January 2022
The trade industry has entertained this question ever since the United States’ GSP Program expired on December 31, 2020. Today, it has yet to be renewed by U.S. Congress. More than 5,000 products that had enjoyed the benefit of duty-free importation have since been subject to normal duty rates.
“The lapse of this Trade program, dating back to its expiration, has cost American companies hundreds of millions of dollars. In fact, as each day passes without reauthorization, it is estimated to be $3 million dollars per day in duty outlay.” Maria Miliante, Assistant V.P. for Customs Operations
So when will GSP be renewed? Historically the program has been renewed 14 times in the last half-century, so the odds are good GSP will be renewed again. However, over a year later, importers and companies overseas are getting anxious as there is still no timeframe for renewal. Even if the program is renewed, the question is, for how long?
Businesses in the U.S. and abroad are not the only groups interested in GSP’s renewal. India, Thailand, Indonesia, Brazil, and the Philippines collectively claimed the highest benefits from GSP in 2019, amounting to over USD 14.7 billion on imports ranging from travel goods to vehicle parts to jewelry. With potential economic growth of this magnitude, it’s no wonder the trade world waits for any news on when GSP will be renewed.
Congress routinely extends the program for 2 or 3 years at a time. This practice is nothing new. 10 of 14 renewals were done while the program was elapsed. If GSP is renewed, importers are eligible for a retroactive refund of duties and taxes if their customs entry contains the GSP Special Program Indicator “A,” “A+,” or “A* .”
So why has the U.S. Congress not yet renewed GSP this time around? The simple answer is they have been busy. The government’s docket has been heavily dealing with the Covid Pandemic, investigating the January 6th U.S. Capitol Attack and the Biden Administration’s anticipated Infrastructure Bill.
There is also debate concerning if GSP should be renewed at all. Some view the GSP Program as obsolete, replaced with other institutions and trade agreements since its inception. Today, the U.S. has established multiple free trade agreements with many of the same benefitting countries and regions. The World Trade Organization, established in 1995, incorporates 164 member nations with the goal of developing free trade and subsequently bolstering the economies of the same developing nations. While all of this has expanded the function of GSP, it does not replace it, and the program has enough support to warrant renewal.
The good news is the program’s renewal is in the works. There are two bills, H.R. 4037 & H.R. 3975, introduced in the House of Representatives in June 2020 to renew GSP. However, according to Congress’s website, both bills’ statuses remain unchanged since they were referred to the Subcommittee on Trade. Assuming one of these bills passes, it still would need to pass the Senate, then be signed into law by the President.
All we can do now is remain patient and wait for the program’s renewal legislation to make its way between the branches of the U.S. Government and into law. But for both the benefitting nations and American businesses with $97 million in potential refundable paid duties hanging in the balance, waiting is easier said than done.
What is GSP?
Short for “Generalized System of Preferences,” GSP serves as a nonreciprocal trade benefits program for developing nations to bolster their emerging economies by incentivizing importers with duty-free goods. Established by the United Nations Conference on Trade and Development in 1971, the program has been implemented by many of the world’s developed nations such as Australia, Canada, the European Union, Japan, the United Kingdom, and Russia.
The 119 current beneficiaries of GSP mainly consist of emerging countries founded following European Decolonization in the 20th Century spread across South America, Africa, and Southeast Asia. Several former Soviet and Yugoslavian Republics joined the list in the 1990s. The World Bank defines these countries as “low income” with a gross national income per capita of less than USD 12,535.
For the United States, GSP represents the oldest and largest free trade agreement in modern history. The U.S. program went into effect following the Trade Act of 1974. It is administered by the Trade Policy Staff Committee under the U.S. Trade Representative, with primary authority residing under the President of the United States for determining a country’s GSP status based on its economic development and compliance with international labor standards. This was exercised as recently as 2019 when India and Turkey were removed from the U.S.’s GSP eligibility: India for not providing the U.S. with “equitable and reasonable access” to its markets, and Turkey for its level of economic development. The former has since begun petitioning for its GSP status to be reinstated.
GSP Special Program Indicators
"A" All beneficiary developing countries
"A+" Least-developed beneficiary countries
"A*" Imported from a beneficiary developing country, some countries are not eligible for duty-free treatment
Peter F. Killian
Brokerage Manager, LCB, CCS
NNR GLOBAL LOGISTICS USA - Chicago
Email:pkillian@nnrusa.com