Update on Tariffs Reductions from 119 Developing Countries

In this video from The Franklin Partnership, contributing author Omar Nashashibi unpacks the Generalized System of Preferences (GSP), which expired in December 2020.  The GSP provides tariff reductions for certain products from 119 countries. If you import products from a developing country or manufacture goods competing with those imports, this video will help explain the GSP and the outlook for Congress restarting this program. 

Background

Congress has much on its to do list this year, and on that list is renewal of the Generalized System of Preferences (GSP).

Established by the Trade Act of 1974, the goal of the GSP is to promote economic development by eliminating duties on thousands of products when imported from one of these 119 designated beneficiary countries and territories.

Countries Targeted

The GSP provides tariff reductions for certain products from 119 countries, but it expired in December 2020, with Congress still unable to pass legislation reinstating it. GSP provides duty- free treatment for imports from eligible developing countries, including Argentina, Brazil, Ecuador, Indonesia, Nigeria, Philippines, Thailand, and others.

Products Impacted

Approximately 3,500 articles, classified by U.S. Customs and Border Protection at the eight-digit tariff rate line, are generally eligible for duty free treatment from all GSP beneficiaries. An additional approximately 1,500 articles are eligible for duty-free treatment when imported from Least Developed Beneficiary Developing Countries.

If you are importing from a designated beneficiary country, you may want to reach out to CLA about whether your product could potentially be eligible for duty relief should Congress restart the GSP. You can also contact CLA to determine whether the country from which you are sourcing appears on the GSP list or if it does not, whether the same product is available for import from a GSP-eligible country if you are not able to find that product manufactured in the USA.

But again, Congress allowed the GSP to expire in 2020, so the duties remain in place on these imports, despite bipartisan support for GSP.

Steps Toward Renewal

The Senate in 2021 approved language renewing GSP as part of the supply chain legislation that became the CHIPS semiconductor bill. But ultimately, negotiators dropped the entire trade title due to unrelated provisions, which meant that GSP fell out, and was not renewed retroactively.

On September 14^th, a top Senator on the Finance Committee in charge of trade said he was still committed to moving forward with a trade measure this year. A hold up on GSP is on who remains eligible, especially as some on Capitol Hill want to factor in labor and environmental standards as part of those eligibility requirements.

For its part, the House of Representatives Ways and Means Subcommittee on Trade held a hearing on September 20^th about how to reform the Generalized System of Preferences to protect U.S. supply chains and address issues related to China.

The Why

Separately, 32 Democrats and 34 Republicans sent a letter to Ways & Means Committee leaders saying that GSP “can play a critical role in helping American companies find non-Chinese suppliers.”

What we’re watching

So pressure is continuing to build for GSP renewal but this will all likely come down to how does such a provision move? As with everything in Washington, D.C., it will need a vehicle. Most expect lawmakers to try and add a trade title to a final government spending bill in December. That trade title would likely include a GSP extension, along with other provisions, but that all relies on a lot of moving parts – agreement on the GSP provision, whether to include a trade title at all, and if Congress can actually agree on a government spending bill or other “must pass” vehicle – to carry the GSP language across the finish line.

There are lots of moving parts.  For those impacted by GSP, the impact could be quite significant to the bottom line.

Need help understanding the economic impact on your business?  Contact CLA.