Trade Compliance

GHY discusses changes to international trade regulations and explores cutting-edge compliance strategies.

Congress Allows GSP to Expire – Again

Posted January 03, 2018

Before recently adjourning for the year and heading home for the holidays, Congress failed to agree on renewing the Generalized System of Preferences, a trade initiative that unilaterally grants products from developing countries tariff-free access to the American market.

As a result of lawmakers’ inability to get their act together despite broad bipartisan support for the program, effective January 1, 2018, all goods previously eligible for duty free benefits under the GSP must now be entered with the payment of applicable duties in addition to the U.S. Customs’ Merchandise Processing Fee.

First established by the Trade Act of 1974, the GSP covered $19 billion worth of imports from 120 participating countries in 2016, saving importers more than $700 million in duties. These imports provide raw materials and intermediary goods to a wide range of U.S. industries, from manufacturers and fisheries to retailers and wholesalers.

GSP proponents such as the American Apparel and Footwear Association view it as “one of the very best tools in our arsenal for building economic and political relationships with least developed countries,” but critics argue that countries such as India – the GSP’s largest beneficiary – have for too long abused the program by ignoring its rules, and that past administrations have been too lax in enforcing them.

“India doesn’t qualify on any count,” Curtis Ellis, founder of the American Jobs Alliance which advocates hardline economic nationalist trade policies, wrote last month in a Brietbart article. “It routinely rips off U.S. intellectual property and blocks U.S. imports through a combination of high tariffs, taxes and corrupt bureaucracy.”

Last November, a coalition of more than 350 companies and trade associations had urged Congress to renew the program ahead of the December 31 expiration date, warning that “companies will be forced to pay over $2 million per day in extra taxes,” should the authorization be allowed to lapse.

When the GSP program last expired in August 2013, the failure of Congress to reauthorize it for two years led to disastrous consequences for some U.S. businesses. According to Coalition for GSP Executive Director Dan Anthony, “companies were forced to lay off workers, freeze new hires, cut wages and benefits, and delay capital investments.” Although Congress eventually renewed the program retroactively, “much of the damage could not be undone,” said Anthony.

The Office of the U.S. Trade Representative, which administers the program, had previously declined to comment when asked whether the Trump administration supported renewal of the GSP, leading some to speculate that it may be dead for the foreseeable future. Yesterday, however, a White House official reportedly said the administration would like to see Congress reauthorize the GSP “early this year.”