We are six weeks away from GSP expiration (July 31, 2013). It seems like it was just yesterday (2011) that we went through this process and here we are again. The reality is that the debate to renew GSP is extremely complicated. Congress has its fair share of legislation to pass. The likelihood of GSP renewal before expiration seems slim at this moment.

In previous years when GSP has been allowed to expire, importers temporarily paid duty at the normal Column 1 General rate during the period between expiration and renewal. Once GSP was renewed, duties were refunded (without interest). There is no guarantee that the policy of refunding duty will continue. In fact CBP explicitly does not commit to refunding of duties.

The current debate to renew GSP is complicated by a number of trade related issues.

• GSP benefits are skewed towards countries that many politicians feel no longer need the benefits. Top six beneficiaries in 2011 (based on GSP duty-free import value) are the following countries. You can make your own assessment of whether you think these countries should still qualify as developing and require the aid of U.S. duty benefits. (Source: USITC Trade Dataweb, http://dataweb.usitc.gov, and Harmonized Tariff Schedule, 2012.)
  • India
  • Thailand
  • Brazil
  • Indonesia
  • South Africa
  • Philippines
• For some of these countries (India in particular), some U.S. Congressman argue that their lack of respect of intellectual property rights as well as their protectionist policies (discriminating against foreign goods) should disqualify them from GSP benefits.
• In the case of some of the more developed countries on the GSP list, there is an argument to remove them from the list in favor of separate Free Trade Agreements. The advantage of separate FTA’s with individual or regions of countries is that it would allow for an exchange of benefits between the United States and the foreign country, theoretically benefiting U.S. exporters as well as U.S. importers. I would caution that FTA’s take an extremely long time to get signed and approved (often bogged down by domestic as well as foreign politics).
• As we saw with the previous GSP renewal in 2011, there may be domestic manufacturers adversely affected by GSP who will fight against the renewal or at the least for for minimization of benefits.

The Congressional Research Service published a GSP report on January 9, 2013 to help prepare Congress for the debate on renewal. It is worth reading to get a general understanding of the background of the debate as well as the options that Congress is reviewing.

-Jimmy Ting

Great World

jimmyting@great-world.com

tel: 650-873-9050 ext.1019