The Generalized System of Preferences (GSP) program expired at the end of 2020 leaving the duty-free treatment of certain U.S. imports from developing countries in limbo. Congress could renew the legislation reinstating regulations retroactively, though that action would have to be specifically addressed in the reauthorization. Until then, duty-free treatment of goods under GSP has expired pending further review, resulting in the Normal Trade Relations (NTR) duty rate to apply for goods as of January 1, 2021. In other words, goods formerly eligible for duty-free status under GPS in 2020 are now subject to pay the “General” rate of duty in 2021.
Will GSP be reinstated?
In 2020, a bill was proposed in the House to extend the GSP six months, while the Senate introduced a proposal that would have provided an extension of 16 months. Neither moved forward primarily because of disagreements on eligibility requirements for developing countries. It does not mean the issue is dead.
Since its inception in 1974, Congress has let GSP expire several times only to subsequently reinstate it. In 2017, the expiration of GSP lasted several months before Congress reached agreement on its renewal. This type of renewing legislation has typically included provisions to retroactively refund duties paid during the lapse. While not guaranteed, history suggests a similar path to renewal.
How is 2021 different?
One of the provisions of the GSP is the President may limit, withdraw, terminate, or otherwise suspend a country’s GSP status with a 60-day notice to Congress citing that country’s failure to meet one or more of the GSP eligibility requirements. Last year, President Trump took such action to terminate India’s eligibility, citing that country’s failure to provide equal market access. Now the question is whether or not the Biden administration will try to leverage this situation into a trade deal with India.
The Office of the United States Trade Representative (USTR) also conducts independent reviews of GSP beneficiary countries to determine recommended status. Last year, this review resulted in the suspension of GSP benefits for over $800 million in U.S. imports from Thailand because of a lack of access for U.S. pork products. The USTR is also reviewing worker rights concerns in other GSP beneficiary countries.
How can I ensure my products will qualify for GSP savings if reactivated?
U.S. Customs and Boarder Protection (CBP) published a guidance document in December 2020 advising importers to continue to flag formerly GSP-eligible products with the Special Preference Indicator (SPI) during the lapse in GSP. If and when the GSP is renewed with a retroactive refund provision, the CBP has programming in place to process duty refunds automatically for entries with the SPI flags.
With over 100 qualifying countries and territories, covering over 4,500 products, an experienced customs broker can strategically guide you through the qualifications process to accurately determine if your product meets U.S. Customs regulations per GSP guidelines.
- Duty-free treatment under the GSP program expired on January 1, 2021, essentially removing duty-free treatment of goods previously under the program to Normal Trade Relations (NTR) duties.
- The program is currently pending US Congressional review
- After midnight December 31, 2020, importers should continue to mark GSP eligibility or Special Program Indicator (SPI) so CBP can process duty refunds, if the program is renewed.
- Juno Customs Solution’s experienced customs brokers can help electronically file and actively monitor your refund requests on your behalf.