GSP is Back! What To Do

GSP is back! As of April 22, 2018 importers can once again take advantage of the retroactive renewal of the Generalized System of Preferences (GSP) program. This means:

  1. Entering GSP-eligible products without having to pay duties; and
  2. Claiming refunds for duties paid while the program was lapsed (January 1, 2018 – April 21, 2018)

Entering GSP-Eligible Products

Products eligible for duty-free entry into the United States should be filed by placing before the tariff number one of these special indicators – “A”, “A+” or “A*” (as explained in General Note 4 of the Harmonized Tariff Schedule of the United States). One of these indicators in the “Special” column of the HTSUS indicates that the product is eligible for duty-free entry under GSP when imported from an eligible country.

Claiming Your Refund

Refund claims forduties paid while the program was lapsed are being processed by CBP as follows:

  1. Product was entered in ABI using the Special Indicator: No action is required by the importer. CBP has indicated its intention to begin automated processing of these refunds shortly. This process should be completed by mid-July, 2018.
  2. Product was entered in ABI without the Special Indicator: The importer must file a written request for a refund with the relevant Port Director.
  3. Product was manually entered: Whether entered with or without the special indicator, the importer must file a written request for refund with the relevant Port Director. This includes duties paid on baggage brought in by travelers using Customs Declaration Form CF 6059B.

Written requests must be submitted by September 19, 2018. No interest will be paid on the amounts owed to the importer.

Planning Ahead

GSP was renewed for only two years, and again lapses on December 31, 2020, unless renewed before that date. Sadly, importers probably need to anticipate the possible lapse of GSP and hope for the possibility of claiming a refund on duties paid while the program was lapsed. Should this situation recur, importers using the Automated BrokerInterface (ABI) will, again, be able to receive automatic processing of refunds.

Also note that for importers of aluminum and steel GSP-eligible goods subject to Section 232 duties their eligibility ended on March 23, 2018.

Contact us for more information and/or assistance with requesting your refund!

Trade Happenings

Since the start of 2015, there have been several interesting developments on the trade front. Here are some highlights:

Flag of Cuba

US-Cuba Relations:  Previous posts on ILG have discussed the improved tenor of US-Cuba relations, including some limited opportunities to trade with Cuba and lifting of designation of Cuba as a state-sponsor of terrorism. These developments have been followed by news of plans to re-establish direct phone links, increased flights and launch of a ferry service between Florida and Cuba, and the arrival of Airbnb and of Netflix in Cuba. Nevertheless, the laws imposing the U.S. embargo against Cuba remain in place and are being enforced. This includes the repressive Helms-Burton Act which extends the U.S. embargo to non-U.S. actors. As a result, non-U.S. persons may still be penalized for taking actions in Cuba that some U.S. persons are now able to do. And, because of the embargo, while it will be possible to import goods and services from independent entrepreneurs in Cuba, goods will still be subject to higher tariffs than those placed on the goods of most U.S. trade partners. Legislation to normalize trade with Cuba has been introduced in the U.S. House and Senate (HR 403, HR 274, HR 735, S 491). However, Congress is now focused on issues more essential to the Obama Administration trade agenda.

US Trade Agenda:  Legislation to provide Trade Promotion Authority (TPA) to President Obama has been introduced in Congress. TPA gives the U.S. President a mandate from the U.S. Congress to negotiate trade agreements that meet specified criteria. Also known as “fast-track”, TPA has been a key tool of U.S. trade policy since 1974 but lapsed in 2007. As we discussed in an earlier post, the Republican-led Congress provides President Obama with his best hope of getting TPA enacted in time to successfully conclude ongoing trade negotiations that face strong opposition within his own party. With the introduction of TPA legislation, a furious battle has begun to sway U.S. legislators to vote for or against. As always, it will be a close fight.

Courtesy of Wikipedia

Courtesy of Wikipedia

Trade Preferences, in the form of the Generalized System of Preferences (GSP), is another key tool in U.S. trade policy. GSP allows over 5,000 products from about 127 developing countries to enter the U.S. market duty-free. The program helps exports from developing countries to be competitive in the U.S. market. U.S. importers rely on the program to access lower-priced consumer goods and manufacturing inputs. The program has been lapsed since August 1, 2013, disrupting many small traders who rely on its benefits. Some members of Congress have been reluctant to renew GSP legislation without taking steps to exclude countries like Brazil and India which, they believe, are not compliant enough on issues of importance to the U.S. However, legislation to extend GSP for a short period has been introduced into Congress.

So too, has legislation to extend the Trade Adjustment Assistance (TAA) which provides federal funding to retrain workers who have lost their jobs as a result of a foreign trade. TAA is current but scheduled to lapse this year, unless extended. TAA is favored by many Democrats. According to reports, there are efforts to bundle these, and other, trade issues into one piece of legislation that will have something for everyone. Early results show the risk of this strategy, including the possible demise of all these issues.

What do Bangladesh and Snowden Have in Common?

The country of Bangladesh and US fugitive Edward Snowden are both at the center of questions over the future of two U.S. trade preferential programs — the Generalized System of Preferences (GSP), and the Andean Trade Preference Act (ATPA) programs.

GSP is a program that allows about 5,000 products from about 127 developing countries to enter the United States on a duty-free basis. GSP duty-free access benefits exporters from developing countries as it helps them to be competitive in the U.S. market. US importers also rely on the program for access to lower-priced consumer goods and manufacturing inputs. Developed countries, like the United States, extend GSP unilaterally to beneficiary countries; it is not the result of a negotiated agreement.

In the United States, the program is authorized by legislation. The US President also has the authority to remove previously eligible countries that fail to meet the specified requirements.

On June 27th, President Obama announced the suspension of Bangladesh from the program. Though under review for some time, the timing of the decision is a direct result of the death and injury in April (2013) of hundreds of garment workers as a result of poor working conditions.

Bangladesh garment factory (Courtesy of Wikipedia Commons)

Bangladesh garment factory (Courtesy of Wikipedia Commons)

Sadly, it is difficult to see how the lot of the workers has been improved by this decision. The garment industry is notoriously fickle. Companies have moved operations all around the world in search of the cheapest inputs and of countries whose products are allowed duty-free access back to their home markets. Complete loss of GSP access to the US market for products from Bangladesh is likely to result in loss of jobs for Bangladesh workers. We can only hope that the suspension will spur the government and private companies to move at warp speed to improve working conditions.

On the same day, President Correa of Ecuador, who is reviewing an application for asylum by Edward Snowden, announced his intention to refuse the benefits that Ecuador receives under the ATPA. Ecuadorean government officials have accused the United States Government of using the program to blackmail the country for its willingness to review Snowden’s asylum request. Ecuadoran products are also eligible for unilateral duty-free entry under the GSP program. The Obama Administration is also said to be considering expelling Ecuador from GSP. The US Government has been known to wield threats of denying access to GSP and other preferential programs by countries with whose actions they disagree. Ecuador apparently has decided to act first. Meanwhile, however, this leaves Ecuadorean exporters wishing to access the US market at a disadvantage.

Profile of Ecuador's exports (Courtesy of Wikipedia Commons)

Profile of Ecuador’s exports (Courtesy of Wikipedia Commons)

It is also worth noting that both the GSP and ATPA programs are set to expire on July 31, 2013. This won’t be the first time. The programs periodically expire and are then renewed again. Unfortunately, these periods of expiration seriously inconvenience and harm the companies that rely on the programs. President Correa’s actions increase the likelihood that the ATPA may not be renewed any time soon, if at all. Trade programs, like GSP and ATPA, that provide a lifeline for many small exporters in developing countries, should not be held hostage to politics.