On December 31, 2017 the Generalized System of Preferences ("GSP") trade program expired after Congress failed to reauthorize the program. The GSP is a program utilized by U.S. importers that allows for duty-free entry of specified products from 120 designated beneficiary countries. The GSP is the U.S.'s largest trade preference program, and in 2016 alone, U.S. imports under the GSP reached $18.95 billion.1 As will be described in more detail below, although the GSP is currently expired and importers must pay duties on the entries of GSP-eligible goods, U.S. Customs and Border Protection ("CBP") has "strongly encouraged" importers to continue to flag GSP-eligible imports with the applicable Special Program Indicator ("SPI").
The GSP was authorized by the Trade Act of 1974 and was implemented on January 1, 1976. The GSP is a program designed to promote economic growth in the developing world. It provides preferential, duty-free treatment for over 3,500 products from a range of designated beneficiary countries ("BDCs"), including many least developed beneficiary developing countries ("LDBDCs"). In addition to the 3,500 products mentioned above, an additional 1,500 items are eligible for duty-free treatment only when imported from LDBDCs. Articles eligible for GSP treatment are identified in the Harmonized Tariff Schedule of the United States ("HTSUS"); the SPI code in the "Special" column in the HTS identifies the article as GSP-eligible under certain conditions. The SPI code A designates articles that are GSP-eligible from any BDC. A+ means the article is GSP-eligible only when imported from an LDBDC. Finally, A* indicates the article is no longer GSP eligible when imported from one or more specific BSDs.
The GSP periodically expires, and must be renewed by Congress. Congress has failed to renew the GSP, and, as a result, the GSP expired on midnight December 31, 2017. The GSP has expired in the past (most recently in 2013). In the past, when the GSP was later extended, Congress applied duty-free treatment to GSP products retroactively, thereby allowing importers to seek refunds on duties paid during the period of expiration. It is not known at this time whether similar treatment will be applied should Congress renew the GSP. Additionally, while it is not known at this time whether Congress will ultimately extend the GSP, the expiration of the GSP has no effect on either the African Growth and Opportunity Act ("AGOA") nor the Caribbean Basin Trade Partnership Act ("CBTPA").
In the meantime, importers should pay the normal trade relations duty rates on any GSP items they import after midnight December 31, 2017. When importing these items, importers should make sure to continue to flag these entries with A or A+. It is especially important to flag qualifying entries with the GSP SPI because CBP has stated that it will not allow post-importation GSP claims via post-summary correction or protest for importations made after December 31, 2017.2 Based on previous actions by Congress, it is possible that any renewal of the GSP would be made retroactive. This would mean that importers who imported GSP eligible items between midnight December 31, 2017 and the date of renewal, would be entitled to a refund on duties paid. It is important to note that, although this has been the case previously, there is no guarantee that similar treatment would be applied to any future renewal.
Footnotes
1 GSP by the Numbers, Generalized System of Preferences, Office of the United States Trade Representative, July 28, 2017, available at https://ustr.gov/sites/default/files/files/gsp/GSP%20by%20the%20numbers%20July%202017.pdf.
2 Generalized System of Preferences (GSP) Due to Expire December 31, 2017, CSMS #17-000622, September 29, 2017, available at https://apps.cbp.gov/csms/viewmssg.asp?Recid=23021&page=&srch_argv=&srchtype=&btype=&sortby=&sby (last visited January 19, 2018).
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