Importers Take Note: GSP Renewal on the Horizon; Are You Eligible for Refunds?

4 min

The wrangling over Trade Promotion Authority (TPA) in Congress corralled a handful of other important trade initiatives with it. These include Trade Adjustment Assistance, Customs Reauthorization, and a preference package containing renewals for the Generalized System of Preferences (GSP) and the African Growth and Opportunity Act (AGOA). These provisions all passed easily out of Committee along with the extension of an increase to the Merchandise Processing Fee and an amendment creating a new process for Congress to create a Miscellaneous Tariff Bill to extend duty suspensions on certain imports. Because today Senate leadership filed a cloture motion to consider TPA, a vote on one or more of these trade bills is imminent.

Importantly, renewing GSP would direct U.S. Customs and Border Protection (CBP) to refund duties paid on GSP-eligible entries since its expiration in July 2013. The recently approved bill reauthorizes the program through 2017. Estimates of duties paid since the program expired on July 31, 2013 are nearly $2 million per day.

How Do You Get Your Share? Refunds will be made, without interest, upon request filed with CBP. The request must contain sufficient information to enable CBP to locate the entry or to reconstruct the entry if it cannot be located. Importers should understand how your products were declared to CBP so that you can promptly request any GSP duties owing before the 180-day deadline following the Act's passage closes. In 2012, the last full year of GSP implementation, GSP imports made up about 1% of total U.S. imports, or nearly $20 billion.

Am I eligible for GSP Benefits? The GSP program provides non-reciprocal, duty-free tariff treatment to certain products imported from designated Beneficiary Developing Countries (BDCs). The program gives this trade preference to developing countries to help expand their economies. It provides duty-free entry to over 3,500 products from 122 BDCs, and to an additional 1,500 products from 43 GSP beneficiaries designated as least-developed beneficiary developing countries (LDBDCs). The rules of origin require that at least 35% of the appraised value of a product be from the BDC. CBP administers stringent documentation requirements to verify whether an import's processing qualifies for preferential duty treatment, even during the program's lapse. The GSP program does not apply to certain products that are import sensitive in order to protect U.S. manufacturers and workers. As such, it is beneficial to have a Customs expert review dutiable imported products to assess their potential eligibility.

Beware: The Country List is Not Static! Since the last GSP legislation expired in 2013, President Obama has removed, suspended, and added countries to the list of BDCs. President Obama removed (or "graduated") Russia because it was sufficiently advanced in economic development and trade competitiveness to no longer be on the list. He also suspended Bangladesh from the GSP list for failure to advance workers' rights, and Argentina for not acting in good faith in enforcing arbitral awards in favor of U.S. citizens and corporations. Conversely, South Sudan has been added to the list of BDCs.

Senate Majority Leader Mitch McConnell (R-KY) on May 7 filed cloture on a motion to proceed to a bill to renew TPA. This means that the Senate could be voting on TPA as early as Monday, May 11. It is unclear, however, whether three other trade bills will be moving along with it, including bills reauthorizing Trade Adjustment Assistance, renewing several trade preference programs such as GSP, and addressing customs and trade enforcement issues. Senate Minority Leader Harry Reid (D-NV) has called for all trade bills to move together in one piece of legislation, and has threatened to block cloture if TPA moves alone. Negotiations in the coming days between the Majority Leader and Minority Leader will determine how quickly TPA, GSP, and the other trade bills come up for a vote.

If you have questions regarding the eligibility of your imported goods or the refund of duties for GSP-eligible products, please contact Venable's International Trade Group for guidance.