Why the Generalized System of Preferences Program is good for American workers and businesses.
U.S. preference programs - which provide duty exemptions for certain products from developing countries - have played an important role in the nation’s trade and development efforts for decades. The Generalized System of Preferences (GSP) is the oldest of these programs, having been created by the Trade Act of 1974 and implemented in 1976.
GSP lapsed in December 2010, when the Senate failed to act on House-passed extension legislation. H.R. 2832 renews the program for 22 months (until July 31, 2013) and provides duty refunds retroactive to the date of GSP’s lapse in December 2010.
PROGRAM:
Under the basic GSP scheme, 129 beneficiary developing countries are eligible to export approximately 3,400 types of products duty-free to the United States. The GSP program also provides additional benefits to the 42 GSP countries that are designated “least developed" under the program. These countries may export an additional 1,400 types of products.
Most categories of import sensitive products are excluded from the scope of the GSP program by statute (e.g., most textiles and leather goods, watches, footwear, luggage, home décor textiles, steel, glass and electronics). Parties are also able to petition an inter-agency group led by USTR to remove additional products.
To qualify for GSP benefits, participants must meet eligibility criteria (e.g., whether the country has taken, or is taking, steps to afford internationally recognized worker rights; whether the country provides certain protections for U.S. investors).
IMPACT:
Extension of the GSP program is important for U.S. workers and businesses, as well as workers and businesses in developing countries. Indeed, the majority of U.S. imports under GSP (approximately 65-75%) are inputs used to support U.S. manufacturing, including raw materials, parts and components, and machinery and equipment.
COST:
The bill’s total cost is $1.482 billion. This cost is paid for by increasing the Customs merchandise processing fee from the current rate of 0.21% to 0.3464% for the period Oct. 1, 2011 to June 30, 2014. The merchandise processing fee is applied to most imports into the United States to cover costs of processing merchandise and ensuring compliance with customs and trade rules.
