What is the Generalized System of Preferences (GSP) trade program? What is the current status of the program? What countries are involved? What are some examples of GSP eligible products? Read below for answers to these common importer questions and more.
The Generalized System of Preferences (GSP) was instituted in 1976 as a result of the Trade Act of 1974. It is United States largest and oldest trade preference program, eliminating duties on over 4,000 products imported from 120 countries and territories that have been designated as GSP eligible. The program was created to encourage economic growth in the developing world while benefiting the importer with free or reduced duty rates.
Currently, the GSP program is expired (as of 12/31/17) but its renewal was passed by the House of Representatives on February 13 by a 400 – 2 vote. Action is now pending in the Senate, and the GSP renewal and Miscellaneous Tariff Bill package are expected to come to a vote soon.
The GSP renewal is expected to extend the provision through the end of 2020 and allow for retroactive GSP duty refunds on any entry eligible for GSP from Jan 1, 2018 until time of renewal.
GSP encourages trade between the United States and various designated beneficiary countries (BDC) such as Ecuador, India, Indonesia, Uzbekistan and includes many least-developed beneficiary developing countries like Cambodia, Ethiopia, Tanzania and Zambia. The full list can be found in the Harmonized Tariff Schedule under the General Notes.
If the harmonized tariff is eligible for full GSP treatment, regardless of the GSP country, it will be symbolized with an “A” in the Special sub column of the HTS.
But if the harmonized tariff has limitations designated by the President, there will be an “A*” symbol next to the Harmonized Tariff which indicates that certain beneficiary developing countries are not eligible for preferential treatment on that particular classification.
An “A+” designation provides for preferential treatment eligibility for all least-developed beneficiary countries.
For an import to qualify for duty free treatment under GSP, it must meet certain criteria.
Certain items are automatically ineligible for GSP treatment, including most textiles and apparel, watches, footwear, work gloves and leather apparel. Also import-sensitive steel, glass and electronic articles are not eligible for GSP.
The President can limit a certain product’s eligibility for GSP as well, based on petitions from interested parties on specific products or based on the country of origin of that product.
There are times when a country’s GSP eligibility will be reviewed and the country will “Graduate” from the GSP eligible list. When it is determined that the beneficiary country is a “high-income country” or it has advanced in economic development and trade competitiveness, it will most likely graduate from the list.
The United States is not the only country that has a GSP program. There are more than 25 industrialized nations that manage their own GSP program and each program varies for each country.
All importers are encouraged to look into the GSP program and determine if their products are eligible and if there are countries on the designated beneficiary country list from which they currently import or from where they potentially could import.
Do you have questions regarding the GSP program or importing in general? Contact our International Freight Forwarding team by clicking here.