The first hurdle in the renewal of the United States’ Generalised System of Preferences (GSP) was overcome last week Tuesday when the US House of Representatives passed H.R.4979 – To extend the Generalized System of Preferences and to make technical changes to the competitive need limitations provision of the program. This is welcomed news for the 120 countries and territories which benefit under the GSP, but just the first step towards the programme’s renewal.
The US GSP lapsed on December 31, 2017. This Bill provides a three year extension through to December 31, 2020. H.R. 4979 requires there be an annual report on the enforcement of eligibility criteria to ensure that countries designated as beneficiary developing countries are meeting the eligibility criteria.
Exporters would also be refunded for the duties collected during the lapse period. This is not the first time the GSP has expired, a fact which has created some uncertainty for exporters from GSP beneficiary countries seeking to make use of the programme. Other sources of uncertainty are that the President may graduate any country, remove products from GSP eligibility and remove products for an individual country which has exceeded competitive need limitations (CNLs). There are also a number of criteria for GSP eligibility which reflect the geopolitical and other objectives underpinning the programme, for example, the ineligibility of communist countries.
The US GSP was instituted by the Trade Act of 1974 and it is one of several US government trade preference programmes which allow designated goods from certain disadvantaged countries to enter the US market at preferential rates of duty. According to the Office of the United States Trade Representative (USTR) fact sheet on the GSP, some 5,057 8‐digit U.S. tariff lines are eligible for duty‐free entry under the GSP, of which 1,519 are eligible for Least Developed Countries (LDCs) only.
The fact sheet further notes that in 2016, total US imports under the GSP was $18.7 billion, with the top five GSP beneficiary countries being 1. India ($4.7 billion), 2. Thailand ($3.9 billion), 3. Brazil ($2.2 billion), 4. Indonesia ($1.8 billion) and 5. Philippines ($1.5 billion).
As of March 2017, the GSP-eligible countries in the Caribbean include: Belize, Dominica, Grenada, Guyana, Haiti, St. Lucia, St. Vincent and the Grenadines, while the following non-independent Caribbean territories are eligible: Anguilla, the British Virgin Islands (BVI) and Montserrat.
Caribbean countries do not feature among top US GSP countries and there is a good reason for this. Most Caribbean countries are beneficiaries of the Caribbean Basin Initiative (CBI), while Haiti is a beneficiary of the HOPE Acts. As such, according to the 2015 Report on the Operation of the Caribbean Basin Economic Recovery Act (CBERA), in 2014, US imports under the GSP from CBI beneficiaries were just 0.02% of the total imports from those countries. As such, CBI countries’ exports under the GSP are quite small, though some countries like Belize, Jamaica and Dominica make more use of the GSP than others.
The GSP renewal Bill received bipartisan support in the House and is now before the Senate. For HR 4979 to become law, the identical bill would have to be passed in the US Senate. Failing this, there must be reconciliation of the bills passed in both houses before being signed into law by President Trump.
The text of the House Bill may be viewed here.
Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.