The letters “GSP” can refer to a surprising number of things, most famously to the device that we increasingly rely on for directions to new destinations. This post provides directions for those new to importing or who rely on the Generalized System of Preferences (GSP) program.
The Generalized System of Preferences, or GSP, Program allows about 5,000 products from about 127 developing countries to enter the United States on a duty-free basis. The duty-free access benefits exporters from developing countries as it helps them to be competitive in the U.S. market. A variety of US importers also rely on the program for access to lower-priced consumer goods and manufacturing inputs. In 2012, U.S. businesses imported $19.9 billion worth of products under the GSP program.
The benefits provided under GSP program are not negotiated with the beneficiary countries, but rather are offered unilaterally by the United States (and other developed country markets listed below) to promote economic development in developing countries. Created by the U.S. Trade Act of 1974, to be eligible for the U.S. program, the countries and the imported products must meet certain criteria.
Meeting GSP Criteria
Country Eligibility: To be GSP-eligible, countries must:
- Have a GNP per capita that does not exceed the World Bank’s threshold for a high-income country (US$12,476 in 2011); and
- Commit to uphold specified U.S. interests — ensure access of U.S. products to the country’s market, protect the property of U.S. citizens located in the country, protect intellectual property and internationally-recognized labor rights, recognize and enforce U.S. arbitral awards, and support U.S. efforts to combat terrorism.
The full list of GSP-eligible countries can be found in General Note 4 to the U.S. Harmonized Tariff Schedule (HTSUS).
Product Eligibility: Most textiles and apparel articles, watches, footwear, handbags, luggage, flat goods, work gloves, and import-sensitive steel, glass, and electronic articles are NOT ELIGIBLE for GSP duty-free access. GSP-eligible products must be:
- Imported directly into the United States from a beneficiary developing country that is eligible to receive GSP duty-free entry of that product; and
- Totally grown, produced, or manufactured in the beneficiary developing country, or if using imported materials meet the specified rules of origin for GSP products.
General Note 4(d) to the HTSUS contains the list of products that are NOT ELIGIBLE for GSP duty-free entry when imported from specified countries.
Importers can identify the products that ARE eligible for GSP at the time of entry by the designations “A”, “A+” or “A*” provided in the “Special” sub-column under column 1 in chapters of the HTSUS.
Annual Reviews of GSP Eligibility
The Trade Act requires the President to conduct an annual review of the program to determine whether changes need to be made to the countries and products eligible for GSP duty-free entry into the United States.
The President may remove a beneficiary developing country from the GSP program because the country has been determined to be sufficiently developed or competitive. The President may also suspend or limit the country’s eligibility to receive GSP duty-free entry for a specified product or products.
Competitive Need Limitations on Importation of GSP-Eligible Products
The Trade Act states that a product imported from a beneficiary country may lose its GSP-eligibility if it exceeds the competitive needs limitations (CNLs) or quantitative ceilings identified in the statute. A country’s products are considered to be sufficiently competitive and therefore no longer in need of GSP benefits when:
- Imports into the United States of the product from the country in a calendar year account for 50% or more of the value of total U.S. imports of the product; or
- Imports into the United States of the product from the country in a calendar year exceed a specified dollar value. The CNL value was $155 million in 2012. This ceiling increases annually by $5 million.
Products that have reached or exceeded their CNL ceiling lose their GSP-eligibility on July 1 of the year following the review unless the President has granted a waiver.
Hearings & Opportunity to Comment
As part of the annual review, at various times each year the U.S. Government (USG) invites and encourages the input of importers, exporters, and other interested parties. These may take the form of:
- Petitions to have countries or products added to or excluded from GSP-eligibility
- Waiver petitions for products that might reach or exceed their CNL ceiling (usually November)
- Requests for redesignation, i.e. to have a country or product’s GSP-eligibility reinstated
- Comments on the results of its investigations and pending decisions.
It is important to pay attention to these reviews. Country and product eligibility can change as a result. All notices are published in The Federal Register.
GSP Periodic Lapses
One other essential fact is the unfortunate reality that the GSP program expires periodically. You will need to check to determine its current status (which as of March 2021 is sadly expired). Products arriving from certain countries that benefit from regional preferential programs – the African Growth & Opportunity Act (AGOA) and Caribbean Basin Initiative (CBI) — remain available during these periods of lapses. Products that are unable to take advantage of these programs can continue to enter the U.S. but are unable to claim GSP status. Congress wishes to reform the program but has been unable to agree on a way forward, leading to these periodic expirations and renewals.
Contact us to learn more about GSP and how it may affect your U.S. imports.