Congress Poised to Pass GSP Renewal Before Expiration

“It’s positive steps. We are clearly making positive steps towards renewing,” said Daniel Anthony, Director of Research and Government Relations for the Coalition for GSP, an arm of Trade Partnership Worldwide. “There is clearly a commitment to get this done by the Ways and Means Committee and the Finance Committee. We are moving in the right direction.” The effort in the Senate to push GSP renewal through the floor with unanimous consent (UC), likely the only avenue to passage prior to expiration because of procedural propensity to bog down legislation, continues to pose the most formidable scenario roadblock, according to Anthony, who is optimistic that the bill will move in coming weeks. “We are hopeful that we can get UC this week or early next week just to prevent that expiration,” said Anthony.

The immediate trajectory of the bill, should it pass through unanimous consent, will likely entail the Senate using a procedure commonly referred to as “holding it at the desk”, according to congressional and industry sources. The House will prospectively pass the same piece of legislation and the bill will not have to pass through the Senate again. The bill will then proceed to the president’s desk. But should lawmakers fail to pass GSP renewal legislation prior to its July 31 expiration, U.S. importers will face immediate, steep hikes in tariff rates on GSP-eligible products.

The GSP system has expired on nearly a dozen occasions over the past few decades due to procedural impediments. Lawmakers invariably renewed the system retroactively. According to some business players and political observers, however, permitting expiration decreases confidence in the future of GSP, influences product sourcing decisions and damages revenue streams. “From a business standpoint, timely renewal is important. If you’re going to make a substantial commitment…if you’re going to make a substantial investment to a foreign company to move in the equipment you need or get the permits for health inspections and all the stuff you need, you have got to have confidence that you’re going to sustain that supply chain,” said National Foreign Trade Council (NFTC) President Bill Reinsch, at a NFTC roundtable discussion on July 12. “It’s all about global supply chains. You want to know you’re going to sustain that piece of your global supply chain for a substantial period of time. Otherwise it’s not worth it.”

House Ways and Means Committee Chairman Dave Camp, R-Mich., Ranking member Sander Levin, D-Mich., Devin Nunes, R-Calif., and Charles Rangel, D-N.Y. spearheaded GSP renewal by introducing the July 17 legislation (see 13071819), while voicing concern that the Senate could derail the process by attaching amendments onto GSP renewal or including it in a broader revenue or trade legislation package. “We will continue to work together to find a path forward in the Senate that ensures that the Senate can move the bill without amendment,” said Camp at a July 18 House Ways and Means Committee hearing. But the Senate, led by Finance Committee Chairman Max Baucus, D-Mont., and Ranking Member Orrin Hatch, R-Utah, introduced straightforward GSP renewal (see 13071926).. Due to differing rules between the House and the Senate, the Finance Committee included a mandatory funding offset. Although the offset has been used traditionally in the past with GSP and other trade bills, there remains potential for that specific inclusion to generate dissent within the Senate. Last year, Senator Tom Coburn, R-Okla., opposed the same offset within a provision extension of the Africa Growth and Opportunity Act (AGOA).

The GSP system is designed to fuel stronger U.S. trade abroad by offering duty-free, U.S. market access for products that do not threaten U.S. industry. Through more economic activity drawn from added profit potential for U.S. importers, GSP benefits 127 countries, including 44 least-developed countries (LDCs). Since its 1976 inception, GSP has claimed widespread bipartisan support. Senators often used unanimous consent to pass GSP renewal legislation in the past, while the House has used suspended rules.

If consensus is not reached before the expiration date, U.S. importers will feel tangible consequences at the outset. According to the Coalition for GSP assessment, U.S. importers will pay an additional $2 million a day in previously-absent tariffs. After retroactive renewal, requests are granted for tariff refunds. But in the immediate future, members of the business community must cope with decreased revenue.

Continued Uncertainty

The uncertainty over passage remains a cause for serious concern. “All I can find is no one knows. It's politics,” said Ken Schaeffer, President of Oceanside, Calif.-based Carbon Resources, who imports GSP-eligible products from Indonesia and Malaysia. “They can add something to the bill or prevent it from coming to the floor and not think about the thousands of businesses that are impacted…it’s a lot of red tape and hassle getting reimbursed. It’s hardship on cash flow.”

When GSP expired in 2010 and Congress renewed the system retroactively the following year, Carbon Resources had to pay $255,000 in previously-absent tariffs, Schaeffer said. He claims he has yet to be fully reimbursed. Considering business relationships have to develop months and years in advance in order to import products from the Asian-Pacific region, U.S. importers have already designed business models that often incorporate GSP benefits. Now GSP expiration looms and U.S. importers do not know the tariffs they will be obligated to pay for products currently at sea or irreversibly en route to the U.S.

While testifying before the House Ways and Means Committee on July 18, the United States Trade Representative (USTR) Michael Froman endorsed renewal of the program. “I very much agree that GSP has both its development dynamic to it but also very importantly it helps importers who can’t otherwise have access to those products, to bring those products in to provide to American customers at lower cost,” said Froman. “So we think it’s both good for American consumers but also good for development.” -- Brian Dabbs