Prolonged GSP Expiration Threatens Retroactivity, Product Eligibility, Says Sandler
The longer the Generalized System of Preferences (GSP) expiration continues, the less likely renewal legislation will include retroactivity provisions, said Marideth Sandler, CEO of Sandler Trade, during a Nov. 7 webinar on GSP. The webinar was co-sponsored by Sandler Trade, the Alliance of GSP Countries and the Coalition for GSP. Despite routine implementation of GSP duty retroactivity dating back to the program’s 1976 inception, political concerns render retroactivity uncertain, said Sandler.
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“In my discussions, even up until last week when we talked to chief counsels for each of the trade committees, there was a sense that this is important to U.S. importers but because the discussion is occurring around the budget discussions and the whole milieu of trying to save the government money and sequestration, there is a line that can more easily be drawn,” said Sandler, referring to House Ways and Means and Senate Finance. In 2011, GSP expiration included $640 million duties paid retroactively, said Sandler. While the current political atmosphere does pose a risk to GSP retroactivity inclusion, other industry leaders over recent months have said it remains a probability (see 13101607).
Delay in GSP renewal will also increase the chances of lawmakers amending the system, whether through country or product changes, said Sandler. Amendments would create further delay, she added. The House and Senate introduced nearly identical pieces of legislation in July that did not amend the system. “Everyone right now has been pushing for a straight extension and the bills introduced in July would extend GSP through September 2015 to link it up on the same timeline as [the African Growth and Opportunity Act (AGOA)],” said director of research and government relations at the Coalition for GSP, Dan Anthony, who also spoke during the webinar. Some industry officials and lawmakers have pushed for early renewal of AGOA (see 13101813).
Regardless of the time constraints, the greatest likelihood for GSP renewal rests in the passage of an omnibus trade package, said Sandler. Following the legislative failure to renew GSP prior to its July 31 expiration, industry leaders have repeatedly claimed an omnibus package presents the best avenue for GSP renewal (see 13081212). “Senator Coburn’s objections stand. The Senate Finance Committee has not been able to work out a workable compromise,” said Sandler. Senator Tom Coburn, R-Okla., opposes the funding mechanism in the renewal legislation (see 13073016). “So GSP is not likely going to be renewed by a stand alone bill. That means it's going to be attached to something, likely a trade package, meaning several international trade related bills.”
The omnibus trade package will likely also include Trade Promotion Authority (TPA), Trade Adjustment Assistance (TAA), along with a possible Customs Reauthorization Bill addition. The Senate moratorium on earmarks continues to render inclusion of the Miscellaneous Tariff Bill (MTB) a formidable challenge, said Sandler. Finance Committee Chairman Max Baucus, D-Mont., is pushing for TPA legislation passage by the end of this year, to be accompanied by TAA (see 13103107). “TAA, Trade Adjustment Assistance, is expiring at the end of December. People have pretty much said that it will be linked to Trade Promotion Authority,” said Sandler. “There are some who think that Trade Promotion Authority may move before the end of this year. But there are so few days for that to happen.”
There remain only 16 House legislative days and 35 Senate legislative days on the 2013 calendar, according to Sandler, adding that the omnibus package will likely pass in the first months of 2014. The window for viable passage is constricted, however, said Sandler. “2014 is also an election year. International trade issues are often viewed as hot button or sensitive issues and can be seen to be costly to member reelection,” said Sandler. In the time being, GSP expiration is costing U.S. importers sizeable funds that, in most cases, translate into lost profit, said Sandler. “The total duties that were paid in August, the one month we have data for in which GSP was not operating, was more than $50 million dollars,” said Sandler. “Everybody is getting hit by this.”
CBP recently advised importers to continue flagging GSP eligible products during the period of GSP expiration, marking them with Special Program Indicator (SPI) “A” or A+” (see 13071514). “If the program is renewed with a retroactive clause, the use of the SPI on the form will allow Customs to process automatic duty refunds,” said Sandler. “The goods eligible for preference though under the African Growth and Opportunity Act, however…will continue to receive a preference on the tariff items that display SPIs ‘A’ or ‘A+’ or ‘D’, which is AGOA,” said Sandler. CBP will automatically process the renewals of products entered under Automated Broker Interface system without request for refund, said Sandler, noting CBP claims 99.9 percent of importers currently use the system.