GSP's CNL Limit Hiked in Bipartisan Bill
A bipartisan pair on the House Ways and Means Committee argue that offering more generous competitive needs limitations under the Generalized Systems of Preferences benefits program will help importers shift supply chains out of China, and they recently introduced a bill that would reform the CNL program.
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The CNL disallows GSP tariff benefits when a country becomes a major exporter of a particular product, because the idea is that the country's industry has become so competitive, it no longer needs the tariff break.
In 2020, the last year the program was in effect, the threshold for a CNL was either that more than 50% of the exports of the product from all GSP beneficiaries came from one country, or that any country sold more than $195 million worth of the product in the year. That dollar amount rises by $5 million a year.
CNLs don't apply to countries that are part of the African Growth and Opportunity Act or least developed countries within GSP beneficiary countries.
The bill recently introduced by Reps. Suzan DelBene, D-Wash., and Blake Moore, R-Utah, would hike the dollar limit to $600 million, and increase the limit by 5% annually.
Most recently, due to CNLs, Ecuador lost its GSP eligibility for taro; Brazil lost GSP benefits for gum, wood or sulfate turpentine and diesel-powered electric generating sets.
In a press release announcing the bill, Moore noted that Utah's Black Diamond Equipment testified that higher CNL thresholds would help the company move supply chains out of China, as it wouldn't have to worry about shifting from GSP country to GSP country as that industry developed. The company testified that Indonesia no longer was eligible for backpacks, and that the Philippines, where the company moved next, was close to the limit (see 2309210041).
“Several economic sectors in Utah, including the outdoor recreation industry, rely on an effective and modernized Generalized System of Preferences program to do business,” Moore said in the release. But, he said, CNL has not been adjusted since 1996, which he says harms U.S. economic interests. "This legislation will give Utah companies the flexibility they need to diversify their supply chains away from China and towards more reliable trade partners around the world.”