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Exporters, Importers Urge U.S. to Expand GSP Treatment for Travel Goods

Monday, July 25, 2016
Sandler, Travis & Rosenberg Trade Report

More than a dozen exporting countries and four U.S. trade associations are urging the Obama administration to act quickly to extend duty-free treatment for designated travel goods under the Generalized System of Preferences to all GSP beneficiary countries. A June 30 presidential proclamation added travel goods under 28 HTSUS subheadings (including luggage, backpacks, handbags and pocket goods such as wallets) to the list of GSP-eligible products but only for least-developed beneficiary developing countries (of which there are currently 43) and African Growth and Opportunity Act beneficiary countries (of which there are currently 38).

A coalition of 27 “geographically and economically diverse” GSP beneficiary countries said the administration’s decision to delay indefinitely a decision on adding travel goods to GSP eligibility when imported from non-LDBDC and non-AGOA countries “enables continued single-country dominance” of the U.S. market. Specifically, the trade associations pointed out, 85 percent of U.S. imports of covered goods in 2015 were supplied by China, compared to 0.01 percent by AGOA countries and 1.3 percent from all least-developed countries, including AGOA beneficiaries.

The two groups argued that the administration’s decision to limit GSP eligibility for travel goods will have little practical benefit for any of the countries GSP is intended to aid. The trade associations explained that the covered goods “will not be made in AGOA or LDBDC countries in the near future” because they lack the capacity or are at too early a stage of development to take advantage of the new GSP benefits and that the administration’s decision “will not alter that commercial and supply chain reality.” Further, the coalition said, that decision “removes a congressionally approved and critically needed economic development engine from” those GSP beneficiaries that could offer a viable sourcing alternative to China, such as the Philippines, Thailand, Pakistan, Indonesia and Sri Lanka. The associations said the decision thus “runs counter to decades of GSP policy and practice … and disrupts and distorts the congressional and policy intent underlying the GSP program.”

The coalition also indicated that granting duty-free eligibility to travel goods from all GSP countries would not harm LDBDCs, which was a concern cited by the administration in its decision to limit benefits. Specifically, imports from non-LDBDC and non-AGOA GSP countries would be limited by the program’s competitive needs limitations, which do not apply to LDBDCs and AGOA countries. A bigger concern, the coalition noted, is the Trans-Pacific Partnership, whose 11 member countries provided 11 percent of all U.S. travel goods imports by value in 2015 compared to 7 percent for all GSP countries. Should TPP come into effect, the coalition said, its member countries would also not have any limit on the amount of travel goods they could export duty-free to the U.S.

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