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All GSP Benefits Jeopardized by Administration Approach, Traders Say

Wednesday, April 10, 2019
Sandler, Travis & Rosenberg Trade Report

Duty-free treatment of imports from all countries benefiting from the Generalized System of Preferences could be jeopardized by the Trump administration’s approach to reviewing GSP eligibility, a recent letter from hundreds of companies and trade groups warned. Nicole Bivens Collinson, head of Sandler, Travis & Rosenberg’s government relations practice, said companies that import under GSP should participate in ongoing country eligibility reviews to protect their interests.

President Trump announced March 4 his intent to terminate the GSP eligibility of India, for insufficient market access, and Turkey, based on its level of economic development. However, an April 4 letter to leaders of the Senate Finance and House Ways and Means committees expressed “grave concerns” about the president’s decision, which could take effect as soon as May 4, and challenged his reasoning. Specifically, the letter said, India reportedly offered significant proposals that would improve U.S. market access for a range of products and industries, which appears to be consistent with the GSP eligibility criterion requiring “assurances of reasonable and equitable treatment.” In addition, the letter said, the World Bank has found that Turkey’s gross national income per capita declined each year from 2014 to 2017 and that further declines are expected in 2018, when the country entered recession.

The letter also raised concerns about the Trump administration’s broader approach to GSP, particularly its use of country practice reviews, which “threatens to undermine Congress’ intent in reauthorizing GSP and the benefits to program users.” About one-third of GSP savings for U.S. importers, which totaled a record $1.03 billion in 2018, would be eliminated if India and Turkey are removed from the program, the letter said. Another third is at risk from ongoing reviews of eight other beneficiary countries, such as Indonesia and Thailand, where “decisions could be announced at any time.” Still more benefits, including for countries in Europe and the Western Hemisphere, could be jeopardized if the administration initiates new country practice reviews as part of its ongoing annual review of GSP.

Indeed, the letter concludes, if the administration “chooses to terminate GSP benefits despite efforts from beneficiary countries to address U.S. concerns, and can graduate countries based on positive economic development when data suggest otherwise, what countries’ benefits are not at risk?”

The letter therefore asks the legislative leaders to request that the administration delay any changes with respect to India and Turkey beyond May. This would give Congress time to work with the administration to ensure that these and other decisions affecting GSP “follow both the letter and the spirit of the law.”

But the Trump administration’s tighter scrutiny of GSP enforcement applies to products as well as countries, Collinson said. Importers making GSP claims at entry should therefore closely review their manufacturing operations and documentation procedures to ensure compliance with program requirements.

For more information on possible GSP changes and how to ensure your company’s interests are protected, please contact Nicole Bivens Collinson at (202) 730-4956.

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