The Generalized System of Preferences, which provides duty-free treatment for imports of thousands of products from more than 100 developing nations, is set to expire Dec. 31. If not renewed before then, subject goods will be subject to U.S. tariffs beginning Jan. 1, 2021.

In a recent letter, nearly 300 companies and trade associations urged congressional leaders to immediately pass legislation extending GSP. This program supports U.S. manufacturing by reducing the costs of imported inputs, machinery, and equipment, they said, and saved U.S. companies more than $1 billion in 2019. These savings have helped U.S. companies mitigate the impact of the COVID-19 pandemic and the related economic downturn, the letter added, including supplier shutdowns, shipping delays and increased freight costs, mandatory local closures, and reduced U.S. and global demand for products.

On the other hand, “millions of dollars a day in new taxes starting in January 2021” if GSP is not renewed “would make a difficult situation even worse.” For example, the letter pointed out, temporary lapses of GSP in the past “have forced companies to lay off workers, freeze new hires, cut wages and benefits, and delay capital investments.”

One of the issues that has delayed congressional action on GSP has been a growing interest in reforming the 40+-year-old program, such as by revising eligibility requirements to reflect human rights, environmental, or other considerations; adding or removing beneficiary countries; and altering the list of covered products. While some in Congress and the White House are pushing for such changes to be made in conjunction with a renewal of GSP, the letter said substantive changes should be left to the next Congress because they “cannot receive the careful consideration they deserve in the four weeks before the current authorization lapses.”

ST&R attorney David Olave said even if GSP is renewed this year it will likely be for only a short time, with changes to the program then likely to be debated and possibly codified in 2021. Olave said companies interested in preserving or enlarging their GSP benefits thus have a limited opportunity to urge lawmakers to renew the program as soon as possible and push forward desirable changes.

For more information on GSP and how it can benefit your business, please contact David Olave at (202) 730-4960.

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