President Trump announced March 4 his intent to terminate the eligibility of India and Turkey as beneficiary developing countries under the Generalized System of Preferences. These changes will not take effect until at least May 3 and will be enacted by a presidential proclamation. Once that proclamation takes effect, thousands of products imported from these two countries will no longer be eligible for duty-free treatment under GSP.
The president said India is being terminated from GSP because it has not assured the U.S. that it will provide equitable and reasonable access to its markets. A note from the Office of the U.S. Trade Representative explains that India has implemented a wide array of trade barriers that “create serious negative effects on U.S. commerce.” These include tougher rules on e-commerce marketplaces, efforts to force foreign companies to store data in India, and higher import tariffs on electronic products in apparent violation of India’s commitments under the World Trade Organization’s Information Technology Agreement. However, Trump said he will continue to assess this factor, suggesting that India’s eligibility could be reinstated if sufficient progress is met.
Turkey is being terminated based on its level of economic development, the president said, pointing to Turkey’s increases in gross national product per capita, declining poverty rates, and export diversification since being named a GSP beneficiary in 1975. Given this reason, there appears to be little possibility of a reinstatement.
According to press sources, U.S. imports under GSP in 2017 totaled $5.7 billion from India, making it the largest user of the program, and $1.7 billion from Turkey.
USTR announced in October 2017 that GSP beneficiaries would be subject to heightened scrutiny to help “ensure that countries that are not playing by the rules do not receive U.S. trade preferences.” USTR said it would review each beneficiary’s compliance with the 15 GSP eligibility criteria every three years and that if a review raises compliance concerns for a particular country the U.S. may launch a full country practice review.
The first assessment period focused on BDCs in Asia, and in October 2017 USTR received petitions requesting the removal or suspension of GSP benefits for India based on (a) lack of equitable and reasonable market access for medical devices and (b) unreasonable barriers to imports of U.S. dairy products. In August 2018 USTR launched a review of Turkey based on its imposition of additional tariffs on $1.78 billion worth of U.S. imports in response to the United States’ Section 232 additional tariffs on imports of steel and aluminum products.
For more information on the impact of these changes and how to mitigate any negative effects, please contact Nicole Bivens Collinson at (202) 730-4956.
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