Background

The European Union advanced this week an effort to revise its Generalised Scheme of Preferences, which lowers or eliminates import duties on goods from 67 low-income countries. The proposal must be approved by the European Parliament and the European Council before it can take effect, which is anticipated to be Jan. 1, 2024. The U.S. is also considering changes to its GSP, which expired Dec. 31, 2020, but the effort has stalled in Congress.

The EU offers three GSP arrangements: (1) Everything But Arms, which provides duty- and quota-free treatment for all products except arms and ammunition from least-developed countries, (2) GSP, which grants a partial or full removal of customs duties on two-thirds of tariff lines for low and lower middle income countries, and (3) GSP+, which eliminates duties on the same tariff lines as GSP for beneficiaries that accept additional sustainability requirements.

The European Commission announced Sept. 22 that it has adopted a proposal to update GSP for the period 2024-2034 by making it more focused on reducing poverty, increasing export opportunities, and incentivizing sustainable economic growth for low-income countries. Specific changes would include the following.

- lowering product graduation thresholds (i.e., the temporary suspension of tariff preferences for highly competitive products) by ten percentage points to better focus preferences on less-competitive products and create more opportunities for other GSP beneficiaries

- introducing the possibility of GSP benefit withdrawal for serious and systematic violations of the principles of conventions on climate change and environmental protection

- improving the monitoring of compliance with GSP+ requirements

- introducing a specific process to ensure that the cumulation of rules of origin responds to the requesting country’s development, financing, and trade needs

- adding an urgent withdrawal of preferences procedure to respond to exceptionally grave circumstances

- specifying that the socioeconomic impact of a temporary withdrawal of preferences for a beneficiary country will be considered when it is proposed

- allowing countries set to graduate from least-developed country status in the next decade to apply for the GSP+ program if they commit to strong sustainability standards

- adding international conventions on human rights, labor rights, and organized crime to the list of those that GSP beneficiaries must comply with

- expanding the list of international environmental conventions that GSP+ countries must ratify

Legislation introduced in Congress earlier this year seeks to make some similar changes to the U.S. GSP program. For example, it would add new mandatory criteria concerning human rights and the environment and new discretionary criteria concerning the environment, women’s economic empowerment, rule of law, and digital trade. Other changes would include requiring regular country reviews, adding transparency requirements for administrative decisions made under the program, and requiring the International Trade Commission to study GSP utilization rates, rules of origin, and article eligibility rules.

For more information on GSP, please contact attorney David Olave at (202) 730-4960 or via email.

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