The Generalized System of Preferences (GSP) trade program approaches its expiration date of December 31, and lawmakers in congress are hashing out their differences before renewing the program for 2021 and beyond.

Originally constructed in the Trade Act of 1974 as a means to promote economic development in developing countries via reduced tariffs, the GSP has become a mainstay among U.S. international trade programs. Congress last renewed the GSP in March of 2018 with expiration date set for December 31, 2020.

Now, lawmakers are seeking to renew the program once again.

Renew or Rehash: Opinions Differ

Senate Finance Committee Chairman Chuck Grassley of Iowa is leading the charge. The Republican senator has proposed a 16-month extension of the benefits program that would keep the existing framework intact without updates.

Democrats in congress, however, have pushed for revisions that enhance priorities like human rights, education, and health. According to International Trade Today, Senator Grassley has expressed doubts about whether Democratic lawmakers would be willing to pass a GSP renewal without such revisions.

Private Sector Petitions Stable Course for GSP Renewal

Many in the private sector have voiced their views on the matter as well. A collection of 284 companies and trade organizations signed a letter urging lawmakers to renew the existing GSP in light of imminent year-end expiration and the harsh effects of COVID-19 on the economy. The letter acknowledges the importance of future updates but urges lawmakers to promptly renew the current GSP trade program.

“We understand that some stakeholders may wish to make changes to the GSP program as part of a renewal bill. Based on over 40 years of experience using GSP, many American companies are eager to participate in conversations on how to improve the program as well,” the letter states. “However, substantive changes to GSP cannot receive the careful consideration they deserve in the four weeks before the current authorization lapses.”

What Happens if GSP Fails to Renew?

GSP has gone un-renewed for spells over the past decade. But businesses have still been able to recoup costs after the fact. Once congress eventually renewed GSP in these instances, retroactive refunds were available going back to the lapse date. Companies could recover tariffs paid in the interim and regain savings typically provided by GSP.

If GSP were to lapse without renewal for 2021, CBP has said that companies may continue to claim the GSP flag on entries. This effort could simplify the process of getting retroactive refunds when the time comes.

Stay Informed on GSP Renewal and Other Trade News

Scarbrough International is monitoring this story as it develops. Our global supply chain experts will pass on information to clients who rely on GSP for sourcing affordable goods and components. We are happy to answer any questions you may have regarding GSP renewal or other international trade benefits programs, so feel free to contact your Scarbrough International representative. 

UPDATE 12/16/2020:

Prospects for GSP renewal before the year’s end remain bleak as Republican and Democratic lawmakers feud over priorities and timing.

On one hand, Republicans have expressed frustration with Democrats’ late-stage request for updates to GSP. According to International Trade Today, Senate Finance Committee Chairman Chuck Grassley of Iowa took shots at the final hour proposal. The Republican senator stated, “some of the things [Democrats] are asking to do are legitimate, but we didn’t hear about some of those things until November 27th, and some of them are technical things that it takes a long time to work out.”

According to the International Trade Today report, Democrats claim that many proposed provisions have already been introduced in previous congresses and that Republicans have failed to allot proper time for debating GSP amendments year over year.

It appears unlikely that congress will renew GSP with proposed updates, and it is possible that the program may expire at the end of the year. However, according to Grassley, there’s still an avenue for renewal despite hangups.

UPDATE 12/23/2020:

GSP renewal has failed to appear in year-end legislation from congress. The program will expire December 31 at 11:59 p.m. EST.

Once the program expires, goods from 120 participating countries will be subject to standard duties. CBP is expected to provide instructions for paying standard duties while flagging items for GSP benefits. Congress may offer retroactive duty refunds when GSP is eventually renewed. Properly flagged goods will make it easier for importers to recoup costs down the road when the refunds are available.

Your Scarbrough customs broker will both ensure compliance with updated tariff requirements for all 120 GSP-eligible nations and flag GSP-eligible goods for future refund eligibility. If you have questions, don’t hesitate to reach out to your representative at Scarbrough International.