Federal Trade Program Back in Force; Tariff Cut Will Save Businesses Millions

The $1.3 trillion omnibus spending bill signed by the President on March 23, averting a government shutdown, includes language renewing a federal trade program that saves U.S. companies millions of dollars.

The language renewing the Generalized System of Preferences (GSP) was passed by the U.S. House of Representatives in February.

The bill will renew GSP through December 31, 2020. The renewal of GSP will refund tariffs paid from January 1, 2018 through the reinstatement date. The bill also will change the annual review announcement date from July 1 to November 1, update some dates related to “competitive need limit” (CNL) reviews, and require the U.S. Trade Representative to submit an annual report to the trade committees on country-eligibility criteria.

Eligible Products

Products eligible for duty-free treatment under GSP, according to the Office of the U.S. Trade Representative, include most manufactured items; many types of chemicals, minerals and building stone; jewelry; many types of carpets; and certain agricultural and fishery products.

The House passed the omnibus spending bill by a vote of 256-167 the afternoon of March 22; U.S. Senate passage followed early the next morning by a vote of 65-32.

2017 Savings

GSP saved U.S. companies $865 million in eliminated taxes in 2017. That is about $136 million, or nearly $13 million per month, more than 2016. GSP savings exceeded $1 million for 41 states plus Puerto Rico. More than 80% of U.S. states saw GSP savings grow over 2016.

In 2017, California, along with New Jersey and Texas, saw GSP savings jump by about $19 million, followed by a $17 million increase in Florida and an $11 million increase in New York. In 2017, California spent $3.5 billion on GSP imports and had a total tariff savings of $139 million, thanks to GSP.

See a map of 2017 GSP imports and tariff savings at the website of the Coalition for GSP, www.renewgsptoday.com.

Background

The Generalized System of Preferences provides special tariff preferences for imports from the less-developed countries into the advanced industrialized countries. The idea of such preferences was first formally proposed at the 1964 United Nations Conference on Trade and Development (UNCTAD I). This conference focused on the theme that trade, as opposed to aid, was the most effective vehicle for promoting Third World economic development.

The U.S. GSP was authorized by Title V of the Trade Act of 1974 and instituted on January 1, 1976. Under the program, the President designates countries and products eligible for duty-free treatment. Products determined to be import-sensitive are statutorily exempt.

GSP was most recently reauthorized on June 29, 2015 (effective July 29, 2015) for a period of two-and-a-half years. According to the Coalition for GSP, the renewal alone led to about $1.3 billion in refunds.

GSP is an important tool for boosting economic growth and job creation. Many U.S. companies source raw materials and other inputs from GSP countries, and the duty-free treatment of these imports reduces the production costs of these U.S. manufacturers, making them more competitive.

According to analysis by the Coalition for GSP, approximately 82,000 jobs are either directly or indirectly associated with the importation and use of GSP-eligible imports.

CalChamber Position

The California Chamber of Commerce, recognizing that the Generalized System of Preferences has stimulated two-way trade with the United States and has contributed to the long-term economic development of some developing countries, supports regular extensions of the GSP.

In keeping with long-standing policy, the CalChamber enthusiastically supports free trade worldwide, expansion of international trade and investment, fair and equitable market access for California products abroad and elimination of disincentives that impede the international competitiveness of California business.

Staff Contact: Susanne T. Stirling

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Susanne T. Stirling
Susanne T. Stirling, vice president, international affairs, has headed the CalChamber international activities for nearly four decades. She is a gubernatorial appointee to the California Trade and Investment Advisory Council. She also serves on the District Export Council (appointed by the U.S. Secretary of Commerce), the National Export Council Steering Committee, the U.S. Chamber of Commerce International Committee, and the Chile-California Council. Originally from Denmark, she studied at the University of Copenhagen and holds a B.A. in international relations from the University of the Pacific, where she now serves as a regent. She earned an M.A. from the School of International Relations at the University of Southern California.