Obama Administration Completes Annual GSP Review

by Leroy Baker, Tax-News.com, New York

02 July 2009

US Trade Representative Ron Kirk has announced the outcome of the Obama administration's 2008 Annual Review under the Generalized System of Preferences (GSP) program.

According to Kirk, in 2008, the GSP program facilitated USD31.7bn in imports of nearly 5,000 types of products from 131 developing countries.

Congress created the GSP program in the Trade Act of 1974. Under the program, 131 beneficiary developing countries, including 44 ‘least-developed beneficiary developing countries’ such as Afghanistan, Bangladesh, and Cambodia, are eligible to export approximately 5,000 types of products duty-free to the United States. Each year, the United States conducts a review, in part to determine if there are certain imports currently eligible for GSP benefits that are sufficiently competitive such that duty-free treatment is no longer warranted.

Kirk said that in keeping with GSP's goal to advance economic development, the administration will issue waivers that will prevent 112 exports from 16 beneficiary countries, with a 2008 trade value of USD290m, from being excluded from the program because they exceed statutory import ceilings.

The administration is also expanding the program by adding two agricultural products to the list of products eligible for GSP duty-free export into the United States from all beneficiary countries. In addition, as a result of their success under the GSP program, the administration has determined that 12 products from six beneficiary countries are now sufficiently competitive in the US market to no longer need GSP treatment.

The administration conducts an annual review of the countries covered under the GSP program and products that are eligible for duty-free treatment under the program. The statute includes commercial thresholds and waiver provisions regarding imports of products. Interested parties also file petitions seeking changes in the treatment of countries and products.

In announcing these changes, Kirk stated: "Expanded trade with the world's developing countries is critical to boosting their growth, reducing income inequality, and providing people with hope for the future. The GSP program is an important step in helping to revive global trade and restoring our sense of faith in international commerce to help improve lives at home and abroad."

Products for which GSP eligibility was continued include fancy leather from Argentina, copper wire from Turkey, ferrosilicon chromium from Kazakhstan, and exports made by rural women entrepreneurs that help to increase their incomes, such as garden brooms made from coir natural fiber in Sri Lanka.

The administration also granted the government of Egypt's request to add frozen uncooked potatoes and frozen spinach to the list of products from all beneficiary countries. These products will become eligible for duty-free export into the United States beginning on July 1, 2009.

Consistent with statutory provisions concerning product competitiveness, the administration determined that 12 products from six beneficiary countries, including polyethylene terephthalate (PET resin) from Indonesia, are now sufficiently competitive in the US market to be excluded from GSP eligibility.

The GSP 2008 Annual Review also involved an analysis of petitions to withdraw or limit a country's GSP benefits for not meeting GSP eligibility criteria. These criteria include the extent to which a country provides adequate and effective protection of intellectual property rights (IPR) and whether a country is taking steps to afford internationally recognized worker rights to workers in that country. Several beneficiaries remain under active scrutiny because of such concerns, including: Lebanon, Russia and Uzbekistan regarding IPR protection, and Bangladesh, Niger, the Philippines and Uzbekistan regarding worker rights.

"This is a difficult time for everyone in the global economy and it creates particular difficulties for those living in developing nations," Kirk added. "The GSP program serves as an effective tool for developing countries as they increase their economic participation in the global trading system. It further helps to expand choices and lower costs for US consumers and industry. In part due to the GSP program, the United States is one of the world's most open economies to products of developing countries and in the process helps to alleviate poverty and spread goodwill."

The GSP statute includes two competitive need limitations (CNL) on the eligibility of a product for benefits under GSP: if the annual trade of a product from a specific country exceeds a value-based threshold (USD135m in 2008); or if the annual trade of a product from a specific country exceeds 50% of total US imports of that product. The statute also authorizes the President to waive the application of these limitations if certain statutory conditions are met. Any CNL waiver granted remains in effect until the President determines that such waiver is no longer warranted due to changed circumstances.

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