The Generalized System of Preferences (GSP)
The Generalized System of Preferences (GSP) is a trade system implemented by the United States that offers preferential duty-free import of 4,800 products from 131 designated beneficiary countries and territories. These include 44 least-developed beneficiary developing countries (LDBDCs). The GSP was instituted in the Trade Act of 1974 and took effect.
Purpose of GSP
The Generalized System of Preferences (GSP) is a trade program that provides preferential tariff treatment for certain goods imported from designated beneficiary countries. The GSP was established with the purpose of spur economic development in poor and developing countries, and to help diversify their economies through trade.
The GSP typically serves the following purposes:
- Gives developing nations a platform to promote their economic growth and development.
- Helps spur job creation and allows decent competitiveness in American companies by reducing the cost of imported inputs used.
- Supports progress of the beneficiary countries in aspects such as workers’ rights, intellectual property rights, and the rule of law, promoting American values.
GSP preferences are available in 13 countries. They are – Australia, Belarus, Canada, the European Union, Iceland, Japan, Kazakhstan, New Zealand, Norway, the Russian Federation, Switzerland, Turkey, and the USA.
How does an import qualify for Duty-Free Treatment under the GSP?
If you’re looking to take advantage of duty-free shipping from the US Generalized System of Preferences (GSP), there are a few things you need to know. First, the GSP only applies to designated beneficiary countries as listed by the US trade representative. Second, your import must be eligible for GSP treatment – typically this means it is a raw material or agricultural product. Finally, your shipment must meet the GSP’s rules of origin, which state that the article must be shipped directly from the beneficiary country to the US without passing through any other countries. If your shipment does cross another country’s territory, the GSP requires that the merchandise not have entered into any transactions in that country enroute to the US. Invoices should also show the US as the final destination. Following these guidelines will help you take advantage of GSP shipping benefits and get your products to market duty-free.
Which Articles are Eligible for Duty-Free Treatment under the GSP?
The GSP is a program that provides duty-free treatment for certain products imported into the United States. The GSP subcommittee reviews and revises the list of eligible products annually, which includes manufactured and semi-manufactured goods, as well as certain agricultural, fishery, and primary industrial products. Preferential treatment under the GSP excludes import-sensitive products, such as textiles and apparel goods, watches, footwear and other accessories, electronics, steel, and glass.
How to Determine if a Particular Item is GSP Eligible?
The GSP or Generalized System of Preferences program offers duty-free treatment to certain goods imported from GSP countries. The GSP country list includes developing nations with which the US has trade agreements. The GSP status of a product can be determined by consulting the Harmonized Tariff Schedule of the United States (HTSUS), which is published by the US International Trade Commission (USITC).
To find GSP eligibility information for a particular product, you can search the HTSUS or the USITC’s Interactive Tariff and Trade DataWeb. The GSP country list is available on the USITC website. More information about the GSP program can be found here.
How to Identify an Article as GSP Eligible in the HTSUS?
If you’re looking to identify whether an article is GSP eligible in the Harmonized Tariff Schedule of the United States (HTSUS), you can do so by checking for a Special Program Indicator (SPI). SPI codes “A”, “A*”, or “A+” next to a HTSUS subheading indicate that the corresponding product is GSP eligible for all, some, or no beneficiary developing countries (BDCs) respectively.
- The SPI code “A” in the special sub-column next to the HTSUS subheading indicates that the particular product is GSP eligible for all the beneficiary developing countries (BDCs).
- The SPI code “A+” suggests that the product is eligible only from the LDBDCs.
- The SPI code “A*” means that the product is not eligible to be imported from one or more BDCs under the program.
Keep in mind that just because a product is GSP eligible doesn’t mean that shipping costs will be waived – GSP only provides duty-free treatment for qualifying goods. So if you’re looking to take advantage of GSP benefits, be sure to check with your shipping company or GSP provider to see if they offer GSP-eligible shipping.
How can an Importer Request GSP Treatment?
The GSP(Generalized System of Preferences) is a system that allows certain imports to enter the United States duty-free. The GSP program was established in 1976 as a way to promote economic growth in developing countries by giving them preferential access to the US market. GSP benefits about 120 developing countries and territories around the world, including many in Africa, Asia, and Latin America.
In order to request GSP treatment for your imports, you must use the SPI codes mentioned above. These codes should be written as a prefix before the HTSUS tariff line number on your shipment entry documentation. If you do not claim GSP on your entry summary form, you can do so in other ways. One option is to file a Post Entry Amendment with the customs authorities. This must be done at least 20 working days before the liquidation of the entry. Another option is to file a protest (19 USC 1514, 19 CFR 174) for importations made prior to GSP expiration.
By taking advantage of GSP, you can enter the United States market duty-free, which can save your business money and help promote economic growth in developing countries.
Which Documents are Needed to Ensure GSP Duty-Free Treatment?
The forms necessary to obtain GSP duty-free treatment may differ with each situation. Various criteria, such as the type of shipment, source, and so on are considered while compiling the list of documents needed to ensure GSP duty-free treatment. GSP eligibility depends on the following papers: –
- GSP declaration (see 19 CFR 10.173)
- Bill of materials
- Purchase orders
- Production records of business that are routinely maintained
- Payroll information to document labor costs
- Factory profile
- Affidavit with supporting documentation
When the CBP asks for it, you must have the necessary paperwork on hand to authenticate a GSP claim available for inspection and provided. The importer of the products for which the GSP is being claimed, or possibly both, may be requested to provide records. For five years afterward, the supporting evidence must be kept.
Competitive Need Limitations (CNL)
As stated in the GSP statute, Competitive Need Limitations (CNL) are quantifiable ceilings on GSP benefits for each product and BDC. If the CNLs exceed a certain value and no waiver is granted, then the BDC will lose GSP eligibility for that particular product.
There are two measures for CNLs:
- When the US imports of a particular product from a BDC during any calendar year accounts for 50% or more of the value of total US imports of that product
- The dollar-value limit is increased in accordance with the GSP statute by US$ 5 Mn annually
Products from a specified beneficiary are considered sufficiently competitive when imports’ value exceeds one of these limits.
So, in short, the GSP benefits a BDC receives may be cut off if that country is deemed to be too competitive in the given product category.
What is the Competitive Need Limitations Waiver Request?
The GSP, or Generalized System of Preferences, is a system that allows certain developing countries to ship products to the United States duty-free. The GSP has limitations on what products can be shipped and how much can be shipped, but these limitations can be waived off under certain circumstances.
One circumstance where a GSP limitation can be waived is if the product is not produced in the United States. If an interested party petitions for a waiver during the annual review process, the President may grant a waiver for the product. The President considers factors such as whether the country providing the product is giving fair access to its market and resources, and whether the country providing the product is protecting US intellectual property rights.
Another circumstance where a GSP limitation can be waived is if the total US imports from all countries of a product are “de minimis.” De minimis is a Latin term meaning “about or concerning minimal things.” In this case, it refers to the value of products being imported. The GSP subcommittee automatically considers de minimis waivers for all products from the GSP-eligible countries that exceed the percentage-based limitations. Such waivers are made by considering the public comments after the publication of a Federal Register notice, which is usually in March.
If you’re interested in shipping a product to the United States from a GSP-eligible country, be sure to check whether there are any GSP limitations that apply. If there are, you may be able to get a waiver for those limitations.
Is the list containing eligible goods and countries ever modified?
Yes. The GSP program is reviewed annually by the GSP subcommittee of the Trade Policy Staff Committee. This subcommittee is chaired by the United States Trade Representative (USTR). Modifications to the GSP program take effect on July 1st each year.
Do all the BDCs receive duty-free treatment on the entire list of articles?
No. Some GSP-eligible products from particular BDCs may be ineligible because they are over the CNLs or their GSP eligibility has been removed from one or more countries as part of the annual product review process.
How can someone modify the list of articles or countries?
Someone can petition to change the list of countries that are eligible for the GSP treatment. But can only petition to change the list of items that are eligible for the GSP treatment if they have a good reason. They have to give petitions to the GSP subcommittee by a certain deadline.
What happens if the imports reach or exceed the CNLs during the year?
The GSP eligibility for products from certain countries will end on July 1 of the next calendar year, unless those products and beneficiaries receive a waiver from CNL before that date.
Once a product is removed from GSP eligibility because it exceeded the CNL, can that product from the country ever return to the GSP eligibility list?
Yes, it is possible. If there is a decrease in the amount of a product that is imported to the United States from a certain country, the interested parties are allowed to comment on the possible re-designation of that product during the annual GSP product review.
What is the current status of the Generalized System of Preferences (GSP) program?
The legal authorization for duty-free treatment under the GSP program expired on January 1, 2021. As a result, U.S. imports entering the United States that were previously eligible for duty-free treatment under GSP up to December 31, 2020 are now subject to regular, Normal Trade Relations (MFN) rates of duty.