GSP Renewal – How Long is Enough?

GSP_Expiration&Renewal_History

Whether talking to reporters or on the Hill for meetings, we often get the same question: “How long of a GSP extension would you like to see?”

Our answer is always the same: “As long as possible.” 

Yet more important that what we want is why we want it.  Put simply, history shows that long-term renewals are the key to increasing GSP utilization.  Take a look at the chart above and a couple things jump out:

  • There’s a whole lotta pink, meaning importers frequently (and for extended periods of time) had to pay tariffs after Congress allowed GSP to expire;
  • GSP imports tend to fall during those pink-shaded periods, and
  • GSP imports soared after Congress passed a 5-year renewal in 2002.

This series of short-term extensions and retroactive renewals wasn’t always the norm.  The Trade Act of 1974, which created the GSP program, included an initial 10-year authorization. The Tariff and Trade Act of 1984 included an 8.5-year extension.

After nearly 20 years of uninterrupted operation, things got dicey.  Between July 1993 and July 2002:

  • GSP was allowed to expire 7 consecutive times it was up for renewal;
  • Companies paid tariffs nearly 40 percent of the time on “duty-free” imports, and
  • GSP imports fell because of the uncertainty.

By contrast, as a result of the new certainty provided by the long-term renewal in 2002, GSP imports nearly doubled by the end of 2006

History repeated itself in 2011.  GSP imports were recovering nicely from the 2008-2009. However, the first expiration in almost 10 years led to an immediate, steady decline in GSP imports – a trend that reversed itself as soon as Congress renewed GSP in October

As we talk about GSP renewal in 2013, we can’t forget the lessons of the past. Lesson #1? American companies don’t just want a long-term GSP renewal, they need one.

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