Pending Expiration of Two U.S. Preference Programs Could Significantly Impact Importers & Exporters
Importers and exporters who benefit from two U.S. trade preference programs should act now to prepare for the probable expiration of those programs on Dec. 31. It is regarded as unlikely that the Generalized System of Preferences and the Andean Trade Promotion and Drug Eradication Act will be renewed or extended by Congress before they expire. Retroactive renewal of one or both programs is possible sometime in 2007, but any such action would likely impose dramatic changes in product and country eligibility. While renewal is not guaranteed, the nature of future changes could be affected by providing input to the annual GSP review by the July 20 deadline.

Both GSP and ATPDEA provide significant benefits. GSP provides duty-free entry for more than 4,650 products from 144 beneficiary countries and territories, although most textiles, watches, footwear, handbags, luggage, flat goods, work gloves and other leather apparel are excluded. GSP imports exceeded $26.7 billion in 2005 and have increased another 19% so far this year. ATPDEA provides duty-free access to about 5,600 products from Bolivia, Colombia, Ecuador and Peru and was amended in 2002 to cover many previously excluded products, including certain textile and apparel articles, tuna, petroleum and petroleum derivatives, watches and watch parts, and leather goods.

But GSP and ATPDEA renewal efforts could both fall victim to a difficult political climate for trade issues in Washington in the face of elections this November. Key lawmakers, including Senate Finance Committee Chairman Charles Grassley and House Ways and Means Committee Chairman Bill Thomas, have warned that they are not inclined to extend GSP, at least in its current form. This is largely because some of the program's main beneficiaries, including India and Brazil, are seen as major contributors to the stalemate in the Doha Round negotiations. Thomas has also been among those who have discouraged the renewal of ATPDEA in an effort to pressure beneficiary countries to conclude free trade agreements with the U.S. Peru and Colombia have already done so, although it is unclear when these FTAs will come into force.

If either GSP or ATPDEA is extended, whether prior to Dec. 31 or retroactively in 2007, it is probable that the corresponding legislation will represent the most substantial revamp of the programs since their creation. At a time when Capitol Hill is growing increasingly concerned about soaring trade deficits, trade agreement enforcement and global trade rules, lawmakers are likely to reauthorize GSP and ATPDEA only after making significant changes to country and product eligibility.

At the same time, the Office of the U.S. Trade Representative is considering possible changes to GSP under the existing legal framework. The USTR recently launched its 2006 product and country eligibility review, under which companies can petition to designate additional articles as GSP-eligible, withdraw GSP treatment for particular articles (by country or in general) or countries, or waive the competitive need limitations for certain articles. Product and country eligibility petitions are due by July 20; requests to waive the CNLs are due by Nov. 17.

Information provided by Sandler, Travis & Rosenberg, P.A.
Please forward your inquiry to Laura Hayes by phone at 410-787-3953 or laurah@jsconnor.com