Generalized System of Preferences (GSP) programme

Context

  • President Trump notified the Congress his intent to terminate trade benefits for both India and Turkey under the Generalized System of Preference (GSP) eligibility criteria.

GSP

  • The Generalized System of Preferences (GSP) is a U.S. trade program designed to promote economic growth in the developing world by providing preferential duty-free entry for up to 4,800 products from 129 designated beneficiary countries and territories. GSP was instituted on January 1, 1976, by the Trade Act of 1974.
  • The GSP program has effective dates which are specified in relevant legislation, thereby requiring periodical reauthorization in order to remain in effect.
  • GSP expired on July 31, 2013, and was most recently reauthorized on June 29, 2015 (effective July 29, 2015) for a period of two and a half years.  The relevant legislation permits retroactive extension of GSP benefits.
  • As in past circumstances when GSP was reauthorized with retroactive effect, importers of GSP-eligible products may seek reimbursement for tariffs paid during the lapse in GSP coverage. Importers who filed their entries electronically, used the appropriate special program indicator for GSP (e.g. “A” or “A+”), and paid duty on GSP-eligible goods, will receive an automatic refund.
  • For entries made without using the special program indicator for GSP you will want to contact the port where the goods entered and request your GSP status from U.S. Customs and Border Protection (CBP).
  • About 2,000 products, including auto components and textiles, can enter the US duty-free if the beneficiary developing country meet the eligibility criteria.
  • India was the largest beneficiary of the GSP programme in 2017 with $5.7 billion in imports to the US given duty-free status.

Why withdrawing?

  • President Trump has accused India of failing to ensure the US of “equitable and reasonable” access to its markets. The US is pressing India to reduce US trade deficits and has repeatedly called out India for high tariffs.
  • Withdrawal of GSP is part of the President Trumps plan to redress what it considers to be unfair trading relationships.
  • India has sought talks with the US to avoid the withdrawal of the trade benefits under the GSP. India has offered a trade package to the US which promises of about Rs 35,000 crore annually in oil and gas imports from the US and another Rs 1,00,000 lakh crore in defence orders in the coming years.

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