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US Set to Crack Down on GSP Eligibility for Key Sourcing Countries

The United States has been combing over all of its trade deals to find anything that appears unfair, unbalanced or not in keeping with the America First maxim. Next on that agenda will be more scrutiny for the Generalized System of Preferences trade program and the sourcing countries that benefit from duty breaks under it.

The Office of the United States Trade Representative recently announced a new effort to ensure GSP beneficiary countries are actually meeting eligibility criteria—in fact, there will be an entirely new interagency process to make this assessment.

As part of the GSP program, certain products from 120 beneficiary developing countries can enter the United States duty free. Some travel goods, like luggage and handbags, benefit from these duty breaks, and trade leaders are presently pushing for certain footwear to be included when the overall GSP program gets renewed, which is expected before the end of this year.

The USTR and any other relevant agencies will now be reassessing each beneficiary country’s compliance with GSP criteria every three years. If anything uncovered appears awry, the Administration could start a full review of whether that country will continue to enjoy benefits under GSP.

First up for scrutiny as part of this new effort, will be beneficiary countries in Asia, and other countries will follow for review in years two and three from the start of this process.

“Countries receiving U.S. trade benefits must meet the eligibility criteria established by Congress,” U.S. Trade Representative Robert Lighthizer said in a statement. “By creating a more proactive process to assess beneficiary countries’ eligibility, the United States can ensure that countries that are not playing by the rules do not receive U.S. trade preferences. This sets the correct balance for a system that helps incentivize economic reform in developing countries and achieve a level playing field for American businesses.”

Currently, key sourcing countries like Egypt, Ethiopia, Haiti, Kenya, Lesotho, Madagascar, Mauritius, Pakistan and Turkey, all benefit from GSP trade benefits, as do Indonesia, India, Cambodia, Brazil and Thailand—which all happen to rank among the top 10 sourcing countries for footwear, meaning GSP breaks could serve to save substantial costs on footwear duties U.S. brands are currently dishing out.