S. 1267 – Trade Preference Programs

Overview of the Issue

Generalized System of Preferences

GSP provides duty-free treatment to certain products imported from designated beneficiary countries, which are generally developing countries that do not reciprocate this duty-free treatment. According to the U.S. Trade Representative, the program eliminates duties on close to 5,000 products from 122 beneficiary countries. Approximately 3,500 products from 122 countries qualify for GSP treatment. There are an additional 1,500 qualifying products from 43 countries designated as the least-developed beneficiary developing countries.

Countries receiving the largest GSP benefits include India, Thailand, Brazil, Indonesia, Turkey, Philippines, South Africa, and Pakistan. By comparison, the European Union GSP program had 176 beneficiary countries until January 1, 2014. Today, 90 countries are covered by the EU GSP program. Fifty-four are no longer covered but benefit from other privileged access arrangements, and 32 graduated from preferential tariff schemes entirely. In Canada, benefits were withdrawn for 72 out of 176 beneficiary countries at the beginning of this year.

GSP was first authorized in the 1974 Trade Act, and first implemented in 1976. It is subject to periodic renewal. It most recently expired on July 31, 2013, meaning that products from these countries are currently subject to regular duties under the Harmonized Tariff Schedule. GSP has expired periodically throughout its history. When Congress has reauthorized the program in such circumstances in the past, it applied duty-free treatment retroactively to the date of its expiration. That is done again in this bill.

CRS points out that imports under the program in 2012, the last full year GSP was in effect, amounted to approximately $20 billion. This is about six percent of all imports from GSP beneficiary countries, and one percent of all imports into the United States.

AGOA and HOPE

AGOA and HOPE are regionally focused preference systems. AGOA was created in 2000 for countries in sub-Saharan Africa and is set to expire on September 30 of this year. It identifies 49 candidate countries for benefits, with 39 currently eligible for participation. AGOA covers more products than GSP. For example, apparel products qualify for preferences under AGOA but not GSP. AGOA has additional eligibility criteria and also has benefits in addition to the duty-free preferences. Qualifying countries can still get AGOA benefits, even with GSP currently expired.

The Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2006 is a preferential access program specific to apparel imports from Haiti. It was refined and updated by HOPE II in 2008, and again by the Haiti Economic Lift Program Act in 2010. It provides benefits for certain apparel wholly assembled in Haiti even though the content fabric may have come from countries other than Haiti. General HOPE benefits expire on September 30, 2020, although specific benefits begin to phase out at the end of this year.

Notable Bill Provisions

Title I – AGOA

Section 103 – Reauthorization date

Extends AGOA until September 30, 2025.

Section 105 – Monitoring and review of eligibility

Provides that termination of a country’s beneficiary status may not take effect until 60 days after the president notifies Congress of the intention to terminate.

The section goes on to authorize the president to suspend duty-free treatment for specific goods if the president determines doing that would be more effective at promoting a country’s compliance with AGOA eligibility criteria than terminating the country’s beneficiary status.

It then authorizes the president to initiate an out-of-cycle review of whether a beneficiary country is making progress in meeting AGOA eligibility criteria. Citing the fact that South Africa is “the most developed” beneficiary country, it expresses the sense of Congress that an out-of-cycle review of South Africa should be initiated. 

Title II – GSP

This title renews GSP until December 31, 2017, and retroactively applies it to its expiration on July 31, 2013.

Title III – HOPE

This title extends HOPE authorization from September 2020 to September 2025, and the phase out of certain benefits that was to begin at the end of this year is delayed.

Title IV – Tariff Classification for Certain Articles

This title specifies the tariff classification of recreational performance outwear and duty treatment of specialized athletic footwear.

Title VI – Offsets

Section 601 – Extension of customs user fees

This section extends the current user fees collected by U.S. Customs and Border Protection through July 7, 2025. Under current law, user fees for various customs services expire on September 30, 2024. This section also extends the current rate for one particular custom fee, the merchandise processing fee, through June 30, 2025. CBO reports that this provision will increase offsetting receipts by $5.86 billion compared to a current law baseline.

Section 602 – Timing shift of payment of corporate estimated taxes

For corporations with assets greater than $1 billion, this section increases by 5.25 percent the quarterly tax payment due in the last quarter of fiscal year 2020. In the first quarter of fiscal year 2021, this increase will be reduced by the additional amount paid previously. CBO reports this provision will increase revenue by $3.78 billion in fiscal 2020 and decrease it by $3.78 billion in fiscal year 2021.

Administration Position

A statement of administration policy has not been released at this time.

Cost

CBO has estimated extending these programs will result in $5.8 billion less revenue during the 10-year budget period. This is offset by $5.8 billion less in direct spending in that same period due to the extension in authorization to collect customs user fees.

Amendments

No amendments will be in order during consideration of this bill.