Coalition for GSP Applauds Introduction of Bipartisan “CNL Update Act” by Reps. Stephanie Murphy and Jackie Walorski

Washington (December 10, 2021)– The Coalition for GSP applauded the introduction of the “CNL Update Act,” bipartisan legislation to update the Generalized System of Preferences’ competitive need limitation (CNL) rules and provide additional guidance for the Administration as it conducts country- and product-specific reviews of GSP benefits. The legislation was introduced by Representatives Stephanie Murphy (D-FL) and Jackie Walorski (R-IN), who both serve on the House Ways and Means Committee, which has jurisdiction over trade issues.

“By helping restore GSP for non-sensitive imports, these commonsense changes will further GSP’s development goals, lower costs for American manufacturers and families, and increase the Administration’s leverage as it implements new GSP eligibility criteria,” said Coalition for GSP Executive Director Dan Anthony. “GSP can be a powerful economic development tool, both in GSP countries and at home. The CNL Update Act complements bipartisan efforts to reauthorize GSP in a manner that better promotes a race-to-the-top in trade. We urge Congress to include it any GSP renewal bill.”

CNLs are statutory thresholds that can trigger lost duty-free treatment under GSP even if there is no domestic production or concerns that imports harm U.S. industry. Congress has not updated the CNL thresholds since 1997, and the growth rate for CNLs has declined every year since. Furthermore, while the GSP statute says the benefits “may” be restored if trade levels fall below the CNL thresholds in the future. In recent years, over 95% of affected products were below CNL thresholds, but restoration almost never happens (e.g., less than 10 products since 2007). As a result, product-specific exclusions such as CNLs now eliminate as much as 1/3 of all potential GSP benefits annually (e.g., more trade from Brazil is excluded by these rules than still covered by GSP).

The CNL Update Act would make several changes to CNL rules, including setting a fixed rate for CNL thresholds to grow each year and establishing that the President “should” restore duty-free treatment for products that fall below the CNL thresholds. Changes would not impact products removed from GSP following a country practice review or a petition alleging harm to the domestic industry, which are covered by different sections of the GSP statute. The Administration would retain final discretion in all review decisions.

Additionally, the CNL Update Act includes the Sense of Congress that the Administration should “take all available steps to facilitate continued duty-free treatment for products where the imposition of duties is likely to slow or reverse progress made toward meeting the [various GSP eligibility criteria]…or result in severe economic harm to United States entities, particularly small businesses.” It also says the Administration should create a process to mitigate potential harm, including “exploring the feasibility of preserving duty-free eligibility on a case by case basis for qualifying companies” if punitive action is deemed warranted. Again, the Administration would retain final discretion in all review decisions.

Authorization for the GSP program expired on December 31, 2020, and Congress is considering changes to GSP eligibility criteria and others provisions as part of reauthorization. GSP expiration cost American companies at least $873 million in extra tariffs through October 2021 and costs continue to grow by nearly $3 million per day. In September, over 300 American organizations sent a letter to Congress urging swift GSP renewal, including changes such as those proposed in the CNL Update Act.

“Earlier this year, Ambassador Tai said creating a race-to-the-top in trade would require ‘taking a look at rules that were devised when our world, frankly, looked and operated differently, and maybe think about where those rules need to be tightened or loosened,’ added Anthony. “That characterization could apply to many aspects of the GSP program. We thank Representatives Murphy and Walorski for their leadership on this important issue that impacts so many workers and communities around the world.”