On November 30, a broad range of American companies and associations sent a letter urging Congressional leaders to prioritize legislative action on the Generalized System of Preferences (GSP) program in the Lame Duck session. GSP expired on December 31, 2020. It soon could become the longest GSP lapse ever and the first time GSP remained expired for a whole Congress. Letter signers ranged from single-person companies to Fortune 50 corporations as well as regional and national associations. Company signers are headquartered in 37 states and operate in all 50 states and 435 congressional districts.
“It’s baffling that Congress has let GSP remain expired for two years despite its broad, bipartisan support and all the challenges American companies, workers, and families have faced,” said Dan Anthony, Executive Director of the Coalition for GSP. “Congress must provide GSP relief in the Lame Duck session.”
The current GSP lapse already is the most expensive in GSP’s nearly 50-year history and could not have come at a worse time. As the letter states, “American companies have paid over $2 billion in extra taxes while also dealing with the effects of the COVID-19 pandemic, high freight costs, and supply chain disruptions in both the United States and beneficiary countries. All of these issues have contributed to high and persistent U.S. inflation. At the same time, GSP expiration has hindered American companies’ effort to diversify suppliers and build more resilient supply chains.“
Congress should pass a long-term retroactive reauthorization, including needed changes such as the “CNL Update Act” (H.R. 6171) provisions. The letter notes that “competitive need limitation (CNL) rules last updated by Congress in 1997 clearly undermine U.S. policy objectives in 2022.” In May, a bipartisan group of 54 House members sent a letter supporting the CNL Update Act.
Indonesia illustrates the need for CNL updates. Because it has become an attractive alternative to China, the top 5 GSP imports from Indonesia in 2022 – and 7 of the top 10 – could lose duty-free treatment permanently in 2023 if Congress reauthorizes GSP without CNL changes. This would hurt American and Indonesian companies and workers and significantly undermine the leverage that many in Congress hope to provide by expanding GSP’s eligibility criteria. It’s the ultimate lose-lose outcome.
But Congress should not let the perfect be the enemy of the good. The letter states “If Congress cannot pass comprehensive GSP reauthorization this year, at a minimum it should pass H.R. 8906, which would refund GSP tariffs paid between January 1, 2021 and August 31, 2022.” The bipartisan proposal would provide over $2 billion in relief to American companies that have waited two long years for Congress to renew GSP. Refunds would let small businesses in particular pay off debts, retain/rehire workers, and avoid further price hikes. For some small businesses, it could be the difference between survival and closing for good.
Why are refunds appropriate? The Senate- and House-passed GSP bills included identical language providing for refunds of all tariffs paid due to GSP lapse (it was other details that differed). If refunds are a matter of when, not if, it makes no sense to wait until next year to start the process. Since GSP would remain lapsed, it would not undermine the urgency for the next Congress to pass a comprehensive GSP renewal deal as soon as possible.