Industry News

Congress Passes FTAs and Reinstatement of GSP and TAA Programs
October 13, 2011

Last night, more than four years after the United States initially negotiated free trade agreements (FTAs) with South Korea, Panama, and Colombia, all three FTAs, as revised by the Obama Administration, passed both Houses of Congress. The South Korea, Panama, and Colombia bills passed the House with votes of 278-151, 300-129, and 262-167, respectively and the Senate by votes of 83-15, 77-22, and 66-33, respectively.  The House also passed H.R. 2832, a bill to retroactively renew the Generalized System of Preferences (GSP) through July 31, 2013, by a vote of 301-122.  In addition to renewing GSP retroactively for articles entered after December 31, 2010, the GSP bill includes the renewal of a scaled-down version of the Trade Adjustment Assistance (TAA) program. The GSP bill is scheduled to take effect fifteen days after the President signs the measure into law. The Colombia FTA implementing legislation also includes a retroactive extension of the Andean Trade Preferences Act (ATPA).  The House and Senate votes came only hours in advance of South Korean President Lee Myung-Bak’s address to a joint session of Congress, scheduled for later today.  All four bills will now be sent to President Obama for his signature. 

Both the Korea FTA implementing bill and the GSP/TAA bill provide for increases in the merchandise processing fee (MPF) rate. The current MPF rate is 0.21%. The GSP/TAA bill (H.R. 2832) proposes raising the MPF rate to 0.3464% for the period of October 1, 2011 to November 30, 2015, to 0.21% from December 1, 2015 to September 30, 2016, and to 0.1740% for October 1, 2016 to September 30, 2019.  The Korea FTA implementing bill, however, would increase the MPF to 0.3464% from December 1, 2015 through June 30, 2021. If the KORUS bill is enacted after the GSP bill, the KORUS bill’s MPF provisions would be expected to override the GSP bill’s MPF provisions for the overlapping time period, resulting in a 0.3464% MPF rate for the entire October 1, 2011 – June 30, 2021 period. Neither bill would raise the $485 MPF cap or $25 minimum for formal entries. Which of these provisions will take effect will be determined by the order in which the bills are signed into law by the President. 

Additionally, the Korea FTA implementing legislation extends the MPF for formal entries from January 8, 2020 through August 2, 2021, and the Colombia implementing bill further extends the MPF for formal entries from August 3, 2021 through September 30, 2021. The GSP bill also contains certain prepayment and reconciliation requirements for the MPF for formal and informal entries for a 42-day period in 2012. We will provide an update as to the final MPF rates when the President signs the legislation and when additional information is available. 

For further information, please contact a Barnes/Richardson attorney.

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