As experienced traders know there is a veritable alphabet soup of programs that are intended to increase trade between the United States and other countries and regions. These include GSP, USMCA, AGOA, DR-CAFTA, and others. However, two programs have been in the news more recently than most of the others. Those are the Generalized System of Preferences (“GSP”) and the African Growth and Opportunity Act (“AGOA”).
GSP is a program intended to allow goods with significant value added (35%) in less developed countries to enter the United States duty free. The products and countries have historically been chosen by the United States to minimize benefits to more developed countries and limit direct competition with United States industries. However, GSP benefits expired on December 31, 2020. Historically GSP periodically expired, importers continued to GSP claims on imports, and Congress quickly (for Congress) renewed the program retroactive to the expiration.
So far that has not happened with the 2020 expiration. In fact, while there are a number of legislators who say they want to renew GSP, it is not clear whether GSP will be renewed or what a renewed program would look like. There are several proposals that would radically alter the programs eligibility requirements. It is also not clear whether Congress would be willing to refund at least three years of Customs duties to importers continuing to make claims going back to January 1, 2021. For now, GSP seems to be the program everyone likes, but nobody loves (enough to renew).
AGOA operates similarly to GSP but only African countries are eligible for AGOA benefits. At the moment there are 35 beneficiary countries. AGOA was renewed for ten years in 2015, so it is set to expire in 2025. That alone would be a reason to discuss renewal, but it is also the case that Africa has become a region in which the United States and China are competing economically. AGOA is one of the most significant programs the United States offers potential trade partners in Africa.
In light of the growing importance of AGOA in geopolitical terms there seems to be more significant (and realistic) movement toward AGOA renewal. For instance, Senator Chris Coons (D-Delaware) has circulated a draft bill that would extend AGOA to 2041. The White House has also expressed support for a long term renewal of AGOA. While there are critics of AGOA and its eligibility requirements it does not appear that there is a coherent movement to overhaul the program, as there is with GSP. Given the geopolitical implications of AGOA these criticisms may not be as impactful as they have been with respect to GSP.
While there is no predicting what, or when, Congress will do anything several points seem to indicate that AGOA will be renewed before GSP and likely for a much longer period. If you have any questions about GSP, AGOA, or any other special trade program do not hesitate to contact any attorney at Barnes, Richardson & Colburn, LLP.