GSP Status May Ride on Election

Nov. 7, 2006

The US Generalized System of Preferences (GSP), under which imports from eligible beneficiary developing countries may qualify for duty free treatment, is scheduled to expire on December 31, 2006, unless renewed by Congress.  Congress plans to return for a lame duck session after the mid-term elections on November 7, and a number of scenarios may determine whether and how GSP is renewed. 

The following possibilities are plausible:

• If Republicans retain control of the House for the next Congress, the leadership may proceed with a more aggressive agenda to complete tax legislation, a miscellaneous tariff bill, and a proposed two year extension of GSP with new restrictions on waivers for Competitive Need Limit Waivers.   This depends on whether the current chairman of the Senate finance Committee, Charles Grassley, is willing to consider that proposal in the final agenda, despite having stated his opposition to renewal if Brazil and India remain eligible.
• If Democrats assume control of the House for the next Congress, by a comfortable margin, the Republican agenda is likely to be very restrictive during the lame duck session, and the extension not likely to proceed unless Democratic leadership presses the issue in advance of taking control in January.   The principal Democratic renewal proposal would make no changes to the program, but the Republican chairman of the Senate Finance Committee would undoubtedly resist.
• If neither party wins the House by a clear margin, the agenda will likely be very minimal, and GSP is not likely to be among the issues to be addressed.

Therefore, all scenarios leave immediate GSP renewal in doubt.   If the law expires on December 31, it is also likely there will be a renewal bill soon after the beginning of the year, and that it will have retroactive effect to January 1, 2007.  However, the timing of any such effort is unpredictable, and importers should plan accordingly.