We are six weeks away from GSP expiration (July 31, 2013). It seems like it was just yesterday (2011) that we went through this process and here we are again. The reality is that the debate to renew GSP is extremely complicated. Congress has its fair share of legislation to pass. The likelihood of GSP renewal before expiration seems slim at this moment.
In previous years when GSP has been allowed to expire, importers temporarily paid duty at the normal Column 1 General rate during the period between expiration and renewal. Once GSP was renewed, duties were refunded (without interest). There is no guarantee that the policy of refunding duty will continue. In fact CBP explicitly does not commit to refunding of duties.
The current debate to renew GSP is complicated by a number of trade related issues.
- GSP benefits are skewed towards countries that many politicians feel no longer need the benefits. Top six beneficiaries in 2011 (based on GSP duty-free import value) are the following countries. You can make your own assessment of whether you think these countries should still qualify as developing and require the aid of U.S. duty benefits. (Source: USITC Trade Dataweb, http://dataweb.usitc.gov, and Harmonized Tariff Schedule, 2012.)
- South Africa
- For some of these countries (India in particular), some U.S. Congressman argue that their lack of respect of intellectual property rights as well as their protectionist policies (discriminating against foreign goods) should disqualify them from GSP benefits.
- In the case of some of the more developed countries on the GSP list, there is an argument to remove them from the list in favor of separate Free Trade Agreements. The advantage of separate FTA’s with individual or regions of countries is that it would allow for an exchange of benefits between the United States and the foreign country, theoretically benefiting U.S. exporters as well as U.S. importers. I would caution that FTA’s take an extremely long time to get signed and approved (often bogged down by domestic as well as foreign politics).
- As we saw with the previous GSP renewal in 2011, there may be domestic manufacturers adversely affected by GSP who will fight against the renewal or at the least for for minimization of benefits.
The Congressional Research Service published a GSP report on January 9, 2013 to help prepare Congress for the debate on renewal. It is worth reading to get a general understanding of the background of the debate as well as the options that Congress is reviewing.
tel: 650-873-9050 ext.1019
As a part of the budget sequestration process that began on March 1, 2013, Customs and Border Protection will be required to make significant cuts to its budget. CBP plans on implementing the budget cuts through the following:
- immediate reduction in overtime
- furloughs (which will take at least 30 days to implement. We don’t expect to see furloughs until early or mid- April)
- hiring freeze
The process will have an impact on the importing and exporting community in different ways.
Importers who have a continuous bond and have a positive history of paperless releases should see little impact on their inbound air entries. The electronic paperless release process does not involve CBP active personnel reviewing the entries. Therefore cuts in overtime, furloughs, and hiring freezes should not impact the paperless release process.
Where a delay may be felt is if Customs selects the shipment for review. If Customs selects a shipment for document review, they normally are able to release a shipment within roughly 24-48 hours. However with the budget cuts, this process may take longer. The same may be said in cases where Customs selects a shipment for exam. Fortunately, the frequency of exams on air shipments is significantly lower than the frequency for ocean shipments.
Importers who do not have a continuous bond always have their shipments selected for document review. Therefore such importers who have urgent air shipments should be cognizant of the potential for delayed Customs release and should plan accordingly.
For full containers, importers who have a continuous bond and normally receive paperless releases should not see any impact from the budget cuts. Where importers could see delays would be as follows:
- Containers subject to an x-ray exam. Most ports usually manage to complete x-ray exams in roughly three working days. Customs has already mentioned that officers do from time to time need to work overtime in order to complete these examinations. With the inability to work overtime, Customs has indicated that these exams could take five days or longer to complete. This delay may cost importers not only in time, but also money. Most ocean terminals don’t provide more than five days demurrage (storage) time. If Customs takes longer to examine a container, it is the importer who remains responsible for the demurrage fees.
- Intensive exam – As with x-ray exams, intensive exams are reliant on Customs man power to complete. The inability to provide overtime work combined with furloughs could significantly delay the exam process time resulting in higher fees as well as delays in cargo release.
- LCL cargo is commonly subject to x-ray and/or intensive exams. This is regardless of the importer’s status. Importers who ship LCL cargo must now understand that the likelihood for delays in shipping will rise with the budget cuts.
The Customs Office of International Trade also mentioned that there could also be eventual delays in rulings, audits, and various strategic initiatives.
We haven’t heard about how sequestration may affect other government agencies that regulate imports (FDA, USDA, CPSC, etc.).
Most standard exports are released through the Customs AES system electronically. These shipments should not be impacted by the budget cuts. However shipments that are subject to possible Customs review at the time of export should expect to see longer response times. Automobile exporters should anticipate that Customs may take longer than the customary 72 hours to release a shipment. Carnet exports as well I.E.’s may also take longer to process.
We will be closely monitoring news for additional information about the impact of sequestration on imports and exports.
Feel free to contact me with questions.