Updated June 5, 2019
Generalized System of Preferences (GSP)
What is the GSP? The Generalized System of Preferences
example, eligible countries must not have nationalized or
(GSP) is a trade program that provides nonreciprocal, duty-
expropriated the property of U.S. citizens, infringed on U.S.
free treatment for certain U.S. imports from eligible
citizens’ intellectual property rights, or repudiated or
developing countries. The GSP is the largest such U.S.
nullified existing contracts with U.S. citizens. Countries
program; there are other regional preference programs
must also have taken steps to grant internationally accepted
including the African Growth and Opportunity Act
worker rights, and implemented commitments to eliminate
(AGOA).
the worst forms of child labor, among other things.
What is GSP’s purpose? Congress created GSP to spur
The President may also consider certain discretionary
economic development in poor countries through trade. The
criteria, including the country’s level of economic
program began in the 1970s when the United States and
development, whether it is committed to providing
other developed country members of the United Nations
reasonable and equitable market access for foreign goods
(U.N.) sought ways to enable developing countries to
and investment, and the level at which the country is
diversify their economies and grow through trade. Rather
providing protection of intellectual property rights.
than creating one unified GSP system, developed countries
Can a country’s GSP status change? The President may
created their own programs based on a common set of goals
terminate, suspend, or limit GSP status at any time, based
and principles.
on the eligibility criteria, provided that Congress is notified
When did the U.S. program begin? The U.S. program
60 days prior to the action. BDCs are also mandatorily
was authorized in Title V of the Trade Act of 1974 (19
“graduated” from the GSP if they are determined by the
U.S.C. 2461-2467), and went into force on January 2, 1975.
President to be a “high income country,” as defined by
official World Bank statistics (i.e., gross national income
What other countries have GSP programs? Other
per capita of greater than $12,055 in 2018). The President
countries that implement GSP programs with similar rules
may also graduate a BDC based on its level of economic
and objectives include Australia, Canada, the EU, Iceland,
development (i.e., income per capita, living standards of
Japan, New Zealand, Norway, the Russian Federation,
inhabitants, or any other economic factors the President
South Korea, Switzerland, and Turkey.
deems appropriate).
Who administers the U.S. program? The President holds
the primary authority for GSP. The Trade Policy Staff
Figure 1. Top 5 GSP Beneficiaries, 2018
Committee (TPSC), an interagency committee chaired by
($ in bil ions)
the U.S. Trade Representative (USTR), administers the
program, mainly by conducting annual product and country
reviews and providing recommendations to the President.
The U.S. International Trade Commission (ITC) reports to
the President on the possible effects of proposed changes to
GSP on the U.S. economy. U.S. Customs and Border
Protection (CBP) enforces GSP at the border.
Is GSP permanent? GSP was first authorized for 10 years,
until 1985. Since then, it has been reauthorized 14 times,
with authorizations generally lasting two to three years.
Congress most recently extended the program until
December 31, 2020, in Division M, Title V of the
Consolidated Appropriations Act, 2018 (P.L. 115-141).
Has the GSP program ever expired before being
Source: ITC Trade Dataweb.
reauthorized? The GSP program has lapsed prior to its
How many countries are GSP beneficiaries? Currently,
reauthorization in 10 of the 14 times it was extended.
120 developing countries and territories are BDCs. Forty-
congressional practice has been to extend the program
four of these countries are additionally designated as least-
retroactively from the original expiration date, so that
developed beneficiaries. In 2018, the top five BDCs in
importers are reimbursed for duties incurred during the
terms U.S. imports entering under the program were India,
lapse.
Thailand, Brazil, Indonesia, and Turkey. Total GSP imports
Are all developing countries automatically included in
in 2018 amounted to about $23.6 billion.
the GSP program? Beneficiary developing countries
How can I tell if a developing country is a GSP
(BDCs) are selected by the President on the basis of certain
beneficiary? The current list of all BDCs is recorded in the
mandatory eligibility criteria (see 19 U.S.C. 2462). For
https://crsreports.congress.gov
Generalized System of Preferences (GSP)
Harmonized Tariff Schedule of the United States (HTSUS),
appropriate CBP forms when importers claim duty-free
available on the ITC website (http://hts.usitc.gov/current).
status.
The list can be found under General Note 4 in the HTSUS
“General Notes” section.
Can BDCs import an unlimited amount of a GSP-
eligible product? GSP imports of a single product from an
Are all products eligible for GSP duty-free status?
individual BDC are limited to a certain value amount,
According to the GSP statute (see 19 U.S.C. 2463), certain
referred to as competitive need limits (CNL). If the CNL is
products are considered “import-sensitive” and specifically
exceeded, the BDC loses its GSP eligibility for that
prohibited from GSP treatment. These include most textile
product, unless the President grants a waiver. Interested
and apparel goods, watches, and some electronic, steel, and
parties may petition for waivers if products meet certain
glass products. The President is authorized to designate new
specific criteria. There are no value limitations on GSP
articles as eligible for the program after receiving the
imports from least-developed BDCs or dual-African
advice of the ITC. The President recently declared certain
Growth and Opportunity Act (AGOA) and GSP
luggage and travel articles eligible for GSP, as previously
beneficiaries.
authorized by Congress in Section 204 of the Trade
Issues for Congress
Preferences Extension Act of 2015 (P.L. 114-27). The
Eligibility for Turkey and India. President Trump
program currently covers over 3,500 imported products,
informed Congress that he intended to remove GSP benefits
and least-developed BDCs receive duty-free treatment for
for India (failure to provide equitable and reasonable
an additional 1,500 products.
market access) and Turkey (based on its level of economic
development). Some U.S. business groups urged Congress
Are there other product restrictions? In order to be
to work with the Administration so that “the decisions
imported under GSP, a product must be imported directly
match both the letter and the spirit of the GSP law.” The
from a BDC that is eligible for GSP treatment for that
President removed Turkey’s GSP eligibility effective on
product. At least 35% of the value of an eligible product
May 17, 2019, and India’s on June 5, 2019. For more
must be produced in a BDC, or in two or more countries
information, see CRS Insight IN11075, Trump
that are part of a GSP-recognized association of countries.
Administration’s Proposed Removal of Generalized System
of Preferences (GSP) Benefits for India and Turkey, by
Figure 2. Top 5 GSP Imports, 2018
Shayerah Ilias Akhtar and Vivian C. Jones.
($ in millions)
If a product is eligible for GSP, but tariffs are imposed
on them based on other laws, as under President
Trump’s recent tariff actions, may the product still be
imported duty-free? GSP benefits do not apply to any
products subject to duties or quotas under Section 232 of
the Trade Act Expansion Act of 1962 on steel and
aluminum. Developing countries are largely exempt from
the tariff rate quotas imposed under Section 201 of the
Trade Act of 1974 on washing machines and parts, and on
solar panels and modules, provided that U.S. imports from
an individual country do not exceed 3% by value, or if total
Source: ITC Trade Dataweb.
imports of the product from all developing countries do not
exceed 9%. The tariffs assessed under Section 301 of the
What kinds of products are GSP-eligible? Products
Trade Act of 1974 apply only to products from China,
which is not a GSP beneficiary.
eligible to be imported under GSP must be found not to be
“import-sensitive,” and before new products are added, the
GSP Reauthorization. The GSP program was recently
public has an opportunity to comment, hearings are held,
reauthorized until December 31, 2020. The 116th Congress
and the ITC reports on the possible effects of the product’s
may consider further extending the program. Many
GSP eligibility on the economy and U.S. manufacturers.
importers and developing countries state that longer
The top five GSP imports in 2018 were gold necklaces and
program authorizations would provide greater predictability
chains, ferrochromium, nonsurgical rubber gloves,
when making decisions about sourcing merchandise.
nonalcoholic beverages, and prepared foods.
However, the program also represents a loss of revenue in
the form of foregone tariffs, which must be offset as a result
How can I tell if a product is eligible for GSP status? In
of program extensions. The Congressional Budget Office
the HTSUS, GSP-eligible products are identified by a
(CBO) estimated that the most recent extension (in P.L.
Special Program Indicator (SPI). The SPI code “A” in the
115-141) would cost $347 million in 2018, $475 billion in
“Special” tariff column next to an HTSUS subheading
2019, and $492 million in 2020. For more information on
identifies that the product is GSP-eligible for all BDCs. The
the GSP, see CRS Report RL33663, Generalized System of
code “A+” indicates that the product is eligible only from
Preferences (GSP): Overview and Issues for Congress, by
least-developed BDCs. The code “A*” identifies that the
Vivian C. Jones.
product is not eligible to be imported under the program
from one or more BDCs. The SPI must be indicated on the
Vivian C. Jones, Specialist in International Trade and
Finance
https://crsreports.congress.gov
Generalized System of Preferences (GSP)
IF11232
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https://crsreports.congress.gov | IF11232 · VERSION 2 · UPDATED