One of the major tariff benefit programs administered by U.S. CBP is that of the U.S. Generalized System of Preferences or “GSP”. When GSP is in effect, qualifying products from 119 countries that are imported into the United States are entitled to duty-free status. But the product must meet certain qualifications, including that it was finalized and produced in that country, shipped directly to the U.S. from there and that the that at least 35 percent of its value was accounted for by costs incurred in the home country. Supporting records can be demanded by CBP and failure to produce them can result in a thoroughgoing audit and the imposition of otherwise applicable tariffs and civil monetary penalties.
GSP is a creature of Congress; as such, legislation renewing the program must be approved every three years or duty-free GSP status will lapse. This lapse occurred once more on December 31st, meaning that GSP is not currently in effect and your imported goods from these countries are subject to Column 1 tariffs, also called Most-Favored Nation or “MFN” tariff rates which must be deposited with your entry summaries that are filed with CBP.
Is all lost, or at least the percentage of product value you now are paying in tariffs? No, when past lapses have occurred, Congress has made GSP retroactive to entries posted on or after the date of the lapse. Such retroactivity is likely to be approved by Congress again this year and proposals have already been introduced in Congress to once more adopt and extend GSP and make it retroactive. But nothing moves quickly in Congress and in the meantime, you must pay all applicable duties and fees. But if you have a GSP entry, you should mark the SPI Indicator “A” which should preserve your right to refunds once GSP is renewed and made retroactive to January 1, 2021 by the US Congress. If by chance, your otherwise GSP-eligible entries are liquidated, we recommend you consider filing protests within the 180-day period thereafter.
A similar situation prevails for many items enjoying temporarily reduced or zero tariffs not subject to US Harmonized Tariff Schedules Chapter 98. These imported items, most of which are chemicals or pharmaceuticals, carry two classifications: 1) the “ordinary” HTS classification, such as 2825.60.00 and, 2) the Chapter 99 classification reflecting its reduced tariff rate, such as 9902.01.39. Reduced or zeroed-out tariffs provided to such items covered by Chapter 99 are temporary and are the result of an importer or domestic industry successfully petitioning the U.S. International Trade Commission (“ITC”) for such modifications. The petitions must satisfy three criteria: 1) the tariff modification must be non-controversial, in that neither the domestic industry making the same product nor any congressional representative opposes it; 2) it must be revenue-neutral as it will not cost the US government more than $ 500,000 in duties and fees revenue; and, 3) it must be administrable by CBP. The ITC last year recommended that more than 1000 tariff items receive these temporary modifications but Congress took no action and as a result, the USHTS Chapter 99 tariff benefits lapsed. It is quite possible that Congress will approve the modifications this year and make the tariff benefits retroactive; until that time, you must pay the MFN duties and associated fees that are applicable to your imported product upon entry. We recommend importers consider identifying these entries and if they are liquidated, filing protests within 180 days thereafter in order to preserve your refund rights in the event that Congress does approve the Chapter 99 tariff modifications and makes them retroactive to entries filed on or after January 1, 2021.
Should you have any questions concerning these tariff programs, please contact Robin Grover or Brian T. Delaney via their email addresses listed on this website.
Robin W. Grover