The Generalized System of Preferences (GSP), the longest running U.S. trade preference program, is, again, due to expire at the end of 2020, and the path to renewal remains unclear. Failure to act by Congress will result in substantial tariff costs for U.S. companies—including RV manufacturers and suppliers—and diminish the benefits of the Administration’s efforts to provide liquidity through various loan programs and duty deferral.
GSP SAVES THE RV INDUSTRY NEARLY $1 MILLION EACH MONTH
RV Industry Association members understands the value of GSP. Last year, the RV Industry Association successfully petitioned the Office of the United States Trade Representative to redesignate certain lauan plywood from Indonesia falling within tariff line 4412.31.4155, which we created for this purpose in 2018. We could not have achieved this momentous victory without help from RV Industry Association members and our tireless Congressional champions who supported our petition. That decision has saved the RV industry nearly $1 million a month, as that plywood is no longer subject to the previous eight percent tariff. This year, we must work to get the entire GSP program reauthorized before it expires on December 31, or else that tariff will return until the program is retroactively renewed.
TIMING OF RENEWALS
Since 1994, the reauthorization duration of the GSP program has been unpredictable. Congress has often retroactively reauthorized the program after expiration and with much shorter durations than the original ten-year duration of the program — the last 12 reauthorizations have averaged just over two years each. The current reauthorization occurred on April 22, 2018, after the then expiration of the program on December 31, 2017, and retroactively covers a period of three years from January 1, 2018 to December 31, 2020.
Given Congressional budget rules, recent reauthorizations of the GSP program have been in three-year increments. Eventual reauthorization of GSP is as close to a certainty as is possible in modern Congressional trade politics. All previous reauthorizations have had significant bipartisan majorities. Unfortunately, the lack of controversy does not ensure timely renewal. In fact, the last three reauthorizations were enacted after expiration.
TO RENEW OR RETROACTIVELY RENEW, THAT IS THE QUESTION
The question for users of this program: will reauthorization occur prior to the December 31, 2020 expiration? If not, Congress would almost certainly renew the program after expiration retroactive to the date of expiration. In that scenario, Customs and Border Patrol will reimburse importers for any duties paid during the lapse. In normal times the expiration of duty-free programs is an inconvenience for importers, with administrative headaches and delays in refunds. As businesses navigate through the pandemic recovery, however, with wide-spread liquidity problems for retailers and brands, an expiration would have potentially more serious implications.
A retroactive renewal will temporarily raise duties on U.S. companies at the wrong moment for this to occur. With any luck companies will be heading into 2021 with some positive momentum from the fourth quarter Christmas season. Having new uncertainty and potential liquidity demands come January regarding paying additional tariffs if GSP has expired could well represent a serious setback for many companies, both large and small. The RV industry would see 8 percent lauan duties return, adding additional strain as we seek to bounce back from COVID.
The RV Industry Association government affairs team has already started conversations with members of Congress and will be working with both the House and Senate to ensure that the Ways and Means Committee and Finance Committee get draft language written as soon as possible.
For more information, contact Samantha Rocci at [email protected]