On Friday, March 23, President Trump signed into law the Consolidated Appropriations Act (the “Act”). Generally speaking, the Act authorizes spending and budgets for many federal agencies; however, it also renewed the Generalized System of Preferences (GSP) through December 31, 2020. Title V of the Act specifies that the GSP will take effect on April 22, 2018, and will be retroactively applied to entries going back to December 31, 2017.
Importers may claim duty-free treatment for products imported from specific countries, known as “Beneficiary Developing Countries” (BDCs), under the GSP. The products must meet the following criteria:
- The products must be wholly grown, produced or manufactured in the BDC;
- At least 35 percent of the entered value must be from costs directly attributable to the BDC; and
- The products must be shipped directly from the BDC to the United States.
To make a duty-free claim under the GSP, importers must not only notate the claim on the U.S. Customs and Border Protection (CBP) entry documents with a Special Preference Indicator (SPI), but also have readily accessible certain documentation necessary to substantiate the claim and demonstrate reasonable care in the qualification for entry preferences under the GSP.
As GSP qualification is dependent on the foreign supplier’s direct costs of processing, importers should ensure that coordination with foreign suppliers has been established and processes are in place to support any GSP claim, should CBP request substantiation of the claim.
The last time GSP was retroactively renewed, importers who continued to claim GSP upon entry by claiming the proper SPI and paying duties received refunds automatically after GSP was renewed. Importers who did not claim GSP at the time of entry had to file a request with CBP within 180 days after the new GSP bill was signed into law in order to receive the GSP duty preference (either by Post Summary Correction or Protest, depending on liquidation status). No retroactive claims were allowed after the 180-day period.
This bill specifies that GSP benefits will only apply if a request is filed with CBP not later than 180 days after the Act is enacted, which appears to suggest that importers must make an affirmative request other than having claimed the proper SPI at the time of entry. However, CBP’s implementation instructions should clarify the proper method of claiming refunds.
While we await CBP’s implementation instructions, importers should consider the best method for claiming GSP duty-free treatment on entries made after December 31, 2017, since the bill allows for retroactive application. Accordingly, we recommend that importers carefully track entries that would qualify for GSP treatment to prepare for the timely filing of claims and to ensure that all appropriate duties are refunded. Although importers who claimed GSP treatment at the time of entry received automatic refunds the last time the program lapsed, those who do not receive refunds within a few months after the law takes effect may want to consider contacting CBP or submitting a list of all eligible entries along with a specific request to reliquidate.
For assistance in receiving refunds in the event they are not automatic or for any other questions concerning GSP, please do not hesitate to contact Mollie Sitkowski or any other member of Drinker Biddle’s Customs and International Trade Team.