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Generalized System of Preferences

The United States and twenty six other industrialized countries adopted unilateral programs known as the Generalized System of Preferences in the 1970s, each of which varies in terms of the beneficiaries, products covered, and type of preference granted.

The GSP program was designed to further the economic development of developing countries through the expansion of their exports, especially in industries that cannot compete with producers in more developed countries. Companies and consumers in the United States also benefit, since the elimination of duties lowers the overall price of products imported into the United States under the GSP program.

The Enabling Clause, officially called the “Decision on Differential and More Favorable Treatment, Reciprocity and Fuller Participation of Developing Countries,” was adopted under the General Agreement on Tariffs and Trade (GATT) in 1979 and allows developed country members to give differential and more favorable treatment to developing countries.

The Enabling Clause is the legal basis under the World Trade Organization (WTO) for GSP. Under the GSP program, developed countries offer non reciprocal preferential treatment (such as zero or low duties on imports) to imports from developing countries. Preference giving countries unilaterally determine which countries and which products are included in their schemes.

The U.S. GSP program, which began in 1976 and was last reauthorized under the Trade Act of 2002, grants duty free treatment to more than 4,650 tariff lines (defined at the eight digit level in the Harmonized Tariff Schedule of the United States) that are imported from 144 designated developing countries, territories, and associations of countries.

Top U.S. GSP beneficiary countries include India, Brazil, Thailand, Indonesia, Turkey, Philippines, South Africa, Argentina, and Russia. Approximately 1,400 tariff lines have been exclusively dedicated to the least developed (LDBDCs) and African Growth and Opportunity Act (AGOA) countries. In 2004, GSP eligible beneficiary countries shipped goods worth more than $20 billion to the United States duty free under this program.

MAS analysts review product petitions each year during the U.S. GSP Annual Review in which interested parties can petition the U.S. Government to modify the list of eligible GSP products receiving duty free status. This annual review typically takes 6-8 months and allows for the public to submit comments in writing as well as appear in person to testify about affects possible GSP petitions could have on U.S. industry. MAS’s Office of Trade Policy Analysis leads this review with analytical input from MAS industry offices.

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