On 4 March 2019, The Office of the United States Trade Representative announced through a letter to U.S. Congress that the U.S. intends to terminate India’s designation as a beneficiary developing country under the Generalized System of Preferences (GSP) Scheme.
The move will have direct implications on U.S. businesses that import either finished or intermediate goods from India, increasing their landed costs and further complicating their customs administration.
What is the GSP?
For the uninitiated, GSP is a trade preference program introduced in the U.S. Trade Act of 1974 that provides opportunities for many of the world’s poorest countries to use trade to grow their economies. Several products imported from these countries are extended a preferential treatment, including reduced or waived tariffs. One of the discretionary criteria the U.S. considers when determining the eligibility of a country as a beneficiary of the GSP is whether or not the country being evaluated will provide equitable and reasonable access to its markets and basic commodity resources.
Washington’s recent move to exclude India from the GSP means India-origin goods that were hitherto eligible for preferential treatment will now have import duties imposed, making them more expensive for U.S. importers.