China-Focused Legislative Package Provides Tariff Relief With GSP and MTB Renewal

On May 27, 2021, the U.S. Senate voted to amend the United States Innovation and Competition Act (the Act), formerly the Endless Frontier Act, a bill that started as an effort to increase the United States competitive advantage in the world through investments in research and technology, but has morphed into a broad, China-centered legislative package addressing trade and other issues. The package includes an amendment, the Trade Act of 2021, which would, among other things, allow tariff relief via a multi-year renewal of the Generalized System of Preferences (GSP) program through January 1, 2027, and a Miscellaneous Tariff Bill (MTB) with duty suspensions valid through December 31, 2023.

The larger bill has run into some delays and will be considered when the Senate returns to Washington on June 8. If it passes the Senate, the House of Representatives must pass its version of the bill and then the two chambers will be required to work out any differences for purposes of finalizing the text. Below, our team breaks down some key takeaways of the amendment as originally filed related to the GSP and MTB.

Generalized System of Preferences (GSP)

The GSP is a unilateral duty preference program that allows for the duty-free importation of certain imports from designated beneficiary developing countries (BDC) so long as those countries comply with certain market access criteria and otherwise meet GSP qualification requirements (i.e., a product is last substantially transformed in the GSP country, local content requirements have been met and the product is shipped directly to the U.S.).

Since expiring on December 31, 2020, the GSP program — which maintains strong bipartisan support on Capitol Hill — has been subject to legislative wrangling as lawmakers considered potential reforms to be coupled with a long-term extension. The proposed GSP renewal includes:

• Six-Year Extension: It extends the GSP program until January 1, 2027, and includes a retroactivity provision that allows importers to obtain duty refunds on GSP-eligible products that were deposited after the program’s expiration on December 31, 2020.
• Heightened Eligibility Requirements: It adds new country eligibility criteria, including mandatory criteria related to human rights and environmental protections and discretionary criteria (which the president must take into consideration when designating a BDC) related to environmental protections, women’s economic empowerment, the rule of law and digital trade, among other considerations.
• Supplemental Reviews and Reporting: It also requires triennial country reviews and includes additional transparency requirements for program administration. Under the legislation, the U.S. International Trade Commission (USITC) must also study GSP utilization rates, rules of origin and article eligibility rules.

Consistent with prior GSP renewal legislation, the bill specifies that retroactive duty refunds, absent interest, will be available if a request for duty refunds is filed with U.S. Customs and Border Protection (CBP) within 180 days of the Act’s enactment. Where entries made in 2021 have claimed GSP duty preferences at the time of entry via the appropriate special program indicator, it is anticipated that CBP will automatically process the duty refunds following the Act’s enactment.

Assuming GSP renewal is signed into law, importers should consider the best method for timely claiming GSP duty-free treatment on entries made after December 31, 2020, if not claimed at the time of entry, either via administrative protest if liquidated or post-summary correction (PSC) if unliquidated. For all GSP duty preference claims, importers should ensure that all supporting qualification documentation is available or attainable from the foreign supplier upon CBP’s request.

Miscellaneous Tariff Bill (MTB)

In addition to the tariff relief offered by GSP renewal, the legislation also proposes to authorize the reduction or suspension of duties on certain imported products recommended for inclusion by the USITC through the MTB process. Highlights of the amendment’s MTB provisions include:

• USITC Authority: The American Manufacturing Competitiveness Act of 2016 (AMCA) established new procedures for MTBs, whereby companies seeking a duty reduction or suspension must have submitted a petition to the USITC, following which, the USITC compiled and reviewed the collective petitions in accordance with the requirements of the AMCA (including criteria related to administrability, revenue loss, and domestic production capacity). The USITC submitted its report to the U.S. House Ways and Means Committee for review, and the committee compiled the MTB to implement the duty reductions and suspensions it chose to accept. Under the proposed legislation, the USITC’s authority to continue to conduct and oversee the MTB petition and recommendation process is reauthorized for two more cycles (with the first cycle beginning in 2022 and the second cycle beginning in 2025).
• Three-Year Extension: Of more immediate impact, however, the proposed bill provides duty relief, regardless of the liquidation status of the underlying entry, on manufacturing inputs and other imports that were accepted for tariff reduction or suspension by the USITC in the most recent MTB round and will be implemented within Chapter 99 of the Harmonized Tariff Schedule of the United States (HTSUS) (detailed in Sections 74011-75461 of the proposed bill). The duty reductions and suspensions are available to all importers who import the identified products and will remain in place until December 31, 2023, followed by a new MTB process as indicated above.
• Retroactive Impact: MTB tariff relief will apply retroactively for entries made up to 120 days prior to the Act’s enactment.
• Timing for Duty Refunds Claims: Importers must file with CBP duty refund requests for eligible imported products via PSC or administrative protest within 180 days of the Act’s enactment.

For More Information

Faegre Drinker’s Customs and International Trade team has extensive experience in assisting clients with issues involving the GSP, the MTB process and other duty relief programs. For assistance in identifying which products are eligible or potentially eligible to receive duty relief through the GSP or the MTB process, please contact the authors or any other member of the Customs and International Trade Team.