US GSP Trade Facility for Sri Lanka Likely to be Renewed

07 January 2011, www.lankabusinessonline.com, By Ashanthi Ratnasingham

A United States trade facility allowing duty free Sri Lankan exports that lapsed is likely to be renewed with retroactive effect as has happened in the past, officials said.

The US Congress has not renewed the Generalized System of Preferences (GSP) program before its conclusion of business and therefore GSP expired from December 31.

"The Congress considered legislation in December 2010 to extend the facility but ultimately adjourned without taking action to extend it," Subhashini Abeysinghe, Economist at the Ceylon Chamber of Commerce said.

"This means, GSP products from GSP beneficiary countries arriving in the United States on or after January 1, 2011, will not be eligible for the concession.

"This has happened before and the last time authorization of the GSP program lapsed was in 2001," she said.

"The Congress subsequently reauthorized the program ten months later with the renewal being made retroactive."

If renewed retroactively, companies can arrange to be reimbursed for tariffs paid during the gap period.

In the past, U.S. Customs and Border Protection has arranged for the timely processing of refunds of duties deposited on GSP-eligible entries.

The GSP program is designed to promote economic growth by providing preferential duty free entry for about 3,400 products from 131 designated countries which include Sri Lanka.

"It is not only Sri Lanka that will not have this facility extended from January 2011; there are 131 countries involved as well," Abeysinghe said.

"This has happened seven times since 1993 and we think the US will renew the program retroactively as has happened before."

Products covered under the facility include machinery, electrical goods, chemical products, agricultural products, and jewelry.

Most textiles and apparel are not eligible for preferential benefits under the program.

"Only a small percentage of the overall bilateral trade will be affected because garments and textiles which comprise 79 percent of Sri Lankan exports to the US are outside the realm of the GSP," Abeysinghe said.

Countries eligible for GSP benefits must meet several criteria.

These criteria include internationally recognized workers rights like the right of association, the right to organize and bargain collectively, a prohibition on compulsory labor, and a minimum age for the employment of children.

Prohibition on the worst forms of child labor, acceptable conditions of work with respect to minimum wages, hours of work and occupational safety and health are also included.