Generalized System of Preferences
Generalized System of Preferences A U.S. trade program that eliminates duties on thousands of products imported from designated developing countries to promote economic growth in those nations while providing U.S. businesses and consumers with duty-free access to these products.
Latest Update (March 2025)
The USTR has announced its annual review of GSP eligibility, with several countries under scrutiny for labor rights and intellectual property concerns.
Read USTR Press ReleaseWhat It Means
The Generalized System of Preferences (GSP) is a trade program that lets certain products from developing countries enter the United States duty-free. Think of it as a "discount pass" that helps poorer countries sell their goods to U.S. consumers while saving American businesses and consumers money on imports.
Program Basics
The GSP is designed to give developing economies a leg up in international trade while benefiting U.S. importers:
What It Covers
Approximately 3,500 products from 120+ designated developing countries can enter the U.S. duty-free
Benefits
Eliminates duties that would normally range from 1-6% to over 15% on qualifying imports
How It Works
Country Eligibility
A country must be designated as eligible based on factors like economic development level and protection of intellectual property rights
Product Qualification
Only certain products qualify - primarily manufactured items, with some agricultural and natural resource products included
Origin Requirements
At least 35% of the product's value must be added in the beneficiary country
Claiming Duty-Free Status
Importers claim GSP treatment on their customs entry documentation using Special Program Indicator (SPI) "A", "A+" or "A*"
Historical Timeline
UNCTAD Recommendation
The United Nations Conference on Trade and Development first proposes preferential tariff treatment for developing countries
GATT Waiver
The General Agreement on Tariffs and Trade adopts a waiver allowing developed countries to provide preferential tariff treatment to developing countries
U.S. Implementation
The United States implements its GSP program under the Trade Act of 1974
Product Expansion
GSP Renewal Act of 1996 adds additional products eligible for duty-free treatment
Program Expiration
U.S. GSP program expires, temporarily ending duty-free treatment for eligible products
Program Reauthorization
Congress reauthorizes the GSP program retroactively, with modifications to eligibility criteria
Real-World Example
Case Study: GSP and Jewelry Imports from Thailand
Business Scenario
Stellar Jewels, a U.S. importer, sources silver jewelry from Thailand, a GSP-eligible country. Here's how the GSP program affects their business operations:
Product Details
- Item: Sterling silver necklaces and bracelets
- HTS Code: 7113.11.50
- Normal Duty Rate: 5.8% ad valorem
- Annual Import Value: $1.2 million
Without GSP
Import Value: $1,200,000
Duty Rate: 5.8%
Duties Paid: $69,600
Total Landed Cost: $1,269,600
With GSP
Import Value: $1,200,000
Duty Rate: 0% (GSP eligible)
Duties Paid: $0
Total Landed Cost: $1,200,000
Annual Savings: $69,600
Compliance Requirements
To qualify for GSP benefits, Stellar Jewels must ensure:
- The jewelry meets the 35% value-added requirement (Thai craftsmanship and materials must account for at least 35% of the product value)
- Direct shipment from Thailand to the U.S.
- Proper documentation, including GSP Declaration and Certificate of Origin
- Correct use of Special Program Indicator (SPI) "A" on customs entries
Business Impact
Competitive Pricing
Lower costs allow Stellar to price products more competitively in the U.S. market
Expanded Product Line
Duty savings enable investment in new jewelry designs and materials
Supplier Relationship
Long-term partnership with Thai manufacturer supports economic development
GSP Eligibility Checker
Verify if your product qualifies for duty-free treatment under GSP and estimate potential duty savings.
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