Overview
Title
To modify and reauthorize the Generalized System of Preferences, and for other purposes.
ELI5 AI
The Generalized System of Preferences Reform Act is like a plan to help countries sell certain goods to the U.S. without charging extra money. It changes some rules for picking which countries get help and wants people to follow new rules so everything is fair and good for everyone.
Summary AI
The Generalized System of Preferences Reform Act (H.R. 7986) seeks to modify and extend the Generalized System of Preferences (GSP) until December 31, 2030. It updates rules for determining beneficiary countries, including considerations for human rights and economic policies, and adjusts the rules of origin for eligible products. The bill also introduces procedural changes for enforcing compliance and allows for public participation in reviewing country designations. Additionally, it aims to extend customs user fees until September 30, 2033, affecting the collection of fees on goods entering the United States.
Published
Keywords AI
Sources
Bill Statistics
Size
Language
Complexity
AnalysisAI
The proposed piece of legislation titled "Generalized System of Preferences Reform Act" aims to amend and extend certain provisions of the Trade Act of 1974, primarily concerning the Generalized System of Preferences (GSP). This system allows for duty-free importation of certain products from designated developing countries, purportedly to stimulate economic growth in those regions through trade and promote a broader integration into the international trading system.
General Overview
The bill primarily seeks to extend the GSP program from its prior expiration date of December 31, 2020, to December 31, 2030. Additionally, it modifies how beneficiary countries are selected and assessed, with new criteria introduced concerning human rights, trade fairness, and other geopolitical factors. The legislation also proposes changes to the rules of origin, which determine whether goods qualify for duty-free treatment, as well as reforms to procedural enforcement, including how countries' benefits under the program may be withdrawn or suspended. Lastly, the bill provides for an assessment framework to ensure compliance with eligibility requirements and addresses competitive need limitations that influence which products can benefit from the GSP.
Significant Issues
One of the notable issues is the bill's retroactive application of duty-free treatment to goods entered after December 31, 2020, but before the effective date of the Act. This could result in a significant financial impact on U.S. revenues, as duties already collected may need to be refunded. The bill does not thoroughly evaluate these budget implications, raising concerns about the potential strain on government resources.
In designating beneficiary countries, the bill lacks specific criteria or metrics for determining "gross violations of internationally recognized human rights," potentially leading to inconsistent applications. It also introduces criteria tied to geopolitical considerations, such as military base constructions by "covered nations," which might be regarded as politically motivated.
The procedural reforms, including public hearings and comments, lack clear criteria for implementation, which might lead to arbitrary decisions. Similarly, the undefined terms and ambiguous language across several sections could complicate enforcement and create room for legal disputes.
Broad Public Impact
For the general public, the extension and modifications of the GSP have mixed implications. By fostering trade with developing countries, the bill could lead to more diverse product options and potentially lower prices for consumers in the U.S. However, there might be concerns about the impact on government revenue due to duty-free privileges, potentially affecting public services funded by customs duties.
Impact on Specific Stakeholders
For developing countries participating in the GSP, the bill provides a substantial economic advantage, potentially leading to increased export opportunities and economic growth. However, the introduction of complex eligibility criteria might present compliance challenges.
American businesses, especially those that rely on imports from beneficiary countries, could benefit from lower input costs due to the duty-free advantages. However, businesses might also face increased compliance burdens owing to the new rules of origin, particularly the gradual increase in required regional content percentages.
The bill's provisions on geopolitical factors might also impact U.S. foreign relations, particularly with nations whose beneficiary status could be influenced by military or political activities.
Conclusion
In summary, while the "Generalized System of Preferences Reform Act" endeavors to extend and refine a crucial trade program, several sections of the bill lack clarity and specificity, potentially impacting its fair and effective application. Its implications for U.S. revenue, foreign relations, and compliance burdens present significant considerations for stakeholders, while also highlighting the challenges of balancing economic, ethical, and political objectives in trade policy.
Financial Assessment
The Generalized System of Preferences Reform Act (H.R. 7986) is a legislative proposal aimed at modifying and extending the Generalized System of Preferences (GSP) through December 31, 2030. This bill directly impacts financial references related to duty-free treatment and customs revenue, as well as sets adjusted thresholds for competitive need limitations.
Financial References in the Bill
Retroactive Duty-Free Treatment
One of the critical financial references in the bill is the retroactive application of duty-free treatment for certain entries of goods. Section 2 discusses the potential retroactive application of duty-free treatment for goods entered into the United States between December 31, 2020, and the effective date of the bill's enactment. This retroactive treatment could have significant implications on U.S. revenues, as it allows for past entries to be treated as if the GSP never expired. This element of the bill raises concerns regarding its impact on national revenue, as it does not detail any evaluation or assessment of the budget implications, thereby aligning with the issue identified regarding potential financial consequences at the national level.
Modifications to Competitive Need Limitation
Section 8 updates the financial thresholds for competitive need limitations within the Trade Act of 1974. It alters the monetary limits by substituting historic values with contemporary amounts. The threshold for competitive need limitation is adjusted from $75,000,000 to $500,000,000 for calendar year 2023. Additionally, the legislation replaces a prior threshold of $5,000,000 with 2.5 percent of the applicable amount, which could potentially expand or contract duty-free treatments depending on these monetary limits.
Similarly, another aspect of competitive need limitations is amended from a threshold of $13,000,000 to $50,000,000, with the previous $500,000 being replaced by 2.5 percent of the applicable amount. Such amendments are aimed at modernizing trade practices and adjusting economic policies to reflect current financial realities. These adjustments respond to the economic environment and potentially facilitate greater participation from beneficiary countries by updating financial baselines.
Considerations Related to Issues
The bill's retroactive application provision poses a challenge, as it doesn't quantify the impact of retroactively liquidating duties—a concern flagged in the issues list, where the potential revenue loss is not addressed. Consequently, this could lead to unclear financial outcomes for U.S. fiscal policy.
Furthermore, the undefined term "potentially sensitive product" in Section 8 might introduce subjectivity and inconsistency in financial matters regarding duty-free treatment. Determining which products are considered sensitive and thus not eligible for restored duty-free treatment can involve financial ambiguity, impacting businesses that rely on predictable economic environments.
Overall, while the aim of the bill is to extend and enhance trade preferences, the financial components warrant careful assessment to ensure they align equitably with the broader fiscal landscape and legislative goals.
Issues
The retroactive application of duty-free treatment in Section 2 could significantly impact U.S. revenues as it applies to entries made between December 31, 2020, and the effective date, without evaluating the budget implications. This could have financial consequences at a national level.
In Section 3, the lack of specific criteria or metrics for determining 'gross violations of internationally recognized human rights' may result in inconsistent application, raising potential legal and ethical issues.
The process for requesting liquidation or reliquidation under Section 2 requires 'sufficient information' but lacks a definition for this term, leading to potential ambiguity and inconsistency in processing requests, affecting stakeholders' ability to access benefits.
The language in Section 4 regarding 'all available steps' introduces ambiguity in defining the extent of actions required by the President, which could affect the enforcement of the bill.
Section 5 lacks specificity in the criteria used to decide when to hold a public hearing or provide a 30-day comment period, leading to possible arbitrary decision-making concerning procedural enforcement reforms.
The criteria for evaluating countries based on military base constructions and economic relations with 'covered nations' in Section 3 could be seen as politically motivated, complicating the economic or trade-related focus of the bill.
In Section 9, the expedited petition process excludes judicial review, which could limit accountability and transparency, raising concerns among adversely affected parties.
The vague term 'appropriate number of countries' in Section 6 could lead to inconsistent application or interpretation regarding the compliance of beneficiary countries.
The modification of rules of origin in Section 7 could impose a challenging compliance burden on businesses, especially due to the gradual increase in percentage requirements over the years.
The undefined term 'potentially sensitive product' in Section 8 could introduce subjectivity and inconsistency in determining products that warrant review for continued withholding of duty-free treatment.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section of the Act states that it will be officially known as the “Generalized System of Preferences Reform Act.”
2. Extension of Generalized System of Preferences Read Opens in new tab
Summary AI
The section extends the Generalized System of Preferences under the Trade Act of 1974 from December 31, 2020, to December 31, 2030. It allows certain imported goods to be treated as if they were entered on the new effective date if they were initially entered after December 31, 2020, and before the new date, provided a request is submitted to U.S. Customs and Border Protection within 180 days of the act's enactment.
3. Modifications to designations of beneficiary countries Read Opens in new tab
Summary AI
The section amends the Trade Act of 1974 to add new criteria for designating beneficiary countries, including addressing human rights violations, military base construction by certain nations, equitable market access for U.S. agriculture, fair tax treatment, and digital trade barriers. It also evaluates these countries' progress in areas like rule of law, poverty reduction, and fighting corruption, while considering their impact on U.S. national security and foreign policy interests.
4. Modification of provisions relating to withdrawal, suspension, or limitation of country designation Read Opens in new tab
Summary AI
The section modifies how the President should decide whether to remove, suspend, or limit a country's trade benefits under the Trade Act of 1974. It requires the President to consider the impact on the affected country's workers and economy and to try to maintain duty-free treatment for goods if adding duties would harm meeting the law's criteria or cause economic damage.
5. Procedural enforcement reforms Read Opens in new tab
Summary AI
The section describes changes to the Trade Act of 1974, which include requiring public hearings or comment periods for certain decisions, allowing the suspension of benefits, and mandating that the United States Trade Representative publish explanations for decisions about countries' eligibility for certain trade benefits.
6. Assessment and report on compliance with eligibility requirements Read Opens in new tab
Summary AI
The President is required to annually evaluate whether certain developing countries meet the eligibility criteria for benefits under the Trade Act of 1974 and decide if a detailed review of these countries’ practices is needed. A report of these evaluations and decisions must be submitted to Congress, and each designated country must be assessed at least once every three years.
7. Modifications to rules of origin Read Opens in new tab
Summary AI
The amendments to the Trade Act of 1974 change the rules for determining where goods originate from in order to qualify for duty-free treatment, gradually increasing the required percentage of materials from certain countries over time. Additionally, the U.S. Trade Representative is required to report on these changes by 2026, including recommending regional associations that could be treated as a single country and proposing updates to ensure that these rules encourage the use of materials from developing countries and the U.S.
8. Modifications to competitive need limitation Read Opens in new tab
Summary AI
The section outlines changes to the Trade Act of 1974, updating monetary thresholds for competitive need limitations and modifying how duty-free treatment is restored for certain articles. It also mandates the President to create a list of articles affected by these changes, conduct reviews on specific items, and report findings to Congress within a year.
Money References
- (a) In general.—Section 503 of the Trade Act of 1974 (19 U.S.C. 2463) is amended— (1) in subsection (c)(2)— (A) in subparagraph (A)(ii)— (i) in subclause (I), by striking “for 1996, $75,000,000” and inserting “for calendar year 2023, $500,000,000”; and (ii) in subclause (II), by striking “$5,000,000” and inserting “2.5 percent of such applicable amount”; (B) in subparagraph (C), by striking “may, subject” and inserting “should, subject”; and (C) in subparagraph (F)(ii)— (i) in subclause (I), by striking “for calendar year 1996, $13,000,000” and inserting “for calendar year 2023, $50,000,000”; and (ii) in subclause (II), by striking “$500,000” and inserting “2.5 percent of such applicable amount”; (2) in subsection (d)(4)(B), by adding at the end the following: “(iii) Clause (ii)(II) shall not apply with respect to any article if a like or directly competitive article was not produced in the United States in any of the preceding 3 calendar years.”. (b) Applicability.
9. Expedited product coverage petition process Read Opens in new tab
Summary AI
The section outlines a process for the United States International Trade Commission to accept and review petitions about adjustments to the list of products eligible for duty-free treatment under U.S. trade laws. It specifies the timeline for submitting and publishing petitions, opportunities for public comments, and the requirement for the Commission to report findings to Congress, while detailing who qualifies as an "interested party" and noting that these decisions cannot be legally challenged.
10. Extension of Customs User Fees Read Opens in new tab
Summary AI
In this section, the expiration date for certain customs user fees is extended from September 30, 2031, to September 30, 2033. This change affects the Consolidated Omnibus Budget Reconciliation Act of 1985 and the merchandise processing fees in the United States-Korea Free Trade Agreement Implementation Act.