GSP Expires on 31 st December

Generalized System of Preference (GSP) is going to expire on December 31st, 2017 midnight. The program had expired twice since December 2010 and on both the occasions the congressional renewal had taken months. In those interim periods, the importers who were reaping the GSP benefits had to pay full duties on transactions.
With no official news yet regarding when it will be back on, there would be a considerable impact on the level of exports with the expiry of GSP in developing countries like India. The higher tariff rates would increase the prices in the market and simultaneously the size of exports would be declining that would affect to penetrate the market vis a vis market share.

GSP allows duty-free treatment of more than 3,500 products encompassing numerous Beneficiary Developing Countries (BDC’s) and an extra 1,500 products from Least Developed Beneficiary Developing Countries (LDBDC’s). For the GSP to be applicable, the goods need to be directly shipped from the beneficiary country to the US. GSP doesn’t provide any exemption on Merchandise Processing Fee (MPF).

Indian exporters have been getting indirect benefits from GSP as not only the tariff is reduced or made duty-free for eligible Indian products but also this very removal or reduction of import duty makes it even far more competitive to the importer. Barring that, GSP also facilitates new exporters to get into the market and it helps already established exporters increase their market share and thereby improve the profit margins.

With the GSP all set to get expired once more, it may well have an adverse effect on some of the Indian exporters whose products have thus far been enjoying the exemption on duty while trading in the US market. Moreover, with GSP so far favouring developing countries like India to a greater extent than some of the other nations it is almost evident that its expiry is sure to have some impact of the substance on some of the Indian exporters.