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USTR to Reconsider Duty-Free Treatment for Travel Goods from All GSP Beneficiaries

The Office of the U.S. Trade Representative has initiated its annual review of the products and countries eligible for duty-free treatment under the Generalised System of Preferences and is accepting petitions seeking to add, preserve or remove GSP benefits. As part of this review, importers, foreign governments and others will again have an opportunity to petition the U.S. government for changes in the coverage of GSP. Notably, USTR has also decided to open a supplemental comment period and hold a hearing to give stakeholders the opportunity to submit further information with respect to the possible addition to GSP of handbags, luggage and other travel goods made in more advanced beneficiary developing countries.

As previously reported, a 30 June presidential proclamation added handbags, luggage and other travel goods under 27 HTSUS subheadings (including luggage, backpacks, handbags and pocket goods such as wallets) to the list of GSP-eligible products but only for least-developed beneficiary developing countries (of which there are currently 43) and African Growth and Opportunity Act beneficiary countries (of which there are currently 38). This decision was met with disbelief by U.S. travel goods importers and retailers, trade associations and lawmakers, who have since urged USTR to change its position and expand the designation to cover travel goods from all GSP beneficiary countries. The American Apparel and Footwear Association applauded USTR’s announcement to reconsider its stance on travel goods “because it sets forth a clear process and a definite timeline for a final decision.”

USTR will hold a hearing on 18 October in Washington, D.C., to explore the travel goods matter and will allow parties to submit comments, pre-hearing briefs and requests to appear at the hearing by 4 October. The agency notes that interested parties need not resubmit information previously provided and should rather provide any new information or analysis with respect to the possible further extension of GSP benefits for non-LDBDCs for each of the travel and luggage tariff lines under consideration in light of the statutory criteria. USTR is aiming to conclude its review of travel goods by January 2017.

The eventual addition to GSP of handbags, luggage and other travel goods from all eligible beneficiary countries could potentially undermine the competitive position of mainland Chinese and Hong Kong exporters in the U.S. market for these products. Mainland China is by far the largest U.S. supplier of the tariff lines under consideration with a 60.7 percent share or US$2,746.3 million of total U.S. imports during January-June 2016, while Hong Kong ranks fourteenth with a 0.6 percent share or US$27.8 million. Vietnam ranks second with an 11.0 percent share or US$496.0 million, followed by Italy with an 8.4 percent share or US$382.2 million and France with a 5.7 percent share or US$258.2 million. While none of these suppliers benefit from preferential duty treatment under GSP, fifth-ranked the Philippines, sixth-ranked India, seventh-ranked Indonesia and tenth-ranked Thailand would qualify to receive duty-free treatment should USTR decide to expand the scope of the travel goods initiative. The Philippines accounted for 2.4 percent or US$108.6 million of total U.S. imports of covered goods during January-June 2016, India held a 2.0 percent share or US$90.5 million, Indonesia held a 1.2 percent share or US$54.9 million, and Thailand accounted for 0.8 percent of all imports or US$35.7 million.

U.S. imports from mainland China of the travel goods under consideration have been sluggish in recent times, falling by 12.0 percent during January-June 2016 after dropping by 0.4 percent to US$6,418.8 million in 2015. By comparison, imports from Vietnam went up by 12.0 percent to US$949.3 million in 2015 and 7.7 percent during January-June 2016, imports from the Philippines increased by 64.9 percent to US$226.0 million in 2015 and 11.2 percent during January-June 2016, imports from India grew by 11.5 percent to US$217.5 million in 2015 but fell by 10.0 percent during January-June 2016, shipments from Indonesia advanced 10.6 percent to US$110.6 million in 2015 and 2.1 percent during January-January 2016, and imports from Thailand grew by 18.8 percent to US$90.5 million in 2015 but declined by 14.1 percent during January-June 2016.

Currently, sixteenth-ranked Cambodia is the only relatively large U.S. supplier of covered travel goods that benefits from duty-free treatment under GSP. U.S. imports from that country surged 143.3 percent to US$48.6 million in 2015 but were only 1.7 percent higher at US$23.7 million during January-June 2016. Twelfth-ranked Burma (Myanmar) and fifteenth-ranked Bangladesh are also up-and-coming least-developed country suppliers of covered travel goods that are making significant strides in the U.S. market, but they are currently ineligible to receive GSP benefits. Bangladesh was suspended from the programme in June 2013 due to its failure to meet statutory eligibility requirements related to worker rights (a worker rights review of Bangladesh is on-going), while a review of Burma’s potential GSP designation is currently under way.

U.S. import duties on the travel goods under consideration are substantial, averaging 13.1 percent during January-June 2016. Duties are high or fairly high for most major and up-and-coming suppliers, including mainland China (14.7 percent average during January-June 2016), the Philippines (12.5 percent), India (8.0 percent), Indonesia (12.1 percent), Thailand (14.5 percent), Burma (10.3 percent) and Bangladesh (9.9 percent). This means that an eventual decision to provide duty-free treatment to covered goods from all GSP-eligible suppliers (including the Philippines, India, Thailand, Indonesia and Pakistan), as well as a separate decision to add Bangladesh and Burma to GSP, would give these suppliers a considerable edge over mainland China.

Interested parties, including foreign governments, may also submit petitions to USTR as part of the regular annual review to (i) designate additional articles as eligible for GSP benefits, including when imported only from LDBDCs or beneficiary sub-Saharan African countries under the AGOA; (ii) withdraw, suspend or limit the application of GSP duty-free treatment with respect to any article; and (iii) otherwise modify GSP coverage. Such petitions are also due by 4 October and must include a detailed description of the product and the eight-digit HTSUS subheading under which it is classified.

Moreover, any interested party may submit a petition to (i) review the GSP eligibility of any beneficiary developing country with respect to any of the GSP designation criteria (petitions are due by 4 October); or (ii) waive the 2016 competitive need limitation for individual beneficiary developing countries with respect to specific articles that would otherwise be removed from GSP eligibility (petitions are due by 2 December).

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