MANILA, Philippines — Nowadays, exporters are asking: Has the US-GSP program that expired on December 31, 2010 been extended by the US Congress?

The latest report on the US-GSP (Generalized System of Preferences) program is that on or about September 9, 2011, the lower House of US Congress approved the proposed extension until July 31, 2013 and retroacted the program from December 31, 2010. Hopefully, the US Senate will also approve the extension of the US-GSP Program by October 2011. The US importers of certain Philippine products are also looking forward to the approval of the extension of the US-GSP program to July 31, 2013 because the import taxes of their shipments effected from the Philippines on December 31, 2011 onwards will be reduced or exempted if the US-GSP program is extended.

One may ask: What is the GSP program? The GSP program is a kind of a special tax preference. This is a scheme whereby the exporters based in developing countries are encouraged to ship locally manufactured products using locally grown/produced indigenous raw materials to importers based in developed countries (known as donor countries).

The GSP scheme benefits both the exporter and the importer. The exporter - because more importers from the donor countries will be attracted to place orders for the GSP–eligible products of the exporters from the developing countries. The importer – because the landed costs of the imports from the developing countries are cheaper due to the reduction or exemption from import taxes.

There are many countries that have been extending the GSP program to developing countries like the Philippines. To name some countries: Australia, Austria, Canada, EC countries (Belgium, Netherlands, Luxemberg, Denmark, France, Greece, Ireland, Italy, Great Britain, Germany, Spain, Portugal), Finland, Japan, New Zealand, Norway, Sweden, Switzerland, United States of America, Czechoslovakia, Hungary and Union Soviet Socialist Republic.

There are however limitations to the GSP program. Meaning that not all export products from the developing countries – beneficiaries are eligible under the GSP scheme.

Only the products listed in the bilateral or multi-lateral trade agreements between or among the developing and developed countries are eligible for the GSP concession in import duties. The exclusion of certain products from the eligible listing is to protect certain domestic industries in the donor countries.

Another limitation of the GSP scheme is the setting of yearly quotas and ceilings per product. If this ceiling is reached before the year ends subsequent shipments will then be subject to the normal and usual import tax rate be it under the most favored nation clause (MFN) or other import tax scheme.

There is another limitation – the foreign content of the products to be exported from the developing countries must not exceed a certain percentage which varies from one donor country to another. In Australia and New Zealand for example – the foreign content must not exceed 40% of the ex-factory price. Under US policy, the local content of the product must be more than 35% of the ex-factory price.

Also, the donor countries do not follow a uniform formula for computing the local and/or foreign content of the products for purposes of availing the GSP scheme.

Going back to the US-GSP Program - unlike in earlier years when Filipino exporters have to secure the forms from the Bureau of Customs to avail of the US-GSP program (like the Certificate of Origin – A) – today the Filipino exporters need not fill up any form anymore. It is the US importer who applies for the availment of the US-GSP program with the US Customs – via electronics.

Let’s look forward to the approval by the US Congress (both Houses) of the proposed extension of the US-GSP Program.

Have a joyful day!