December 30, 2020

Congress Slips USMCA Corrections into Omnibus Package, But No Deal on GSP and MTB

Holland & Knight Alert
Nasim D. Fussell

Highlights

  • After months of negotiations, Congress passed an omnibus legislative package on Dec. 22, 2020, that funds the government through September 2021 and includes a package of hard-fought COVID-19 relief measures.
  • Included in the package was a bundle of technical corrections to the United States-Mexico-Canada Agreement (USMCA) implementing bill, which provides statutory authority for the trade agreement between the U.S., Mexico and Canada that succeeded the North American Free Trade Agreement (NAFTA).
  • Lawmakers were unable to reach a deal on a new Miscellaneous Tariff Bill (MTB) or the renewal of the Generalized System of Preferences (GSP) program, which is set to expire on Dec. 31, 2020.

After months of negotiations, Congress passed an omnibus legislative package on Dec. 22, 2020, that funds the government through September 2021 and includes a package of hard-fought COVID-19 relief measures. Also included was a bundle of technical corrections to the United States-Mexico-Canada Agreement (USMCA) implementing bill, which provides statutory authority for the trade agreement between the U.S., Mexico and Canada that succeeded the North American Free Trade Agreement (NAFTA). However, lawmakers were unable to reach a deal on a new Miscellaneous Tariff Bill (MTB) or the renewal of the Generalized System of Preferences (GSP) program, which is set to expire on Dec. 31, 2020.

USMCA Technical Corrections

The technical corrections address drafting errors in the United States-Mexico-Canada Agreement Implementation Act (Pub. L. 116-113), which became law on Jan. 29, 2020. The corrections made conforming changes to language to account for the transition from NAFTA to USMCA. Additional corrections reinstituted the North American Development Bank, and ensured continuation of NAFTA treatment in the refund of merchandise processing fees to importers upon reliquidation of entries and in treatment of imports from foreign trade zones. The technical corrections will be retroactively effective on July 1, 2020, the date on which USMCA went into force.

Technical corrections were also made to the African Growth and Opportunity Act, Caribbean Basin Economic Recovery Act, Trade Facilitation and Trade Enforcement Act of 2015, and other laws to ensure that references to NAFTA were replaced with references to USMCA.

If you are an importer impacted by any of these changes, or have questions about how you may be affected, please contact the author or another member of Holland & Knight's International Trade Group.

Generalized System of Preferences Expiration

The Generalized System of Preferences (GSP) is a preferential trade program that allows eligible products of designated developing countries to enter the United States duty-free on a nonreciprocal basis for an established period of time. This renewable program is set to expire on Dec. 31, 2020, if Congress does not reach a deal on extension before then. Congress' failure to reach a deal before it passed the omnibus package on Dec. 22, 2020, all but ensures that the program will lapse until lawmakers can resume negotiations toward a deal in the new year.

The debate over GSP extension was between the need for a clean and timely renewal to provide certainty for importers and countries hard hit by the health and economic fallout from the COVID-19 pandemic, and a desire to update the program's qualification criteria. The debate was further bogged down by election politics and congressional efforts to reach a deal on COVID-19 economic stimulus relief and funding the government before the end of the year.

Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and House Ways and Means Trade Subcommittee Chairman Earl Blumenauer (D-Ore.) introduced competing GSP renewal bills this year. Grassley introduced a bill in September that would extend GSP without any changes for 16 months, kicking any debate over new eligibility criteria into the 117th Congress. Blumenauer introduced a bill on Dec. 8, 2020, that would extend GSP for six months and update the GSP eligibility criteria in the areas of human rights, environmental protections and support for women and worker rights.

What Does Expiration Mean for Importers?

Congress' failure to reach a deal on renewal before Dec. 31, 2020, means that GSP eligible goods entered or withdrawn from warehouse will be subject to tariffs effective Jan. 1, 2021. It is important to note that GSP has lapsed prior to renewal in 10 of the 14 times that the program has been extended since its inception in 1974. When GSP last expired in 2017, it took Congress several months to renew the program, during which time imports were subject to duties. Upon renewal, Congress extended the program retroactively from the original expiration date so that importers were refunded for duties incurred (sans interest) during the lapse.

U.S. Customs and Border Protection (CBP) is already preparing for this potential outcome once again. CBP issued a bulletin on Dec. 21, 2020, advising importers to continue flagging GSP eligible imports beginning Jan. 1, 2021, because it has "programming in place that, in the event that GSP is renewed with a retroactive refund clause, will allow CBP to automate the duty refund process."

What Are the Odds of GSP Renewal in 2021?

There is a lot yet to be determined before the odds and timing of GSP renewal in 2021 become clear, including the outcome of the Georgia run-off races for the U.S. Senate. It is expected that the incoming Biden Administration will be supportive of updating the GSP eligibility criteria in the areas of human rights, environmental protections and support for women and worker rights, therefore boosting Rep. Blumenauer's push for such updates. If successful, this could alter the eligibility prospects of current GSP beneficiary countries and therefore the business landscape for importers relying on duty-free goods from such countries.

If you have any questions about how you may be impacted by the upcoming expiration of GSP, or seeking to influence the renewal discussions, please reach out to the author or another member of Holland & Knight's International Trade Group.

No Deal on a Miscellaneous Tariff Bill

The Miscellaneous Tariff Bill (MTB) provides temporary duty relief on imports recommended for such by the U.S. International Trade Commission (ITC). The ITC provided its recommendations to Congress in August, leaving it to Congress to determine the final package of products that would qualify for inclusion in a bill this year. Congress did not reach a deal on MTB for inclusion in the end-of-year package, which kicks this debate into 2021 along with GSP renewal. Congress will also have to consider renewal of the statutory process that governs the consideration of MTBs, which expires at the end of 2020.

If you have any questions about the MTB process, or how you may benefit from it, please reach out to the author or another member of Holland & Knight's International Trade Group.


Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.


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