PROBLEM 6.

5
TARIFF
PREFERENCES FOR
Import World and Leather Goods
The Setting
 Import World, Inc. is an Illinois
Corporation specializing in the import of
different consumer goods, most notably
leather goods

 For most goods, Import World pays most

favored nation (MFN) tariffs under US law

 But, some goods – including the leather –

come from developing countries
The Problem
 Import World wants to know how the
United States Generalized Systems of
Tariff Preferences (GSP) works.

 Specifically, does the GSP apply to the

imports of leather goods?

 If so, how does it apply to Import World?

The Ultimate Problem

The Ultimate Problem

Can Import World import
its leather goods into the
United States duty free
Statutory Authorization
 United Nations
generated
 GATT allowed for
GSPs in 1971 even
though they went
against the most-
favored-nation
principle
 USA was one of last
countries to sign on
 “Donor” country
sponsorship
Two-Step Test to gain GSP
status
(1) Country must (2) Product(s) must
qualify qualify
 “Beneficiary  Meet country
Developing qualification
Country”  Executive Order
 Not communist after ITC advice
 Not in league with  Meet Rule of Origin
other anti-US
 Direct import from
countries (politically
or economically) BDC + 35%+ of
value
 Proper human and
 Substantial
child labor rights
Transformation
 Will extradite US
fugitives  Not be an exclusion
Substantial Transformation

Where in the process did the importing

developing country start working?
Excluded Products
 Import Sensitive
Products

 Agricultural
Products

 Certain hand-
knotted or hand-
woven carpets
Competitive Need
Limitations
 Can’t export to the
US over a certain
dollar amount in a
given year or
you’re out

 Can’t export to US
more than 50% of
the total US
imports of that
product
Waivers to the Limitations
No like or directly
competitive article
produced in US
De minimus
amount
Least developed
country
Preferential trade
relationship
No adverse effect
on US industry and
in economic
Graduation
 Per Capita GNP over $8,500

 Presidential discretion for “sufficiently

developed” countries
 Economic development
 Competitive position of imports
 Overall US economic interests

“Yeah, you graduated! Now stop taking our

Join the “special” club!

 Caribbean Basin Economic Recovery

Act

 Andean Trade Preference Act

 Africa Growth and Opportunity Act of

2000
How do politics play into GSP?

How do politics play into

GSP?
…it’s all about the
socks!
Duty Reduction for certain
leather products…early 1990s
 (1) Subject to paragraph (2),
the President shall proclaim
reductions in the rates of
duty on handbags, luggage, 
flat goods, work gloves, and
leather wearing apparel that-
 (A) are the product of any
beneficiary country; and
 (B) were not designated on
August 5, 1983, as eligible
articles for purposes of the
generalized system of
preferences under title V of
the Trade Act of 1974.
(2) The reduction required
under paragraph (1) in the
rate of duty on any article
shall—
(A) result in a rate that is
equal to 80 percent of the
rate of duty that applies to
the article on December 31,
1991, except that, subject to
the limitations in paragraph
(3), the reduction may not
exceed 2.5 percent ad
valorem; and
 (B) be implemented in 5
equal annual stages with the
first one-fifth of the
aggregate reduction in the
rate of duty being applied to
entries, or withdrawals from
warehouse for consumption,
of the article on or after
Leather! Leather! Leather!
Ultimately…

Ultimately…
… y ofollowing
…by u ’ l l p aythe
a very
p r i cfair
e f and
or n ot
non-
gpolitical
r e a s i nprocess
g t h e of
Po we
the r s Import
GSP, That B e!
World
should be importing leather goods into