It’s been a weird few years for international trade. If you’re importing goods into the United States, you’ve probably spent a lot of time staring at duty rates and wondering why on earth some products from certain countries are suddenly way more expensive than they used to be. Most of that confusion tracks back to one specific, somewhat aging piece of legislation: the US Generalized System of Preferences.
GSP is the granddaddy of trade preference programs. It’s been around since 1974, and the basic idea is pretty simple. The U.S. government decided, "Hey, let's help developing nations grow their economies by letting them ship certain products to us duty-free." It’s a win-win, right? Developing nations get a foot in the door of the world's largest economy, and American businesses get cheaper raw materials and consumer goods. But here is the kicker—the program actually expired on December 31, 2020. Since then, it’s been stuck in a sort of legislative limbo that has left thousands of businesses footing the bill for tariffs they weren't expecting to pay.
What is the US Generalized System of Preferences anyway?
Let’s get into the weeds. The US Generalized System of Preferences isn't just one big "free trade" button. It is a targeted tool. It covers thousands of products—think everything from chemicals and jewelry to certain types of agricultural goods and car parts. These items come from over 100 "beneficiary developing countries."
Technically, it’s a non-reciprocal program. Unlike a Free Trade Agreement (FTA) where both countries agree to lower their guard, GSP is the U.S. acting solo. We give them the break, and in exchange, they have to meet certain criteria. They’ve got to show they are making progress on worker rights, protecting intellectual property, and providing the U.S. with equitable market access. If a country starts acting up or becomes "sufficiently competitive" (meaning they don't need the help anymore), the President can yank their status.
Remember when India was kicked out of the program back in 2019? That was a massive deal. The Trump administration argued that India wasn't providing "equitable and reasonable access" to its markets. Just like that, billions of dollars worth of Indian exports were suddenly subject to standard MFN (Most-Favored-Nation) tariffs. It shows that GSP isn't a permanent right; it’s a privilege tied to a lot of political and economic strings.
The Great Lapse: Why your wallet feels lighter
If you are currently importing goods and paying duties on items that used to be free, you are experiencing the "GSP gap." Congress has to reauthorize the program periodically. Usually, it’s a rubber-stamp situation. But right now? We are in the longest lapse in the program’s history.
Why does this matter to you? Well, because normally, when Congress eventually gets around to renewing the US Generalized System of Preferences, they do it "retroactively." This means you can get a refund for the duties you’ve paid during the lapse. But you have to be careful. You need to keep marking your entry summaries with the "SPI" (Special Program Indicator) "A" even though the program is dead. If you don't flag it at the time of entry, getting that refund back from Customs and Border Protection (CBP) can be a nightmare of paperwork and "Post Summary Corrections."
The criteria most people overlook
It isn't enough for a product to just come from a GSP country. There are rules. Complex ones.
First, the item must be "wholly obtained" or have at least 35% of its value added in the beneficiary country. You can't just take a finished product from China, ship it to Thailand, put it in a new box, and call it GSP-eligible. That’s "transshipment," and CBP is very good at catching it.
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Second, there is the "Competitive Need Limitation" or CNL. This is basically a "success ceiling." If a country starts exporting too much of a specific product—usually over a certain dollar threshold or more than 50% of the total U.S. imports of that item—they lose the duty-free status for that specific product. It’s the government’s way of saying, "Okay, you've won this level, now you have to play by the normal rules."
Small businesses are the ones getting hit hardest
Big corporations have entire departments to handle this stuff. But for a mid-sized furniture importer or a small electronics firm, the US Generalized System of Preferences lapse is a cash flow killer. According to the Coalition for GSP, American companies have paid billions in extra tariffs since the 2020 expiration. That is money that could have gone toward hiring, R&D, or just keeping the lights on.
Honestly, it’s a bit of a mess. You’ve got companies hoping for a refund that might be months or years away, while they try to compete with larger firms that might have manufacturing hubs in countries with active Free Trade Agreements, like Mexico or Vietnam.
The Political Tug-of-War in 2026
The reason the US Generalized System of Preferences hasn't been renewed isn't because people hate it. Most Democrats and Republicans actually like the program. The hang-up is usually about the "strings" I mentioned earlier.
Some lawmakers want to add stricter environmental standards. Others want to beef up the labor requirements to ensure we aren't supporting "sweatshop" conditions. Then you have the group that wants to use GSP as a tool to pull supply chains away from China. By making it easier for countries like Indonesia, the Philippines, or various African nations to export to the U.S., we theoretically reduce our reliance on Chinese manufacturing. It's a "near-shoring" or "friend-shoring" strategy, depending on which buzzword you prefer.
Real-world impact: A case study in jewelry
Take a look at Thailand. For years, Thailand was a massive beneficiary of GSP, especially for silver jewelry. When certain GSP benefits are removed or lapsed, the cost of a silver ring might jump by 5% to 10% instantly. In a low-margin business, that’s the difference between profit and loss. Jewelers often had to choose: do we eat the cost, or do we raise prices and risk losing customers to "fast fashion" brands that source differently? Most end up raising prices, which is why your favorite accessories have probably gotten more expensive lately.
How to navigate the current GSP mess
So, what do you actually do right now? You can't just wait for Congress to wake up. You have to be proactive.
- Check your HTSUS codes. The Harmonized Tariff Schedule of the United States is your bible. Make sure the codes you are using are actually eligible for GSP (they’ll have an "A" or "A*" in the Special column).
- Audit your supply chain. Are you 100% sure your supplier in a GSP country isn't just sourcing all the components from a non-GSP country? If they are, and you get audited, you're on the hook for those back duties plus penalties.
- Use the "A" indicator. Even though the program is lapsed, continue to claim GSP on your entry filings. This is the only way to ensure you're in the queue for a refund if/when the retroactive renewal happens.
- Look into alternate programs. Sometimes a product might not qualify for GSP but could qualify for the African Growth and Opportunity Act (AGOA) or the Caribbean Basin Trade Partnership Act (CBTPA). These are "GSP-like" but often have different expiration dates and rules.
- Talk to your broker. Seriously. A good licensed customs broker is worth their weight in gold right now. They can help you calculate the "what-if" scenarios for your landed costs.
The US Generalized System of Preferences is a relic of the 70s that is still trying to find its feet in the 2020s. It’s a tool for development, a weapon for diplomacy, and a massive accounting headache for importers. While we wait for the political theater in D.C. to wrap up, your best bet is to stay lean, stay compliant, and keep those records ready for the day the refund checks (hopefully) start flying.
Actionable Next Steps
- Review your past three years of entry data. Identify every shipment where you paid duties on a GSP-eligible HTS code.
- Calculate your "Refund Potential." Create a spreadsheet of these duties so you know exactly what is owed to you. This is an asset for your balance sheet, even if it's "contingent."
- Request "Certificates of Origin" from your suppliers now. Don't wait for the renewal. If CBP asks for proof of the 35% value-add three years from now, your supplier might not even be in business. Get the paperwork today.
- Diversify. If your entire business model relies on a single GSP country, you're at risk. Explore suppliers in countries with permanent Free Trade Agreements (like the USMCA or CAFTA-DR) to hedge your bets against future legislative lapses.