Trade Preference Program Decisions Could Be More Fully Explained

The Generalized System of Preference (GSP) Program permits duty-free entry of selected products from 140 developing countries and territories. In the past, GSP has been administered according to an equal application principle, which meant that decisions to add or remove products from preference eligibility were applicable to all rather than some beneficiaries. In a Presidential report on the first 5 years of operation of GSP, it was announced that the equal application principle will be modified to allow for selective designation; product eligibility decisions may now take into consideration a beneficiary's economic development level, its competitive position in that product, and the overall economic interests of the United States.

GAO found that not all eligible imports may receive duty-free treatment. Products from a beneficiary are ineligible if, in the previous calendar year, they equaled 50 percent of more of total U.S. imports of that article or exceeded $41.9 million for 1979. Products need not be entirely manufactured in beneficiary countries to be eligible for trade preference treatment. GAO found that no significant increase in preference benefits would accrue to mid-level and less developed countries if the competitve need exclusion and rules of origin were less stringently applied to them. The President decides the eligibility of products for preference treatment upon the recommendation of the interagency Trade Policy Staff Committee (TRSC), which is chaired by the Office of the U.S. Trade Representative (USTR). Domestic and foreign parties or individuals may annually petition TRSC to change product eligibility. Aside from the possible effect of preference treatment on domestic industry, it was found that two of the factors influencing product eligibility decisions are: (1) the constraining effect of the initial product list of over 2,700 tariff lines, and (2) the interaction of several agencies with differing role preceptions. USTR does not fully explain to the petitioners the basis of the product eligibility decisions. Petition-related recordkeeping at USTR is too informal. Regulations do not clearly state the kind of information beneficiaries need to provide in support of their petitions.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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