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U.S. to Revoke Russia’s GSP Status

President Obama said Wednesday he intends to rescind Russia’s eligibility under the Generalized System of Preferences.

WASHINGTON — President Obama said Wednesday he intends to rescind Russia’s eligibility under the Generalized System of Preferences, a program under which developing countries receive duty-free benefits on designated imports to the U.S.

The move came as tensions between Russia and the West continue to grow in light of Russia’s annexation of the Ukrainian peninsula of Crimea in March and subsequent insurgency in Eastern Ukraine by pro-Russian forces. The Obama administration continues to threaten to impose more severe economic sanctions on Russia unless there is a de-escalation in the Ukrainian situation.

Obama did not link his intention on GSP withdrawal to the political tensions over Ukraine.

“I have determined that it is appropriate to withdraw Russia’s designation as a beneficiary developing country under the GSP program because Russia is sufficiently advanced in economic development and improved in trade competitiveness that continued preferential treatment under the GSP is not warranted,” Obama said.

U.S. Trade Representative Michael Froman said, “The purpose of the Generalized System of Preferences is to assist developing countries to use trade to boost their economic development.…The President’s decision is consistent with the World Bank’s designation of Russia as a ‘high-income country’ as well as actions by the European Union and Canada to remove Russia from similar programs.”

The GSP program provides duty-free benefits for more than 3,500 imported products to the U.S. from 127 designated countries and territories and duty-free status to an additional 1,500 products from 44 GSP beneficiaries that are designated as least-developed beneficiary countries, according to USTR.

Russia’s imports to the U.S. totaled $465.3 million under the GSP program in 2013, according to government data provided by the U.S. Fashion Industry Association. Among the GSP products from Russia were $2.8 million worth of natural or cultured pearls, precious or semiprecious stones and metals; $679,000 worth of cosmetics and beauty products, and $34,000 worth of headgear.

The entire U.S. GSP program, which does not cover most apparel and textile imports to the U.S., expired at the end of July last year and must be renewed by Congress.

“GSP has expired so it doesn’t have an immediate impact on business,” said Julia Hughes, president of the U.S. Fashion Industry Association. “It certainly sends a strong message, though. Those companies that are sourcing GSP products out of Russia will need to change their plans regarding possible refunds retroactively [if Congress renews the GSP program], or duty-free access moving forward.”