Issue 2, 2011, April-May. Magazine Investor.ge
Sule Oktenay Akyuz Senior International Trade Lawyer at Arent Fox Law Firm, in Washington DC,U.S., Mikheil Gogeshvili Senior Lawyer at MKD
United States represents an important, 6th largest business and trade partner with Georgia. In 2010, gross trade turnover between the two countries reached $353.9 million.
The U.S. Generalized System of Preferences (GSP), a program designed to promote economic growth in the developing world, provides preferential duty-free treatment for over 4,800 products from 131 designated beneficiary countries and territories, including Georgia - a GSP member since 2001. The duty advantage varies for each product but it can be up to 15 percent.
How to find the GSP eligible articles:
The relevant product list may be accessed at “http://dataweb.usitc.gov/scripts/gsp/gsp_tariff.asp”
Eligible products include: manufactured items and inputs, jewelry, skins, certain carpets, certain agricultural products, chemicals and marble minerals. Conversely, goods not eligible to GSP treatment are most textiles, leather goods, apparel and footwear.
How to add new products to the list of GSP eligible articles to receive duty free treatment:
The U.S. Government, through the GSP Subcommittee, conducts an annual review of the list of articles (and countries) eligible for duty-free treatment. It is possible to add new products to the list. This procedure takes over a year; and once it has been decided that a particular product be added to the GSP list, this product becomes eligible for duty- free treatment for all the GSP beneficiary countries.
How to qualify for duty-free treatment under GSP:
To get GSP benefits is not automatic; importers must request the duty-free treatment by filling out the Customs entry form 7501. According to the USTR data, importers of GSP eligible goods from Georgia paid duties of $25,554 in 2009 needlessly because they omitted placing the “A” in the correct column. In order to qualify for duty-free treatment:
- Product must be included on the tariff list of GSP-eligible articles and not excluded from Georgia
- Product must be imported directly from Georgia or pass through another country under “through bill of lading” to US
- It must be grown in or be a product of Georgia or it must meet the 35% value-added requirement
- Importers must request duty-free treatment for the item by writing an “A” before the tariff number on Customs entry form 7501
How to increase the amount and type of Georgian exports entering under GSP:
Georgia is not making very full use of the GSP Program. It is exporting only about 1% of possible GSP eligible articles.
According to the 2009 data, Georgia’s biggest exports under the GSP program have been ferrosilicon manganese ($15.6 million), mineral waters ($820,158), fruit juices ($338, 878), sparkling wine ($159,143), sauces and preparations ($127,935), nonalcoholic beverages ($117,542), chlorides and chloride oxides ($26,240). If more information is provided, Georgian exporters can increase the amount and type of exports entering under GSP. Nuts and seeds, wines and other agricultural products are examples of goods which are GSP eligible that Georgia should export more of to the U.S.
Besides, inconsistency of exporting same products each year could represent a lost opportunity in maintaining and building a presence in the US market. For example, of the 52 types of GSP eligible products Georgia exported to the US in 2009, only 19 products are exported every year.
Georgia can make better use of the GSP Program. The U.S. Embassy in Georgia has been organizing seminars, conferences and site visits in order to inform exporters to tell them about the Program. These events have had some impact but there is still room for further growth.
Lack of knowledge and expertise about this program negatively affects the ability to fully benefit from the program. Georgian exporters, as well as U.S. importers, should familiarize themselves with this beneficial program. Georgian export associations, chambers of commerce and various business councils could be doing even more:
- Seminars and conferences must be organized both in the US and in Georgia in order to inform Georgian companies (especially medium size firms) which may not be aware of the opportunities in the U.S.
- A sectoral based study should be conducted on the products that Georgia is exporting to other countries in large amounts in order to identify Georgia’s exports that would enter under GSP in the U.S. Market research studies should be conducted with the leadership of Ministry of Economy and Sustainable Development and their outcome should be shared with the Embassy of Georgia and the Georgian business community in the U.S..
- The products covered by the GSP (including the description of each product) may be modified by the request of Georgian exporters and Georgian business associations. This may enable some additional products to become eligible for GSP classification.
- Local exporters and associations should come into the picture in order to increase exports under the GSP-eligible textiles, apparel, and handicrafts. For example: carpets, kilims, tapestries, and rugs, games, and cotton hammocks, paintings, sculptures, and wall hangings, wooden furniture, statuettes, boxes, and picture frames, walking sticks, and wind, string, and drum musical instruments. The duty advantage for some of them may go up to 15%.