Expanding Thailand’s Exports to the

U.S. through the GSP program

Marideth Sandler, Sandler Trade LLC in collaboration with

The Office of Commercial Affairs, Royal Thai Embassy Washington, D.C., and the

Department of Foreign Trade (DFT) April 2012

2

Today’s presentation

• The U.S. Generalized System of Preferences (GSP) program

• Thailand’s exports to the United States, including under the GSP

• How Thailand’s exports to the U.S. could increase by using GSP

• Resources

2

3

GSP Program • Gives duty-free access to the U.S. market for

developing-country exports while expanding choices for U.S. industries and consumers

• Provides duty-free treatment for 3,400 types of exports from 129 countries, including Thailand (43 are least-developed countries that can export 5,000 products duty-free)

• Major source of goods: $18.5 billion in eligible products entered the U.S. market under GSP in 2011

4

Which products are eligible for GSP duty-free treatment?

• Machinery, electronics, and transportation items

• Jewelry and glassware • Chemicals, marble, base metals, minerals • Plastic, rubber, and wood items • Textile and agricultural products that do not

conflict with U.S. production • Fuel (LDCs only), biofuels, solar panels

5

Types of U.S. imports that received GSP duty-free treatment in 2007 ($30.8b)

6

Products NOT eligible for GSP

• Non-silk blend textile and apparel items • Most watches • Most footwear, handbags, and luggage • Flat goods (non-silk kitchen and bed linens) • Work gloves • Most apparel of leather • Import-sensitive electronic, steel, and semi-

manufactured and manufactured glass items

6

How many products are eligible for GSP duty-free treatment?

8

How can Thailand’s exports qualify for duty-free treatment under GSP? Four Requirements: 1. Must be a GSP-eligible product 2. Must be exported into the U.S. directly from

Thailand or pass through another country on a “through bill of landing” (addressed to a U.S. location)

3. Must be a product of Thailand, or, if it uses imported input, local content and processing must equal at least 35% of overall price to U.S. importer

4. U.S. importer must request duty-free treatment for the product by writing an “A” before tariff number on U.S. Customs Entry Form (Form 7501)

9

Is my product eligible for duty-free treatment under GSP? • The easiest way to find out is to go to:

http://dataweb.usitc.gov/scripts/tariff_current.asp • Fill in the blank with:

– Any part of a product description. For example, “cocoa” OR

– The tariff number (four, six, or eight numbers). For example, 2007, 200799, or 20079925

• Then click on “List Items” • If is an “A” or “A*” in the row entitled “GSP

(Generalized System of Preferences)”, then the product is eligible for GSP. If A*, look just below the A* to see if Thailand is an excluded country

Difference between A,A*, and A+?

• A… Product is eligible for GSP from all 129 countries eligible for GSP

• A*… Imports of the product are not eligible from one or more countries (because of CNLs or because eligibility was removed by petition

• A+ … Imports of the product are eligible for GSP duty-free treatment only from least-developed countries (LDCs)

GSP Rule of Origin • 35% value-added CAN include labor and overhead

(yes, Freight On Board (FOB) cost) • Input from outside Thailand needs to be substantially

transformed - means that the input’s name, character, or use differs from its form when it was imported

• To prove local Thai origin, keep good records (cost of production; where produced; if using imported components – where from and cost) for 3-5 years

• Yes, retrospective claims can be made by certain date: http://www.cbp.gov/xp/cgov/trade/basic_trade/

• Directly sent goods but invoice is from a third country? No, not GSP eligible.

12

Product ‘cumulation’ within ASEAN • Two or more ASEAN countries (such as Thailand and

Cambodia) can work together to produce an export to meet the 35% rule-of-origin

• The item could be partially manufactured in one country, then sent to the second country for finishing and export

• For example, many types of auto parts are produced and exported duty-free using multi-country production within ASEAN

• Products eligible for export only from LDCs could begin their manufacture in Thailand, be finished in Cambodia, & then exported from Cambodia to the U.S.

12

13

Claiming GSP duty-free treatment

• U.S. importer MUST REQUEST duty-free treatment for the import

• How? Importer writes an “A” before the tariff number on Customs entry form 7501

• If importer forgets: can apply to U.S. Customs for refund

Make sure importer marks an “A” before the tariff number on the Customs entry form!

14

14

• To be eligible for the GSP program, a country must meet the following criteria: • Not be communist (unless WTO member), and… • Provide equitable goods access to its market • Reduce or eliminate trade-distorting barriers to

investment and trade in services • Recognize and enforce arbitral awards that are in

favor of United States citizens or business • Provide adequate and effective protection of

intellectual property rights

Criteria for GSP country eligibility

15

• Take steps to provide internationally recognized worker rights to workers in the country (including in EPZs and other designated zones)

• Commit to eliminate the worst forms of child labor • Not help or provide sanctuary to international

terrorists • Be provided GSP benefits by other countries • The full list of factors may be found at:

http://www.ustr.gov/webfm_send/3129

Criteria for GSP country eligibility under GSP (continued)

16

• When its gross national income (GNI) per capita exceeds the World Bank’s “high-income country” threshold of $12,196 (2010)

• When a petition from an individual or group is accepted that alleges the country is not meeting one or more eligibility criteria, and the country does not take steps to improve the situation

• Recent petitions have focused on IPR, workers’ rights, lack of equitable market access, and not enforcing decisions to reimburse U.S. citizens for lost property or investments

Removal of a country from GSP

17

Submitting a petition: Why? A petition is a written request submitted to the

interagency GSP subcommittee to: • Remove a country from the GSP program • Remove a product from GSP eligibility when

imported from 1 country or from all countries • Add a product to the list of GSP-eligible items • Get a waiver to the CNLs so that a product

imported from a specific country can continue to be GSP-eligible

18

Removal of a product from GSP Two ways for a product to lose GSP either from all

countries or from a specific country: 1. Exceeds one of two competitive need limitations

(CNLs) when the value of the U.S. imports of that product, from a specific country, is: a) more than that year’s limit (2011: $150m); OR b) is more than 50% of all U.S. imports and no waiver is granted

2. Is removed by petition, as approved by the President, because of competition with and injury to U.S. companies

19

Competitive Need Limitation (CNL) • GSP supposed to be “temporary” advantage for an item to

gain competitiveness in U.S. market, therefore… • U.S. Congress created two limits, called ‘CNLs,’ or competitive

need limitations, which are: – Maximum annual trade value for product when imported

from a country: $150m in 2011; +$5m/yr – Maximum of 50% of all U.S. imports of the product – LDCs exempt from these limits

• If a product from a country exceeds a CNL, no more GSP beginning in June of the next year

• But, the President can grant a CNL waiver if petition is submitted and approved

20

• Petitions to add products to the list of GSP-eligible products can be submitted for review; deadline is usually each June; decision occurs by June 30 one year later

• If accepted for review, petition is subject to public comments and a public hearing. It is evaluated based on statutory criteria by agencies with a role in U.S. trade policy

• If a product is approved, it becomes eligible for duty-free entry under GSP from ALL beneficiary countries

Adding a product to GSP eligibility

21

Adding a product to GSP eligibility

• Statutory criteria: – Certain articles are prohibited by law: most textiles, watches,

footwear, handbags, luggage, flat goods, work gloves, other leather apparel, and any items determined to be import-sensitive

– If not prohibited, standards for review are: 1. Will its addition help the economic development of

beneficiary countries through export expansion? 2. Do other countries grant GSP to it? 3. If added, what are the anticipated impacts on U.S.

producers of like or directly competitive products? 4. What is the product’s current competitiveness?

22

Information on submitting a GSP petition General instructions Announcements of annual GSP Product and Country Practice Reviews are published in the Federal Register. They include specific instructions for the submissions: petition’s format, deadline for submittal, maximum length, opportunity to submit “business confidential” version, and method of submission

23

Information on submitting a GSP petition

General information required of all petitioners: http://www.ustr.gov/webfm_send/1169 1. Name of the petitioner and the person, firm, or

association represented by the petitioner 2. Action requested, together with a statement of

the reasons for the action, and any supporting information

3. Reasons for the action and if the request has previously been considered

4. Statement of the benefits the petitioner anticipates if the request is granted

24

7. Information on total sales, including quantity, value, and price data

8. Information on total exports, including principal markets, the distribution of products, existing tariff preferences in such markets, total quantity and value, and trends in exports

9. Information on all exports of that product to the United States, including quantity, value, and price; factors affecting export competitiveness compared with like or directly competitive products from other GSP countries.

10. Information on the industry’s development in other GSP countries and trends in production and promotion

Additional information needed to add a new GSP product or get a CNL waiver approved

25

1. The eight-digit HTSUS tariff number that describes the product 2. Identification of the principal beneficiary developing country

suppliers that are expected to benefit from the proposed GSP modifications

3. Name and location of firms that produce the product 4. Actual production data and estimated increase if GSP eligibility

is granted 5. Actual production and capacity utilization and estimated

increase if GSP eligibility is granted 6. Employment data, including number of employees, type, wage

rate, location, and estimated increases if GSP eligibility is granted

7. How the action would affect the country’s econ. development

Information needed to add a new product or request a CNL waiver

26

• Use www.regulations.gov • Submissions that are hand-delivered or sent

via regular mail will not be accepted. • The relevant Federal Register will provide

instructions for each submission.

How to submit a petition?

27

GSP interagency decision process

28

GSP Expiration • GSP is not permanently authorized by Congress. • Congress has approved GSP for varying lengths of

time and sometimes there have been gaps between authorizations.

• Most recent Congressional authorization began in November 2012 after expiration on December 31, 2011 (10 months)!

• Current authorization through July 31, 2013 • Congress will renew GSP either before or after July

31, 2013, but unknown when; will be after November 2012 election

• GSP for Thailand to continue after July 31, 2013?

GSP Reform - when and how? • Informal discussions are occurring in

Congress on how best to expand exports from more GSP countries

• No legislation yet introduced in U.S. Congress • Current GSP authorization expires July 31,

2013 • Reform discussions will likely intensify in

months leading up to that deadline

30

Impact of U.S. elections

• This year’s elections: November 6, 2012 • To be elected: President, all 435 Members of House

of Representatives, 33 Senators, state Governors • Elections could create major policy changes,

depending on President’s party (Democratic/Republican) & which party or parties control the Senate and the House

• Congress is not taking action before the elections on many major policy issues, including GSP reform, Farm Bill, and other legislation

31

THAILAND’S EXPORTS TO THE UNITED STATES, INCLUDING UNDER

THE GSP

32

33

Thailand and the United States: important trading partners • Thailand’s total exports into the U.S. market in

2011 totaled $24.7 billion - nearly 9% higher than in 2010 – making Thailand the 19th largest U.S. trading partner

• Thailand was #2 in exporting products to the U.S. under GSP (2011) – $3.7 billion in trade; equals 15.1% of Thailand’s total exports into the U.S.

• United States was Thailand’s #3 export market (2010), after Japan and China. United Arab Emirates is close behind the United States

33

34

Thailand’s exports to the U.S. under GSP in 2011

• Thailand’s use of GSP benefits: 3% increase between 2010 and 2011

• 1339 of about 3400 GSP-eligible product types claimed - more diverse than many countries but opportunity to expand: India: 2200 different products; Brazil: 1500

• U.S. importers saved over $150 million in duties (average duty saved: 4.2%)

34

• Certain silver jewelry: HTS 71131150 (5% duty): $594.7 million • Bus & truck radial tires: HTS 40112010 (4%): $352.3 million • Natural rubber gloves: HTS 40151910 (3%): $140.9 million • Food preparations, not canned or frozen: HTS 21069099

(6.4%): $132.9 million • Parts for air conditioning machines: HTS 84159080 (1.4%):

$102.1 million • Ignition wiring sets: HTS 85443000 (5%): $63.5 million • Window/wall AC machines: HTS 84151090 (2.2%): $59.6 m • Eyeglass lenses: HTS 90015000 (2% duty): $49.9 million • Base metal locks: HTS 83012000 (5.7% duty): $43.15 million

35

Top GSP exports from Thailand into the U.S. (by value) in 2011

But, not all shipments were claimed under GSP in 2011

36

Article and Tariff Claimed Unclaimed Unclaimed% Money Lost

Silver jewelry 5% $ 594.7m $ 81.1m 13.6%

$ 4.0 m

Radial tires 4% $ 352.2m $ 61.5m 17.5% $ 2.5 m

Rubber gloves 3% $ 140.9m $ 29.2m 20.7% $ 0.9 m

Food preparations 6.4% $ 132.9m $ 4.8m 3.6% $ 0.3 m Air conditioner parts 1.4% $ 102.1m $ 56.8m 55.7% $ 0.8 m

Ignition wiring sets 5% $ 63.5m $ 51.7m 81.4% $ 2.6 m

Eyeglass lenses 2% $ 49.9m $ 36.8m 73.6% $ 0.7 m

THAILAND’S EXPORTS TO THE UNITED STATES: WAYS TO INCREASE

THEM UNDER THE GSP

37

How to increase exports under GSP

1. Ensure importer knows to mark the U.S. Customs entry form with an “A” to ensure the product is entering under GSP

2. Focus on exporting GSP-eligible items: – that are produced by Thailand’s major industries – for which the duty savings are large – for which other countries may have lost GSP – that are GSP-eligible agricultural products – that are GSP- eligible textiles and apparel – that made by micro and small businesses

38 38

Ensure GSP-eligible products get GSP duty-free treatment

• $5.0 billion of GSP-eligible exports entered the United States from Thailand in 2011

• 74% of the exports were claimed and entered duty-free…BUT

• 26% ($1.3 billion) were not claimed under GSP

39 39

Duties paid in 2011 on… • 1053 types of GSP-eligible exports not claimed as GSP-

eligible (up to $47.3 million in unnecessary duties paid) • For example:

– $25.7 million in horizontal lathes for removing metal, HTS 845811 (4.4% tariff = $1.1 million in duties paid)

– $13.8 million in motorcycles (incl. mopeds) and cycles fitted w/ internal-combustion piston engine w/capacity of 800 cc, HTS 87115000 (2.4% tariff = $330,000 in duties paid)

– $13 million in imitation jewelry not of base metal or plastics, over 20 cents/dozen pcs or pts, HTS 71179090 (11% tariff = 1.4 million in duties paid)

40

Many of Thailand’s major exports are eligible for GSP into the U.S. market • Specific rice products

– Milled rice: HTS 10063010 (duty is 11.2%) – Rice flour: HTS 11029025 (0.09 cents/kg) – Rice meal and groats: HTS 11031914 (0.09 cents/kg)

• Specific rubber products – Adhesive preparations: HTS 35069100 (2.1%) – Tubes, pipes and hoses: HTS 40091100 (2.5%)

• Certain agricultural commodities – Prepared mangos: HTS 20089940, 1.5 cents/kg

– Prepared coconuts: HTS 20081915, 1%

41

42

Product ‘cumulation’ within ASEAN • Two or more ASEAN countries (such as Thailand and

Cambodia) can work together to produce an export to meet the 35% rule-of-origin

• The item could be partially manufactured in one country, then sent to the second country for finishing and export

• For example, many types of auto parts are produced and exported duty-free using multi-country production within ASEAN

• Products eligible for export only from LDCs could begin their manufacture in Thailand, be finished in Cambodia, & then exported from Cambodia to the U.S.

42

• Items with 10% duty saving or higher: – Less expensive silver jewelry: HTS 71131120 (13.5%) – Flashlights: HTS 85131020 (12.5%) – Wood screws of iron or steel: HTS 73181200 (12.5%) – Certain prepared or preserved vegetables and

vegetable mixtures: HTS 20059997 (11.2%) – Milled rice: HTS 10063010 (11.2%) – Imitation jewelry of base metal: HTS 71171990

(11%)

Exports produced by Thailand’s major industries are GSP eligible:

43

• Items with 8% to 10% duty: Vegetables, prepared or preserved by vinegar or acetic acid: HTS 20019038 (9.6%); Fruit and nut flour, meal and powder of the products of chapter 8, other than of banana and plantain (e.g., coconut, guava) HTS 11063040 (9.6%)

• Items with 6% to 8% duty: National flags and other made-up articles of textile materials: HTS 63079098 (7%); Food preparations not canned or frozen: HTS 21069099 (6.4%); Jewelry articles of precious or semiprecious stones: HTS 71162015 (6.5%)

44

Exports produced by Thailand’s major industries and farmers

• Gold necklaces and neck chains: HTS 71131921 (5% duty)

• Gold articles (other than jewelry): HTS 71159030 (3.9% duty)

• Monumental or building stone and articles thereof, of granite: HTS 68022300 (3.7% duty)

• Refined copper, wire, w/maximum cross-sectional dimension over 6 mm but not over 9.5 mm: HTS 74081160 (3% duty)

45

Export products for which other GSP countries (e.g., India and Turkey) have lost GSP eligibility

• These textile and apparel items from Thailand would offer U.S. importers duty savings of up to 14.6% under GSP: – hats, silk blend headbands, headgear, national

flags, wall hangings, sports gloves – silk and silk blend apparel: handmade fabrics,

shawls, men’s and women’s apparel, handkerchiefs, kitchen linen

– apparel and accessories of plastic – national flags; silk-blend women’s/girls dresses

46

GSP-eligible textile and apparel opportunities

• Crab products with fish meat; prepared meals with crab: HTS 16051005 (10% duty) e.g., crab salad

• Crabmeat, prepared or preserved, other than in airtight containers: HTS 16051040 (5% duty)

• Sardines, prepared or preserved, minced: HTS 16041390 (avoids 3.1% duty)

• Thailand no longer eligible for any shrimp products under GSP

47

Seafood: a major Thai industry with more potential use of GSP

USDA and FDA regulate food imports and will examine samples upon entry to ensure food safety. Exporters need to pay attention to product content (contaminants (mercury) and bacteria (Salmonella)0 and published import alerts.

Export GSP-eligible items made by small businesses and artisans • Different types of silver jewelry (5%-11% duty) (HTS

7113, 7116, and 7117) • Wood kitchen/home accessories, wood ornaments,

frames, and statuettes: HTS 4419 and HTS 4420 (3.2%-3.9% duty)

• Brooms and brushes of twigs or vegetable materials bound together: HTS 96031090 (10% duty)

• Silk blend scarves: HTS 61171040 (1.5%) • Rattan baskets: HTS 46021216 (5%) • *Packaged flavored green tea (HTS 09022010) and

sweetened flavor coffee HTS 21011248 (6.4-8.5%)

48

RESOURCES!

49

Questions?

• Royal Thai Embassy in Washington, D.C. – Mr. Perapat Uthaisri, Minister Counsellor Office of Commercial Affairs, Royal Thai Embassy

Washington, D.C. 20007 Tel. 1-202-467-6790; Fax 1-202-429-2949 http://www.commercethaiusa.org/

• Department of Foreign Trade: www.dft.go.th

• Thai Chamber of Commerce and Board of Trade of Thailand: http://www.thaichamber.org/

Tel. +66 (0) 2622 1860 - 75

50

Questions? • U.S. Embassy in Bangkok

Ms. Julie J. Chung, Economic Affairs Counselor U.S. Embassy Bangkok

120/22 Wireless Road, Bangkok, Thailand 10330 Tel: +66-2-205-4000 http://bangkok.usembassy.gov/

• Sandler Trade LLC Marideth Sandler, CEO of Sandler Trade LLC

sandler@sandlertrade.com skype: marideth.joy.sandler http://sandlertrade.com

51

For additional information

Office of the U.S. Trade Representative Website

• GSP guidebook, GSP-eligible and ineligible products, notices, country use information

• http://www.ustr.gov/trade-topics/trade-development/preference-programs/generalized-system-preference-gsp

52 52

Phyto-sanitary and sanitary requirements

• U.S. Food and Drug Administration (FDA) regulates processed food (except most beef and poultry), cosmetics, biologics, drugs and some electronics – http://www.fda.gov/Food/InternationalActivities/Imports/def

ault.htm • Product requirements: pure and wholesome; safe to

eat; produced under sanitary conditions; informative and truthful labels in English

• Importer files notice and pays a bond to Customs, which contacts FDA: a test may be needed

• Bioterrorism Act: for food imports, producer required to register with the U.S. the food production and processing facilities where the food is produced

53

• The U.S. Animal and Plant Inspection Service (APHIS) must approve any fresh products for export from Thailand to the United States – http://www.aphis.usda.gov/favir/info.shtml – https://epermits.aphis.usda.gov/manual/index.cfm?action=co

untrySummCommP&REGION_ID=191&dspNavBar=1

• Inspection at the port of entry and other requirements apply (click on “OPEN→” before name of product)

54

Fresh fruits and vegetables approved for export to the U.S. – how to find out

55

For additional information Agricultural Requirements (APHIS and FDA) • Sanitary and Phytosanitary Management http://www.aphis.usda.gov/import_export/sanitary_phytosani

tary.shtml • USDA Port of Entry procedures http://www.fsis.usda.gov/regulations_&_policies/port_of_entr

y_procedures/index.asp • Fruits and Vegetables Import Requirements (FAVIR) https://epermits.aphis.usda.gov/manual/index.cfm?ACTION=p

ubHome • Procedures and Requirements for Importing Food Products http://www.fda.gov/Food/InternationalActivities/Imports/def

ault.htm 55 55

For additional information Agricultural Concerns Animal and plant health requirements

http://www.aphis.usda.gov/import_export/plants/plant_imports/index.shtml

Lacey Act (governs wood and plant products) http://www.aphis.usda.gov/plant_health/lacey_act/inde

x.shtml Import Alerts

http://www.accessdata.fda.gov/cms_ia/country_TH.html Consumer Product Safety Act (CPSIA) – lead, flammability

• http://www.cpsc.gov/about/cpsia/cpsia.html • http://www.cpsc.gov/businfo/smbus.html

56 56

For additional information

U.S. Tariff Schedule http://www.usitc.gov/tata/hts

Department of Homeland Security: Customs & Border Protection http://www.cbp.gov/xp/cgov/trade/basic_trade/

Customs Entry Form 7501: http://www.cbp.gov/xp/cgov/toolbox/forms/ http://forms.cbp.gov/pdf/CBP_Form_7501.pdf

57 57

ขอขอบคณุค่ะ Kop Khun Ka Thank you!

58 58