The U.S. is extending tariff relief for 5,000 types of products — including some tires — imported into the country. Importers can rejoice, in part because they can petition to reclaim duties paid for the past two years.
But it’s not an automatic windfall.
Mike O’Rourke, an attorney whose clients include BKT Tires Inc., says the clock is ticking for companies who want to request a refund of the duties paid since the Generalized System of Preferences (GSP) was last in effect — July 31, 2013. The GSP was reauthorized through Dec. 31, 2017, and made retroactive, to Aug. 1, 2013. Importers have 180 days from June 29, 2015 (the day President Barack Obama signed the bill extending the program) to file for a refund.
“For GSP benefits you have to make the claim and you have to qualify,” O’Rourke says.
GSP was created 39 years ago as the U.S. wanted to help developing countries with an incentive for them to import products into the U.S. market. The GSP offers “preferential duty-free treatment” for products from designated countries. The 226-page products list includes everything from food and glassware to super-heated water boilers — and tires.
The program comes up for regular review by Congress, and over the years has had other lapses. O’Rourke says whether to make the GSP retroactive was a sticking point this time around.
“Part of the back and forth with Congress on the renewal was whether they’d allow interest (on the refunds due). Interest got whacked,” O’Rourke says. “For most people this is kind of found money.”
U.S. Customs and Border Protection oversees the GSP, and it’s a highly specific program. Only certain countries are eligible. (China isn’t one of them.) Only specified products qualify. And even though tires are on the list of eligible products, not every tire meets the criteria. There’s a 28-page document that essentially defines a tire: “What Every Member of the Trade Community Should Know About Tires.”
O’Rourke says to be eligible for GSP, an importer/manufacturer has to show that not less than 35% of the product’s final appraised value is attributable to the labor, inputs or elements from the designated country. For a tire, that means the country of origin for every element – rubber and steel cord included – is important. If the tire is made in India, but the rubber comes from Indonesia, O’Rourke says the rules require a company to show that the material has been “substantially transformed twice” in the production process.
If a company comes up for audit, it’s not enough to claim ignorance, either. If Customs determines an importer has been claiming GSP but not actually qualifying for those benefits, the importer will have to pay back the tariffs — with interest.
That’s why companies rely on experts like O’Rourke to help keep tabs of the details. He’s been to BKT’s factories. He’s been to a number of the ports in the U.S. He’s compiled videos and documentation and presented and maintained files of data. “I try to think about ‘what would Customs want or need,’ and present that to them. Be ahead of the curve.”
