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Obama Withdrawing Trade Preferences for Russia

May 7 (Bloomberg) -- President Barack Obama, amid U.S.- Russia tensions over Ukraine, notified Congress he will withdraw Russia’s eligibility for lower tariffs accorded to developing countries under the Generalized System of Preferences program.

“Russia is sufficiently advanced in economic development and improved in trade competitiveness that continued preferential treatment under the GSP is not warranted,” Obama said in a message to Congress issued today.

Obama’s announcement came as U.S. officials said they haven’t seen evidence to support Russian President Vladimir Putin’s declaration that Russia has pulled back its troops from the Ukrainian border, and as Putin urged separatists in southern and eastern Ukraine to postpone planned May 11 plebiscites over regional autonomy.

Caitlin Hayden, a spokeswoman for the National Security Council, said while Russia’s actions in Ukraine are “not directly related” to Obama’s decision on GSP benefits, they “make it particularly appropriate to take this step now.”

Russia’s classification last year by the World Bank as a high-income country had already qualified it for “graduation” from the GSP in 2016, Hayden said.

U.S. Trade Representative Mike Froman said in a statement that Obama’s decision was consistent with the World Bank designation and similar steps by Canada and the European Union.

Formal Proclamation

U.S. imports of GSP-eligible goods from Russia will be subject to non-preferential rates of duty once Obama issues a proclamation formally withdrawing Russia’s eligibility, White House press secretary Jay Carney said in a statement.

The GSP program, which expired at the end of July 2013, provides zero or reduced tariffs for certain goods from developing countries. U.S. importers benefit because they can waive the import taxes on those goods. The program has been renewed retroactively in the past, though no one benefits while it is expired.

Russia was the ninth-largest beneficiary nation under the GSP program in 2013 according to a fact sheet on the U.S. Trade Representative’s web page. About $296 million in U.S. imports from Russia were eligible for the trade benefits through last July, it said.

The U.S. previously has imposed asset freezes and a travel ban on individuals and companies linked to Putin’s inner circle in an effort to punish Russia for its involvement in the turmoil in Ukraine. The administration also has put a hold on the processing of permits for exports that may have a military use.

To contact the reporter on this story: Margaret Talev in Washington at mtalev@bloomberg.net

To contact the editors responsible for this story: Steven Komarow at skomarow1@bloomberg.net Joe Sobczyk, Mark McQuillan

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