GSP Expiration Cost Another $54 Million in January 2015

Based on data released last week, continued GSP expiration cost American importers another $54 million in January 2015. For both Arizona and West Virginia, it was the most costly month to date in terms of tariffs paid to date.

The cost of tariffs paid because of expiration exceeded $1 billion in January. At $150 million through 18 months, California importers paid the most because of GSP expiration. Companies in New Jersey paid more than $91 million, while companies in Texas paid $87 million and those in New York paid $71 million. In total, companies in 44 states plus Puerto Rico paid more than $1 million because GSP remained expired.

The list of companies and associations urging Congress to renew GSP has grown to nearly 700. If you’re not already on the list, please take a moment to add your name here.

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Welcome to Renew GSP Today

Thanks for stopping by to check out our website about the GSP trade program.  Despite a “long-term” renewal in 2011, the GSP program expired on July 31, 2013. As a result, American companies now face an estimated $2 million per day in new taxes.

If you’re one of those companies paying higher taxes, be sure to get engaged in GSP renewal by:

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Breakdown of Tariffs Paid Because of GSP Expiration by State, August 2013-January 2015

GSP_Tariffs_Paid_by_State_Aug2013-Jan2015

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Dear GSP importer, the bank regrets to inform you…

GSP_Canceled_Line_of_Credit“After careful consideration Sun National Bank has decided not to renew the above referenced $600,000 line of credit.”

That one sentence, from a bank letter (right) forwarded by a GSP importer, immediately raises concerns about the future viability of the business.

The reason for the bank’s decision? The company could not pay the balance down to zero for 30 consecutive days and otherwise meet the terms of the loan agreement.

Why couldn’t the company meet the terms? It had paid nearly $250,000 in additional taxes because of GSP expiration – a huge sum for a family-owned business with 22 employees.

Lines of credit are crucial for importers, especially small businesses. Companies use them to bridge the gap between paying foreign suppliers upon delivery of goods and collecting payment for the subsequent US sales. Reduced or eliminated credit can lead to a vicious cycle that looks something like this:

GSP_Reduced_CreditAt the end of each cycle, your business looks worse to the bank, which leads to the next round of credit reductions. And the company from that letter certainly isn’t alone*:

  • In January, we wrote about a family-owned company for which GSP expiration was a “major factor in the loss of margin in our products, which led to the bank calling our loan.” The couple was forced to sell the business it spent years building.
  • In that same article, we wrote about another company who emailed: “I’m in over my ears in debt, bank recalled our credit line due to a loss in our financials, don’t know how much longer I can survive.” The company expected to run out of money around this time of the year.
  • In March, we wrote about another family-owned company who said: “The trickle down effect is this- you don’t meet your sales numbers, you don’t have the [Accounts/Receivable], you don’t get to borrow the same amount of money, you slowly lose your credit line, then your bank wants to get rid of you because you’re now “non-performing” and now your company has to cut back even further. Lay off more people, cut back more expenses or delay capital expenditures, etc. Small business owners might stop taking salaries and those cuts start trickling down into household budgets.” That company has stopped importing (previously) GSP-eligible products and, after 34 years, is contemplating getting out of the importing business completely.

As the examples show, once credit starts to dry up, companies have few options – or at least few good ones.

*If you’re a GSP importer that has experienced something similar and are willing to be profiled, please let us know.

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Snowball Effects of GSP Expiration

WhiteHouse_SnowIt’s a snowy day in Washington. The Federal Government is closed. The House and Senate both agreed to wrap up work early and flee DC before the snow hit (the House won’t return until March 16). So it seems appropriate to highlight the snowball effects of continued GSP expiration.

The following comes from an email we received a few days ago from a small business owner in New Jersey. It’s been broken up into key points, but the italicized sections are direct quotes and represent the entire (unedited) email.

The big picture: “The longer the non-renewal goes on, the harder it will be to ever fully recover from the permanent damage this extended expiration is doing to the sustainable business model we once had as a small business.”

Increasing costs and decreasing credit: “With the full effects of the ACA and Dodd Frank taking hold, costs for employing workers keep increasing and small businesses can’t get access to the credit that they used to. Add 20 months of GSP tariffs on top of that and small businesses run the risk of losing their lines of credit if they can’t meet their sales numbers (because they can’t compete from countries that no longer benefit from GSP) and can’t just transition their business into another country or another vendor instantaneously.”

The snowball effects: “The trickle down effect is this- you don’t meet your sales numbers, you don’t have the [Accounts/Receivable], you don’t get to borrow the same amount of money, you slowly lose your credit line, then your bank wants to get rid of you because you’re now “non-performing” and now your company has to cut back even further. Lay off more people, cut back more expenses or delay capital expenditures, etc. Small business owners might stop taking salaries and those cuts start trickling down into household budgets.”

What every Member of Congress should know: “Non-renewal of GSP is not a one-off that Congress can just pick up and say 20 months later that it’s now FIXED. It will take years to actually FIX the damage that they have inflicted on a whole class of entrepreneurs from this fiasco.”

All the talk from Members of Congress about helping small businesses and encouraging entrepreneurship makes that last line worth repeating (over and over and over): It will take years to actually FIX the damage that they have inflicted on a whole class of entrepreneurs from this fiasco.”

Congress can’t fix the damage, but it can help companies start the multi-year rebuilding process. When the snow melts and Congress returns to DC, it should start the process by passing an immediate, retroactive GSP renewal bill.

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New 2014 State-by-State GSP Reports Released

Today, the Coalition for GSP released updated reports for on why GSP matters for all 50 states. For each state, the reports highlight:

  • total GSP imports and tariffs paid on account of GSP expiration in 2014;
  • companies importing GSP-eligible products;
  • top GSP imports by product type, and
  • top source countries by both value of imports and amount of tariffs paid.

A copy of the Kentucky report can be downloaded by clicking below. All reports are available for download on the state reports page.

GSPReport_Kentucky

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Letter from 628 Organizations to Congressional Trade Leaders: Renew GSP Immediately

Today, the Coalition for GSP joined with 627 other American companies and associations to send a letter urging the Chairmen and Ranking Members of the Senate Finance and House Ways and Means Committees to pass, without further delay, legislation that would retroactively renew the Generalized System of Preferences (GSP) program.

The letter comes as GSP expiration is about to enter its 20th month, the longest in program history. To date, American companies have paid more than $1 billion in higher taxes on account of GSP expiration. That figure grows by nearly $2 million for each additional day that GSP remains expired.

As Dan Anthony, Executive Director of the Coalition for GSP stated in a press release about the letter: “GSP expiration has forced many American companies to lay off workers, delay new hires, cut benefits, and cancel job-creating investments. The longer GSP remains expired, the worse it gets.”

The companies signing the letter are headquartered in 45 states and 286 congressional districts, plus the District of Columbia and Puerto Rico. The vast majority of companies are small businesses with less than 100 employees.

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Coalition for GSP’s House, Senate Trade Policy Hearing Submissions

We want to thank all the companies that gave statements for our hearing submissions to the House Ways and Means and Senate Finance Committees. Both included comments from about 3 dozen companies on the pain caused by continued GSP expiration. You can download the House submission here and the Senate submission here.

In addition to the comments highlighted the other day, here are some of the other company statements found in the submissions:

  • Bruce Marlin, Purchasing Manager at Circa Corporation in San Francisco, California: As a rare, surviving U.S. manufacturer of leather goods, it is essential to us that GSP be renewed. Our competitors manufacture primarily in China and India, and we need as level a playing field as possible to remain viable as a U.S. domestic manufacturer.
  • Donna O’Sullivan, U.S. Sales and Customer Service Manager at Janice Girardi Designs in Stone Ridge, New York: The non-renewal of the GSP has cost our company over $90,000. Unfortunately, we’re not able to raise our prices to compensate for the duties we’re now paying because it’s already challenging to stay competitive in this economy. We’ve had to lay off a few people because of this and it’s vital for us to have the GSP renewed.
  • Cathy Korndorffer, Chief Operating Officer at Chantal Cookware Corp in Houston, Texas: We are a small, privately owned company in the housewares industry. We struggle every year to compete on a global scale with huge conglomerates and every penny that our product cost increases counts. We have not laid anyone off because of GSP non-renewal, but we cannot pass this along to our retailers.   What happens? Our employees do not get raises. There is no money going into their 401K plan. There is no Christmas bonus. There is a reduction in our medical insurance contribution from Chantal. Is it painful? YES!
  • Daniel Hamilton, President of Vortex Optics in Middleton, Wisconsin: If GSP is renewed with tariffs refunded, we could purchase new equipment needed for our US manufacturing plans, move forward on building plans for expansion, and hire additional employees. All of the money would go right back into the local economy.

Just because you missed the submission deadline doesn’t mean we don’t want to tell you story. If you’re willing to be profiled on the Renew GSP Today site, then drop us a line. At a minimum, we need your name, company name, and location, but the more details you can provide, the better!

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