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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In The Hill: “Failure to Renew GSP is America’s Hidden Fiasco”

In The Hill today, Rick Helfenbein wrote an amazing article about the the “hidden fiasco” that is Congress’ continued inaction on GSP. As he writes about expiration:

small operators were suddenly forced to pay an unexpected tax in the form of previously waived duties. Real profits were yanked right out of their bottom line, and operational costs skyrocketed. By failing to act, Congress placed a direct hit on the small business community of America.

That direct hit happened 18 months ago, but the pain continues. So we remain vocal about the damage being done to American companies and workers as a result. This call to action is loud and clear in the article:

We must remind everyone (who will listen) that the tax clock ticks every single day for a small business owner. This core of American business needs to be protected, and it remains our responsibility to see that it is done.

The GSP Coalition attempts to do this every day. We know many individual companies and associations do too, whether that’s joining us for congressional meetings, writing letters to congressional offices, or allowing us to tell you story to anyone and everyone that will listen. The article is not just a call to action for GSP supporters, but Congress itself. As Rick concludes:

Congress, please do renew GSP quickly. Try to get into the heads and hearts of the small business operators and understand that their GSP problem is caused solely by your inaction. Their pain should be your pain and, only then, will it finally get the attention it needs and the resolve it deserves.

It’s hard to envision a scenario where Congress would forgo its salaries or lay off its staff for a full 18 months. Yet if that was Congress’ choice – find a way to pass (bipartisan) legislation or face the consequences personally – it’s easy to envision Members of Congress coming together to strike a deal. After 18 long months, let’s hope they internal their constituents’ pain and redouble their efforts to renew GSP immediately.

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House, Senate Hearings on Trade

Today, both the Senate Finance and House Ways and Means Committees are both holding hearings on trade. We’ll be tweeting out facts and figures about GSP expiration on Committee members all day and would greatly appreciate if you would retweet – particularly if they apply to your state/district.

The Coalition also will be submitting official comments for the record and would like to include brief statements (2-3 sentences) from GSP importers. The form below allows you to send us a few statements for the submission, which could focus on the costs of GSP expiration (e.g., we had to lay off workers, cut wages, etc.) or what you could do if Congress renewed GSP with refunds of taxes paid to date (e.g., we would hire XX workers).

Another way to think about it: if you had just 30 seconds to tell your Representative or Senator why GSP renewal is important, what would you say? We want to be brief, but detailed. So “we would hire 2 new warehouse workers” is better than “we would hire 2 new workers,” which is better than “we would hire workers.”

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An Unfortunate Milestone for American Companies: $1 Billion in Taxes Paid Because of Congress’ Failure to Renew GSP

Today marks an unfortunate milestone for American companies: $1 billion in taxes paid because of Congress’ failure to renew GSP. Obviously, these costs were not incurred overnight. It’s the cumulative effect of 540 days without GSP – with an average daily cost of $1.85 million in new taxes. Nearly 18 months of expiration, far surpassing the previous GSP expiration “record.” For many, death by a thousand paper cuts.

Those new taxes affect companies in every state. Here are the taxes paid by state through November 2014. Companies in 43 states are estimated to have paid $1 million or more to date. California importers pay about 15 percent of all GSP taxes, so they have the most to gain from retroactive renewal in terms of actual dollars refunded. But the impacts are no less for smaller states: Rhode Island pays the highest average import taxes because of GSP expiration at 7.1 percent

So who exactly is harmed by expiration? More than 660 American companies and associations have urged Congress to renew GSP. Since GSP expired and many companies were hit with unexpected tax bills, about 4 to 5 new organizations per week have come out in support of renewing GSP. Even that growing list of companies is just the tip of the iceberg, as we learned back in July 2014.

Some on the list are recognizable to everyone – Coca Cola, General Electric, The Home Depot – but most are not: 80 percent of those urging renewal are small businesses with 100 or less employees. Small businesses accounted for 60 percent of GSP savings in 2012, so it’s likely they have paid at least $500 million in direct taxes because of GSP expiration. (No public data exist on GSP savings/tax payments for individual companies, but hundreds have provided that information to use when signing up for the supporter list.)

Those with the greatest stake are often these small- and medium-sized businesses. One privately owned company with 130 employees has paid more than $7 million in higher taxes since GSP expired, more than any other company we know. Those taxes have prevented the company from moving ahead with new US manufacturing plans or a building expansion – both of which would allow it to hire more employees. Put simply, GSP expiration is costing jobs. And theirs is one of the more “positive” stories of dealing with expiration.

A survey conducted last August showed the toll GSP expiration is taking on many individual companies:

  • Matrix Metals laid off 75 manufacturing workers in Iowa.
  • Small business owners Danny and Candace Abitbul from Sophia Foods in New York laid off 2 workers and canceled expansion plans that would double their business.
  • Instead of hiring a new worker, Stackhouse Athletic in Oregon instead had to cut health insurance for its 9 employees.
  • B&C Technologies in Florida bought a building to start manufacturing in the United States, but cannot afford to get it up and running because of the new taxes.

These unfortunate stories were all too common: about 1 in 8 companies laid off workers as a direct result of GSP expiration; nearly half delayed (otherwise) needed hires; and 40 percent canceled investments that would create jobs at their company or local suppliers. Since the typical company urging GSP renewal has just 15 employees – the difference between growing or contracting by just 1 or 2 workers can be huge.

Sometimes it is more tragic: as we wrote about yesterday, one family-owned business started by a husband and wife team was forced to sell the rights to the company name and assets after their bank called in the loan. GSP taxes – even if they were to be refunded eventually – meant the company was losing money. They are also not alone. Another company we’ve worked told us in December that the bank will no longer extend them credit. They expect to run out of money by the end of March and may be forced out of business if Congress doesn’t renew GSP retroactively before then.

For the American companies that import under GSP, the $1 billion tax hike has been terrible. It’s been 18 long months without knowing whether the products they purchase today will be subject to higher taxes when they arrive. It’s been 18 long months of uncertainty about whether the hundreds, thousands, or millions of dollars in taxes paid will be refunded or lost forever. It’s been 18 long months of asking customers, suppliers, creditors, and employees to keep the faith that GSP will be renewed. Eventually. They just need to trust Congress.

Well now it’s time for Congress to act. To pass an immediate, retroactive GSP renewal so that American companies can get their money back and try to undo as much of the damage from the last 18 months as possible.

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Too Late to Save This GSP Importer, But Not Too Late for Others

We heard yesterday from someone that used to import under GSP. Sadly, he and his wife no longer own the business they started together more than 10 years ago. Why? GSP expiration caused a major hit on cash flow and made it difficult to fulfill orders. By the time we surveyed companies in September 2014 about the impacts of one year of GSP expiration, their small business had paid over $180,000 in taxes. According to our old contact, GSP expiration was amajor factor in the loss of margin in our products, which led to the bank calling our loan.”

With no other options, the couple sold the rights to its name and products to a large development company, which folded them into existing businesses. After years of building the business, we did not net anything on the sale.”

So where are they today? His wife continues to work for the new owners. That’s better than being unemployed, but a far cry from running the company you founded. He has started a new business, but it’s off to a slow start. He noted: It took us four years to grow [the old company] to the point where I was able to quit my day job. I don’t have 4 years this time around, so hopefully we’ll get some traction soon.”

As the (former) owner said back in September when first informing us of his company’s sale, timely GSP renewal would have enabled us to avoid this unfortunate event.” 

After 18 months, and about a billion dollars in taxes paid, it’s impossible to know how many companies face similar situations. But they certainly exist. One company emailed us the following in December: customers wont allow increase, 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…if this isn’t passed in the first quarter, I’ll be out of funds and will have to hope the factories we work with will give some sort of terms.

Examples like these show why it is critical for the 114th Congress to pass an immediate, retroactive GSP renewal. Arcane congressional procedural rules should not delay action any further: people’s livelihoods are at stake. If a long-term renewal is not an option, then a short-term renewal that refunds tariffs paid to date should be pursued.

The 114th Congress cannot undo the damage done by the last Congress’ failure to renew GSP, but it can try to minimize it by passing an immediate, retroactive renewal.

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For GSP Importers, the State of the Union Could Be Stronger

President Barack Obama will begin his annual State of the Union address momentarily. It will touch on a number of issues, includes taxes, foreign policy, education, and yes, even trade. Some proposals will be viewed as partisan, and others will simply be controversial (regardless of party). Many will be DOA in Congress. Yet programs like GSP, which has bipartisan support in Congress and the support of the Administration, are much less likely to come up.

Regardless of the content, it likely will end with a statement about the State of the Union being strong. For GSP importers, that is not so clear. The following examples show just some of the ways the State of the Union could be stronger for GSP importers:

  • despite strong bipartisan support, GSP has remained expired for nearly 18 months;
  • despite no one advocating for tariffs to remain in place, American companies have been forced to pay about $1 billion in higher taxes;
  • despite companies in 290 congressional districts and 45 states urging renewal, there’s been no legislative action to renew GSP in the House or Senate, and
  • despite the clear damage being done to importers by expiration, it remains unclear when GSP might be renewed.

In a strong union for GSP importers, the minor procedural issues that blocked GSP renewal in July 2013 would have been overcome. They certainly would not continue to prevent GSP renewal 18 months later.

There is hope in the new Congress. New Finance Committee Chairman Orrin Hatch made clear this morning that GSP renewal is a priority. We looking forward to working with Chairman Hatch and everyone in the 114th Congress to make this a stronger union for companies that have come to rely on programs like GSP.

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Which States’ Companies Are Paying Higher Taxes Because of GSP Expiration? All of Them.

As we posted the other day, GSP expiration cost American companies $55 million in new taxes in November 2014, bringing the total taxes paid from August 2013 to November 2014. With GSP expiration, it’s not the case that just a few areas are impacted. Companies in every state are paying higher taxes, as shown on the graphic below.

GSP_Tariffs_Paid_by_State_Aug2013-Nov214Taxes paid range from a high of $134 million in California to a low of $153,000 in South Dakota. Even states with low(er) total taxes paid often bear the brunt for specific products. For example:

  • South Dakota accounted for more than a third of taxes paid on wooden statuettes from Sri Lanka;
  • Wyoming accounted for more than 80 percent of taxes paid on bone char imports from Brazil,
  • West Virginia accounted for more than 80 percent of taxes paid on iron cores for ignition systems from Thailand.

This often reflects a single importer being hit with higher taxes on niche products. And they will continue to do so until Congress renews GSP.

Posted in Brazil, California, Florida, Georgia, GSP, Illinois, Maryland, New Jersey, New York, North Carolina, Ohio, South Dakota, Sri Lanka, Texas, Thailand, West Virginia, Wyoming | Leave a comment

GSP Expiration Cost American Companies Another $55 Million in November 2014

Based on data released last week, continued GSP expiration cost American importers another $55 million in November 2014. For New Mexico, November 2014 was the most costly month yet in terms of unnecessary taxes paid because of GSP expiration, driven largely by above average imports of jewelry from the Philippines and Turkey.

From August 2013 to November 2014, companies paid an estimated $902 million in higher taxes because of GSP expiration. At $134 million through 16 months, California importers paid the most because of GSP expiration, followed by those in New Jersey ($82 million), Texas ($77 million), and New York ($64 million). GSP expiration has raised taxes on companies in new Senate Majority Leader Mitch McConnell’s home state of Kentucky by $25 million. In total, companies in 41 states plus Puerto Rico have paid at least $1 million because GSP remained expired.

The average tax faced because of GSP expiration was 3.7 percent, but companies in some states paid significantly higher rates. Rhode Island companies have faced average taxes on imports because of GSP expiration (7.1 percent), followed by Montana (5.8 percent) and new Senate Finance Committee Chairman Orrin Hatch’s home state of Utah (5.2 percent). Utah’s above-average rate is driven by high taxes on imports of bikes from Cambodia.

Given an average daily cost of $1.85 million, the direct cost of GSP expiration on American companies is expected to top $1 billion on January 22. These taxes have taken a terrible toll on companies, as shown by a survey last fall. It is critical that the new Congress pass an immediate, retroactive GSP renewal so that companies can stop paying, and start the refund process for, these unnecessary taxes.

There are many hundreds of companies that would benefit from renewal. If you’re not yet on that list but would like to see Congress renew GSP, please add your name here.

Posted in California, Cambodia, GSP, Kentucky, Montana, New Jersey, New Mexico, New York, Philippines, Rhode Island, Texas, Turkey, Utah | Leave a comment