On June 16, over 220 U.S. companies and association sent a letter to the Chairmen and Ranking Members of the House Ways and Means and Senate Finance Committees urging swift renewal Generalized System of Preferences (GSP) program. The current GSP authorization expires on December 31, 2020. The 201 companies that signed, primarily small businesses, are headquartered in 38 different states.
(NOTE: An updated version with 250 signers was submitted for the Ways and Means and Finance Committee hearing record on July 1. If there is sufficient interest, we could issue another update at a later time. To add your organization, please compete this form.)
The letters state that many U.S. companies are experiencing severe harm from the COVID-19 pandemic and the related economic downturn and are struggling to overcome these challenges, recover losses, and start growing again. A recent Coalition for GSP report on COVID-19 impacts showed large majorities reporting both supply and demand issues and large shares expecting steep import declines and negative employment impacts for 2020.
Further uncertainty about whether companies will have to pay millions of dollars a day in new taxes in January 2021 is the last thing the American business community needs. Past research has shown that some companies likely are already placing orders for delivery in 2021 without knowing whether GSP will be in place or not.
The letter highlights that GSP saved American companies over $1 billion in eliminated tariffs in 2019, including $24 million on COVID-19 related products. It also noted that GSP has strong, bipartisan support: the last roll call vote on GSP renewal passed the House by a 400-2 margin.
Yet reauthorization and COVID-19 are not the only challenges facing longtime GSP importers. Lost GSP benefits for India and Turkey cost American companies as much as $375 million in new taxes between May 2019 and April 2020. State-by-state breakdowns of 2019 tariff costs are available here. A partial suspension for Thailand in April 2020 will add millions of dollars more each month in extra taxes.
Similarly, many individual products have lost GSP benefits over the years but qualify for reinstatement after import values fell. USTR publishes a list of such products each year as part of the GSP Annual Review. American companies paid about $100 million in tariffs last year on products eligible for reinstatement in 2020, yet every redesignation petition was denied without review.
While reauthorizing GSP beyond December 31 is the immediate priority, there are a number of areas that Congress could look at to improve the program for American users in the long run.