The longer GSP remains expired, the more permanent the damage. While Congress seems to view “retroactive” legislation as good enough, companies – especially small businesses – don’t have the same luxury. Instead, they face very real and action-forcing deadlines that can be as simple as a lease renewal.
The “temporary” GSP lapse could lead to permanent closure for Bueno of California, which already has paid over $800,000 in extra tariffs due to GSP expiration. That is a massive amount for the 20-person company in Fullerton, California, which sells handbags, wallets, and soft carry-all luggage both online and through major retailers in the United States and Canada. For Bueno, new costs have meant declining orders, layoffs, and canceled investments – and possibly worse in the near future.
I might close the company once our lease expires. The US government is not friendly to small business owners.Bueno of California President Joseph Pagliaro
The feeling that tariffs are unavoidable is particularly strong in (though not limited to) the travel goods industry. Section 301 remedies imposed on China starting in 2018 now raise tariffs on travel goods by up to 45%. Like many others, Bueno found new suppliers in India and Cambodia to avoid these “outrageous” tariffs. Then India’s GSP was terminated in 2019, raising tariffs on those products. Then Congress allowed the entire GSP program to lapse at the end of 2020, raising tariffs on Cambodian too. Not to mention a global pandemic that has reduced demand for travel-related products such as luggage. There are no good options, and Bueno is now buying more from China despite the 45% tariffs.
Reduced orders hurt GSP’s development goals in Cambodia, whose GDP per capita of $1,513 in 2020 was about 42 times smaller than the United States. After years of growth, Cambodia’s GDP per capita declined 8% in 2020, more than three times the 2.6% decline in the United States. Bueno’s contract factories, which employ mostly women, must pass U.S. safety and social compliance audits done by independent audit company. These are “good jobs” at risk for vulnerable populations that desperately need them.
While Congress can renew GSP “retroactively,” decisions such as “close the business instead of renew the lease” are not so easy to undo. Congress must renew GSP before it is too late for all the companies in Bueno of California’s situation.
Note: this example came from a new Coalition survey on expiration impacts. It was published with permission. GSP importers are encouraged to take the survey here – no company-specific details will be published without such permission.