• Top 5 states by tariffs paid due to expiration: California ($287 million), Florida ($98 million), New York ($80 million), Texas ($80 million), Georgia ($61 million)
  
  
• Top 5 states by highest average tariff paid due to expiration: Colorado (12.1%), Maine (11.0%), Wisconsin (9.3%), Montana (9.1%), Utah (9.0%)
  
  
• Top 5 source countries by value of GSP imports: Indonesia ($3.9 billion), Thailand ($3.3 billion), Cambodia ($2.7 billion), Brazil ($2.5 billion), Philippines ($1.9 billion)
  
  
• Top 5 source countries by value of (eventual) tariff savings: Cambodia ($268 million), Indonesia ($218 million), Thailand ($139 million), Philippines ($121 million), Brazil ($94 million)
  
  

Import growth in 2021 was massive. Total U.S. goods imports grew by 21%, while those from GSP countries grew by 35%. Yet “competitive need limitations” (CNLs), which lead to GSP loss for specific products, only grew by 2.6%. As a result, $1.8 billion of the currently eligible imports exceeded the 2021 CNL and another $1.5 billion likely will exceed the 2022 cap based on import levels and trends, putting a huge share of future GSP benefits at risk:

• Top 5 states by share of benefits at risk for exceeding the 2021 CNL: Mississippi (42%), Louisiana (26%), Florida (20%), New York (15%), Virginia (13%)
  
  
• Top 5 states by share of benefits likely at risk from the 2022 CNL: Maine (37%), Colorado (27%), Iowa (27%), Hawaii (19%), Michigan (15%)
  
  

Representatives Stephanie Murphy (D-FL) and Jackie Walorski (R-IN) introduced the bipartisan CNL Update Act (H.R.6171), which would amend the CNLs to grow more in line with historical trends. Not only would the CNL Update Act help preserve GSP for much of that “at risk” trade, it would help restore GSP for some of the $10 billion (!!!) in imports that lost GSP in the past due to product reviews:

• Top 5 states by potential GSP savings increase for products that “should” be restored by H.R.6171: Alaska (84%), South Dakota (72%), Michigan (41%), Maryland (38%), Mississippi (42%)
  
  
• Top 5 states by potential GSP savings increase for products that “may” be restored by H.R.6171: South Dakota (4,565%), Wyoming (218%), Maryland (213%), New York (196%), Minnesota (166%)
  
  

While the CNL Update Act has a chance to “preserve and restore,” there remains considerable down-side risk. The GSP renewal language in the House’s America COMPETES Act not only maintains the current CNL thresholds, but creates a high likelihood of full or partial termination for key GSP supplier countries, particularly Brazil, Cambodia, Myanmar, Philippines, and Thailand. Loss of GSP due to current CNL rules, combined with loss for those countries, would decimate the program:

• States where at least 90% of current GSP benefits are at risk: Wisconsin (-97%), West Virginia (-96%), Montana (-92%), Utah (-91%)
  
  
• States where at least 80% of current GSP benefits are at risk: Colorado (-88%), Connecticut (-86%), Arkansas (-85%), Hawaii (-84%), Wyoming (-83%), Maine (-83%), Alaska (-82%), Kansas (-82%), Mississippi (-82%), Texas (-81%), Indiana (-81%)
  
  
• States where at least 70% of current GSP benefits are at risk: Nebraska (-79%), Georgia (-79%), North Carolina (-79%), Michigan (-79%), Washington (-78%), Rhode Island (-78%), Nevada (-78%), Illinois (-77%), Alabama (-76%), New Mexico (-76%), California (-76%), Minnesota (-75%), Tennessee (-75%), Virginia (-74%), Massachusetts (-74%), Oklahoma (-74%), Kentucky (-73%), South Dakota (-72%), Florida (-72%), Oregon (-71%)
  
  

This last set of stats shows that GSP “renewal” can’t be the only priority. It must be renewed in a way that doesn’t decimate the program in the next 2-3 years. After all, it’s impossible to “promote development through trade” with a program that covers no trade.

Due to GSP expiration, Ciranda has paid over $209,000 in extra tariffs on imports of tapioca powders and syrups, coconut products, rice syrup and powders from Brazil, Pakistan, Philippines, and Thailand. The need to pass these costs onto customers led sales to fall. Even if tariffs paid (eventually) are refunded, those lost sales can’t be regained. As an employee-owned company, everyone at Ciranda is impacted by those lost sales and profits.

Ciranda is a great example of the kind of trade GSP is meant to promote. Its qualification process includes an in-person visit to every supplier. While on-site, it observes each ingredient’s journey from the field to the processing plant. In addition to evaluating product quality, it surveys working conditions, fair labor practices, and the overall environmental health of the project. In 2020, Ciranda published a book highlighting the farmers around the world growing their product.

By eliminating U.S. tariffs on sustainable food ingredients, GSP helps companies like Ciranda do “more good” for workers and the environment in developing countries and the United States. Their example also highlights the risk of imposing too many eligible criteria on GSP countries for which higher tariffs are the only possible punishment. No matter how well-intentioned a new GSP criterion (e.g., on environment) may be, terminating GSP often hurts those meeting or exceeding even the highest standards. That’s why the Coalition believes Congress should consider changes to mitigate any punitive actions as part of GSP renewal, such as supporting partial (instead of full) terminations and/or creating a mechanism for good actors to retain benefits.

Note: Ciranda’s story came from a new Coalition survey on expiration impacts. GSP importers can take the survey here.

“I have had to switch suppliers, as I can no longer afford to do business with Thailand. Most of the new development went to China and a little to Viet Nam. I am still doing some re-orders with Thailand, but as I discontinue products there is nothing more in the pipeline for them.”

Every day that GSP remains expired is a win for producers in China. Congress should renew GSP immediately and update its rules to help American companies shift sourcing from China to GSP countries – not the other way around.

Note: the quote came from a new Coalition survey on expiration impacts. GSP importers can take the survey here.

Due to GSP country terminations of Turkey (May 2019) and India (June 2019) and partial suspensions of Thailand (April 2020, December 2020), American companies have paid about $800 million in extra tariffs. Despite costs to American companies and workers rapidly approaching $1 billion, there has been no progress on any of the issues raised in those country reviews.

With GSP expired for six months, why are we worried about old country reviews? Because the Senate-passed GSP renewal legislation, the House Republican companion bill, and a separate House Democratic bill, all add numerous criteria that could be justified to revoke a country’s GSP status but nothing providing direct help or indirect incentives for countries to comply. If history is a guide, new tariffs on Americans are much more likely than U.S. policy “wins” in GSP countries. Congress should do everything in its power to avoid setting up such lose-lose situations as part of its GSP renewal bill.

Tariff trends make the (lack of) outcomes look even worse. If exporters in India/Turkey/Thailand were suffering, you’d expect to see U.S. tariffs faced falling over time as American companies cut back orders and found alternative sources in other countries. The opposite has happened, with tariffs paid on (previously GSP-eligible) imports from all three countries hitting new highs in April and/or May 2021. While American companies pay $50+ million per month in extra tariffs, the exporters in India, Turkey, and Thailand are thriving. American companies and workers clearly have borne the brunt of GSP terminations.

It’s worth reiterating: there has been no resolution of – or even tangible improvements on – any of the issues raised during the country reviews. There have been no “victories” for American companies or interests, only losses. That includes export losses given that India stopped delaying imposition of Section 232 steel/aluminum retaliatory tariffs immediately after GSP talks collapsed.

This is not to suggest that eligibility criteria can’t or shouldn’t be added. But if policymakers want to create an environment where new criteria are more likely to raise standards – and avoid lose-lose outcomes like these recent cases – Congress should incorporate other changes into GSP renewal legislation to:

• make countries care more about keeping GSP benefits
• help countries make progress on the new criteria
• prevent abuse/misapplication of the new criteria
• minimize collateral damage when actions are necessary

The products facing the most new tariffs vary greatly by state:

• In Florida, roses faced more than $1.8 million in new tariffs due to GSP expiration in the run-up to Valentine’s Day.
• In New York, gold jewelry faced more than $1 million in new tariffs.
• In Louisiana, over $600,000 in tariffs were paid on steel-making materials (likely by a company around the Port of New Orleans for distribution throughout the country).
• In Massachusetts, over $200,000 in tariffs were paid on leather sports gloves.
• In Pennsylvania over $160,000 were paid for rubber gloves. They were also the top products for tariffs faced in Connecticut, Mississippi, and Minnesota. Notably, while GSP countries face new tariffs, identical products from China continue to receive a Section 301 tariff waiver for public health reasons.

The $70 million in tariffs paid is a conservative estimate, and the real figure likely is millions of dollars more. Why? Estimates only capture products that continued to claim GSP despite expiration. Yet for numerous products GSP claims fell dramatically while imports continued or even grew. For example, more than $11 million of road wheels from Thailand (88%) were imported in January that didn’t claim GSP. Just 0.4% of those same imports didn’t claim GSP in January 2020. Camshafts and gelatin from Brazil, guitars from Indonesia, and bicycles from Cambodia similarly saw large values of unclaimed GSP imports in January 2021 when nearly all such imports claimed GSP in January 2020.

GSP expiration is already costing American jobs and raising prices for American companies that need inputs and consumers that purchase finished goods. It is critical that Congress renew GSP – with refunds for tariffs paid – as soon as possible. To help the Coalition for GSP educate policymakers on who is hurt by expiration (and how), companies are strongly encouraged to:

• write their lawmakers about GSP renewal with our Contact Congress tool
• join the Coalition for GSP
• add their name to the free GSP supporter list
• answer our very short survey on GSP expiration impacts to date

To be clear: they’re not paid by the countries and haven’t achieved any other U.S. policy goals and won’t be refunded if benefits are reinstated. They’re just $500 million in new taxes on U.S. companies at a time of unprecedented economic collapse and job losses.

Above is the breakdown of estimated tariffs paid by state. Imports into California and New Jersey have faced about $50 million in new tariffs each. Companies in traditional – or newfound – election battleground states Texas, Georgia, Florida, Pennsylvania, Michigan, and Ohio were all in the top 10 of tariffs paid, collectively paying up to $168 million in extra taxes.

And the taxes paid continue to climb.

The bulk of taxes – up to $366 million from June 2019 to August 2020 – have been paid on imports from India. The typical GSP importer from India had 14 employees and saved $100,000 per year. The burden falls overwhelmingly on small businesses struggling to make it through the pandemic, not the large multinational that can rapidly shift sourcing to suppliers in other countries. A report from April 2019 profiled many U.S. companies that would be hurt by termination for India (and others).

Up to $111 million in tariffs have been paid on imports from Turkey from May 2019 to August 2020. In similar comments submitted as part of the Turkey review, we noted the typical GSP importer from Turkey had 14 employees and saved about $150,000 annually. The Turkey review was launched over “market access” issues, but there were no known discussions about resolving issues. Instead, Turkey was “graduated” for sufficient economic development despite just entered a recession and having a GDP per capita that has now fallen in 5 consecutive years (the metric used to determine if countries should be graduated from GSP automatically).

Up to $23 million in tariffs have been paid on imports from Thailand from May 2020 to August 2020. Importers from Thailand tend to be a little bigger – but far from large! – with the typical importer having 28 employees and savings $183,000 annually under GSP. Most unhelpfully, the product facing the most tariffs appear to be face masks. Higher tariffs on face masks may not have seemed like a big deal when Thailand’s partial suspension was announced in October 2019, but we’re in a very different world with mask imports surging due Covid-19.

Potential GSP renewal legislation is highly unlikely to address country-specific issues, but the impacts from terminations are no less real for American companies than the prospects of expiration. If Congress considers changes to the GSP programs in the future, ensuring importers interests are not ignored in the country review processes should be a top priority.

GSP eliminates $25,000 to $30,000 in tariffs annually on panels designed in the United States and manufactured in Thailand. The savings help Vtronix keep costs low for its customers — SME American manufacturers — who in turn are better able to compete against large, multinational producers.

Watch founder Anil Gowda explain how “this year, especially with Covid…renewing GSP would be a great benefit for us.”

If you’re a GSP importer, submit your own video testimonial here.

Our first video comes from Xpres LLC in Winston-Salem, North Carolina. After tripling employment from 25 to 75 workers since 2015, Xpres has been forced to downsize this year due to Covid-19. Not only did Xpres shut down for 3 weeks, many of its customers around the country did too. In the words of CEO Jan Reid, it’d be “double trouble” if GSP expires and its raw material imports from Thailand face 10% tariffs starting January 1.

Watch the full clip below. If you’re a GSP importer, submit your own video testimonial here.

In July alone, American companies paid over $275,000 on non-disposable cloth face masks from Thailand – and about $25,000 on other types of face masks – that face 7% tariffs without GSP. The next highest tariff line, certain off-road tires, faced a little over $200,000 in new tariffs due to lost GSP.

Such analysis was not possible until recent changes to how the United States reports import data for certain health-related products. Historically cloth face masks were reported in a catch-all “other made-up [textile] articles” category (HTS 6307.90.9889), but that catch-all category was subdivided into the following categories starting July 1:

• N95 Respirators Of Textiles (HTS 6307.90.9845)
• Respirators Of Textiles, Other Than N95 (HTS 6307.90.9850)
• Face Masks Of Textiles, Disposable (HTS 6307.90.9870)
• Face Masks Of Textiles, Other Than Disposable (HTS 6307.90.9875)
• Other Made Up Textile Articles (HTS 6307.90.9891)

Data show the old catch-all category of imports faced nearly $800,000 in tariffs in May/June – about 80% more than the next highest tariff line. And while we cannot know exactly how much of those tariffs were on masks, the July breakdown suggests it is a large majority.

Import trends clearly show tariffs from suspended GSP are hurting Americans, not Thais. While Americans are paying hundreds of thousands of dollars per month in extra tariffs, Thai exporters are shipping more than ever due to surging demand from Covid-19. It’s a lose-lose scenario for everyday Americans and for those that want to use punitive tariffs as leverage.

While the specific tariff costs for Thai masks couldn’t be known until recently, the potential costs were obvious before the GSP suspension took effect. In mid-April, 17 national associations asked the Trump Administration to delay implementation of the GSP suspension. The letter warned that the move “could undermine COVID-19 response directly” and “the United States should not reduce sourcing options or raise costs for potentially important products.”

Recognizing that higher tariffs for face masks would hurt Americans, the Trump administration suspended Section 301 China tariffs on these products in March. The Administration similarly could reinstate GSP benefits for Thailand, or it could continue harming Americans by imposing punitive tariffs on needed items.

While California is far-and-away the #1 state for GSP savings, Texas edges it out for most tariffs paid this year due to country suspensions – companies in each state have paid up to $18.6 million in extra taxes. Companies in New Jersey are not far behind, having paid up to $18.2 million in extra taxes due to country suspensions.

The costs are driven by different Trump administration actions. Texas is the top state in tariffs paid due to India’s suspension, New Jersey has paid the most due to Turkey’s suspension, and California has paid the most due to Thailand’s partial suspension. The table at the very bottom shows tariffs paid, by country suspension and total, for all states.

Including the tariffs paid due to suspensions, both in 2019 and 2020, drastically changes the state savings trends. Instead of the sea of dark red states with declines of over 20% shown yesterday (and below, right), only a 5 states are likely to have seen such declines without country suspensions. Similarly, there would be savings growth for states in every region of the country instead of limited to the Mountain West.

Swings states, including big states not traditionally in play in Presidential or Senate elections, account for some of the biggest dollar swings. Without country suspensions:

• Texas companies’ savings would’ve increased up to $2.4 million instead of declining by $12.7 million, a $15+ million swing
• Georgia companies’ savings would’ve increased up to $3.1 million instead of declining by $5.8 million, nearly a $9 million swing

In more traditional swings states, maintaining full GSP eligibility for all countries would have mitigated declines likely associated with the Covid-19 pandemic. For example:

• Florida companies’ savings would’ve declined by $4.3 million instead of $12.6 million, an $8+ million swing
• Pennsylvania companies’ savings would’ve declined by $350,000 instead of $8.2 million, nearly an $8 million swing
• Michigan companies’ savings would’ve declined by $3.2 million instead of $8.2 million, an $5+ million swing

Swings were even bigger on a percentage basis in states where GSP savings are traditionally lower:

• Instead of declining by 47%, New Mexico companies’ savings would’ve increased by up to 161%, a 200+ percentage point swing
• Instead of declining by 60%, Minnesota companies’ savings would’ve increased by up to 17%, nearly an 80 percentage point swing

These are real costs to real American companies and workers – many in places that will be hotly contested in the 2020 elections – on top of the challenges related to the Covid-19 pandemic and economic fallout. In addition to congressional reauthorization of GSP, administration decisions to restore lost GSP eligibility would provide significant benefits to struggling American companies.