Despite overwhelming congressional support for GSP renewal in 2018, the Trump administration has taken actions that will gut GSP benefits for many American companies. Last week, USTR announced its intent to terminate GSP benefits for India and Turkey.

[Given the risks to those countries and others – companies importing under GSP are strongly encouraged to add their name to our free GSP supporter list]

Imports from India and Turkey accounted for over $330 million of those tax savings for American companies in 2018 – and there could be more bad news to come. There are “pending reviews” for other major GSP suppliers such as Indonesia and Thailand that accounted for over $310 million in GSP savings last year. (Decisions could be announced at any time.) As such, less than 40% of GSP benefits came on products where there is no an immediate risk of losing GSP.

For many states, the situation is even more dire: India and Turkey combined to account for more than 60% of GSP savings for companies in Nebraska (77%), New Mexico (70%), North Dakota (64%), Missouri (64%), Iowa (63%), Delaware (63%), and Oklahoma (61%). House Members from those states voted 25-0 in support of the 2018 GSP renewal bill (2 were not present), but their reauthorization support could be undermined by the Admistration’s actions.

When you include countries under review, 43 states (!) had at least half of all GSP savings in 2018 come from countries at risk of losing GSP. In addition to states listed above, over 80% of GSP savings are at risk for companies in Maine (87%), Tennessee (85%), Mississippi (84%), Alaska (83%), and Minnesota (81%). Again, there was unanimous support among voting House Members from those states for the 2018 reauthorization bill.

By comparison, the most tariffs paid in a single month during the last 2-year expiration was “just” $61 million. So the stakes for a swift, retroactive renewal are much, much higher for American companies this time around.

GSP imports were up by 18 percent compared to January 2017. Had companies not been forced to pay them, tariff savings would have increased by 21 percent. Montana and South Carolina were among the states with big increases in GSP imports getting slapped with new tariffs, as shown in the graphic below.

GSP expiration cost Montana companies $46,000 in January. Potential savings were up $38,000 (514 percent) compared to one year earlier. Travel goods from Philippines and fishing lures from Cambodia contributed most to the increases. As noted recently, Montana Fly Company in Colombia Falls had to lay off 3 workers due to higher tariffs associated with GSP expiration.

GSP expiration cost South Carolina companies $1.8 million in January. Potential savings were up $607,000 (49 percent) compared to one year earlier. Plastic resins from South Africa, motorcycles from Thailand, and plaited goods (baskets, wickerwork) from India contributed most to the increases.

In addition to Georgia and North Carolina, companies in 19 other states (plus DC and Puerto Rico) saw potential GSP savings increase by at least 20 percent, including: Alaska, Colorado, Delaware, Florida, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Missouri, Nebraska, Nevada, New Jersey, New Mexico, Texas, Vermont, Virginia, and Wyoming.

Potential savings on GSP imports from Tunisia increased by 115 percent compared to January of last year. Maryland companies alone imported $3.4 million in olive oil claiming GSP in January. GSP would’ve eliminated about $1.2 million in import taxes on monumental and building stone in January had it been in place. Illinois was among the largest importing states.

*** REMINDER: GSP EXPIRED EFFECTIVE JANUARY 1.***

The House passed GSP renewal legislation in February, but the Senate must pass legislation for GSP benefits to resume. Please use our Contact Congress tool to write your Senators about GSP renewal; answer our brief survey on how GSP expiration impacts you, and/or sign up for the free GSP supporter list to show the broad support for renewal.

Below are some new responses to our GSP reauthorization survey from companies in Colorado, Maryland, and Texas (to go along with responses highlighted yesterday and the day before).

With the Senate Finance and House Ways and Means Committees both expecting to hold trade hearings and votes this week, we’re trying to collect as many responses as possible (ASAP). If you haven’t answered the survey yet, please take a moment to do so here.

Burris Company in Colorado imports sporting rifle scopes from the Philippines. In July 2013, the company decided to expand domestic manufacturing, but those plans were put on hold when GSP expired two weeks later. Since then, Burris has paid about $2.5 million in extra import taxes. The tariff refunds and guaranteed GSP benefits through December 2017 would allow Burris to move ahead with its expansion plans, including an investment in a new facility and CNC machinery that would create 10-15 permanent, high-paying manufacturing jobs in Colorado.

Reynolds Polymer Technology in Colorado imports acrylic sheet from Thailand used in the design and manufacture of custom aquarium windows and other specialty acrylic structures (pictured above). Since GSP expired, the company has paid about $300,000 in extra import taxes for this key component. Overall, revenue dropped by more than half a million dollars and several employees had to be let go. The proposed GSP renewal legislation would lower costs again, allowing Reynolds Polymer to increase sales and hire new workers again.

COLE-TUVE, Inc. is a small business in Maryland that imports Turkish metal fabricating machinery used by U.S. manufacturers. It has paid about $75,000 in extra tariffs because of GSP. Higher prices have forced COLE-TUVE to reduce inventories, and the company has lost about $250,000 in sales to customers that need quick delivery and cannot wait for a new order from Turkey. The company believes the proposal GSP renewal would allow it to increase both inventories and sales, as it would no longer need to turn customers away. The company could also give retirement contributions and annual raises again – both of which have been frozen since GSP expired – and “hopefully hire a new service man.”

Mediterranean Delight is a small business in Texas that specializes in olive oil imports from Tunisia. The company has paid more than $150,000 in tariffs because of GSP expiration and “lost sales that would have allowed the hiring of at least 4 more employees.” By refunding tariffs paid and giving Tunisian olive oil a tariff preference once again, the proposed GSP renewal legislation would allow Mediterranean Delight to hire 3 new account managers immediately. When sales growth returns to pre-GSP expiration levels, the company hopes to hire 6 more. In the meantime, Mediterranean Delight also plans to increase health care contributions to its existing employees.

Not only are the above products – olive oil, prepared Thai and Indian foods, canned fruits, and spices – typically imported under GSP, all of the these brands are imported by American companies on the GSP supporter list! Most of them aren’t even available in the United States, so the choice for families is simple: buy imports or nothing!

The olive oil is imported from Tunisia by CHO America in Baytown, Texas. Even if you don’t recognize this brand, there’s a good chance you’ve tasted olive oil imported under GSP: Sovena USA in Rome, New York supplies more than 50 percent of private-label olive oils in the U.S. retail marketplace. Sovena imports olive oil from Turkey, Tunisia, and Egypt under GSP.

Connecticut companies Andre Prost in Old Saybrook and Preferred Brands International in Stamford import the “A Taste of Thai” and “Tasty Bite” packaged foods. If GSP were in place today, it would eliminate imports taxes of 6.4 percent on both of these products. Yet as a result of GSP expiration, it has cost an extra $850,000 per month to get these same foods into the United States.

Dole Packaged Foods in Westlake Village, California imports a variety of canned fruit products under GSP. These pineapples come from Thailand, but may also come from the Philippines and other GSP countries. GSP benefits help keep costs low for many tropical fruits and juices that would not be available on a year-round basis if not for imports.

Finally, the bottom row is for Sparks, Maryland-based McCormick & Company, one of the newest GSP supporter list companies. Not all McCormick spices benefit from GSP, but if you have as many different spices in your pantry as we do, you probably have GSP products in your home, too!

In each of these cases – the difference between lower and higher prices for American families is congressional action on GSP. Imagine the uproar if the sales tax on numerous food products doubled or tripled (or worse). In effect, that’s what happens when GSP expires. But since the taxes are collected at the border instead of at the cash register, most customers will remain unaware. If that changed, those customers might leave the market with a bitter taste in the mouth.

Imports Week Addendum: Do you see the fresh fruit on the left side of the picture? While not GSP products, they’re still imports and American families would be worse off without them, so in the spirit of Imports Work for America Week we’ve included their details. The bananas can be imported duty free from all countries, in this case from Costa Rica. If you’re incredibly perceptive, you’ll also see a mango and a cantaloupe – both from Guatemala. Both are eligible for duty-free treatment under GSP and may have claimed GSP in past years, but now they enter the United States under the Dominican Republic-Central America Free Trade Agreement (DR-CAFTA). If not for GSP and/or DR-CAFTA, both products would be subject to tariffs – 29.8 percent in the case of the cantaloupe! In our experience, duty-free cantaloupe tastes just a little bit sweeter.

• They are headquartered in 42 states (plus DC) and 221 congressional districts and you can download the list by supporter list by congressional district here.
• They range from sole proprietors to some of the largest corporations in the world, but about 78% are small businesses with 100 or less employees, and the median number of employees is just 15.
• GSP savings range from as little as $1,000 to millions of dollars per year.
• They import from more than a quarter of GSP-eligible countries, including: Bangladesh, Bhutan, Bolivia, Brazil, Burkina Faso, Cambodia, Ecuador, Egypt, Georgia, Ghana, Haiti, India, Indonesia, Kazakhstan, Kenya, Lebanon, Macedonia, Madagascar, Malawi, Mali, Nepal, Pakistan, Paraguay, Philippines, Russia, Senegal, South Africa, Sri Lanka, Tanzania, Thailand, Tunisia, Turkey, Ukraine, and Uruguay.

For those comparing to our last update, we’ve added 2 states (New Hampshire and Vermont), a number of new CDs, enough very small businesses to drop the median employees from 17 to 15,  and one new GSP-eligible country (Ukraine).

If you’re not yet on the list, be sure to add your name here.

The GSP’s importance to its beneficiary countries cannot be underestimated. The import program benefits more than 3.8 billion people living in two-thirds of the world’s economies. They rely on GSP duty-free exports to the United States to create tangible economic development.

The letter also noted that when GSP was allowed to expire for 10 months back in 2011:

U.S. imports of GSP-eligible items during that period decreased by over 17 percent, while overall U.S. imports increased by 15 percent.

We’re in the process of collecting company/association signatures for a similar U.S. business letter.  If you’d like your organization to be on that letter, just add your name (if you haven’t already) to our GSP Supporter List.  But act quick, as our letter will be going out VERY soon!