GSP remains expired on April 1: that’s no joke for American companies and workers

It’s been three full months since Congress let GSP expire. In that time, American companies likely have paid over $200 million in extra tariffs – it was at least $70 million in January alone. Last week we highlighted how GSP expiration reduces American jobs, makes pay/benefits at existing jobs worse, makes China more competitive, and raises costs for American manufacturers (even for products not available in the United States). The examples from last week are hardly unique. Below are new comments received over the last few days about impacts of GSP expiration.

Burris Company, a manufacturer in Greeley, Colorado, has paid nearly $400,000 in tariffs due to GSP expiration. Vice President of Finance Mike Kinnison reports: “Burris Company manufactures as well as imports. The lower cost of imports helps to sustain our manufacturing and keep overall costs low. Additional tariffs puts US manufacturing at risk. Much more delay will result in canceling any large capital investments and lead to layoffs.”

Franklin Mfg Inc. in Jericho, New York has paid about $25,000 in tariffs due to GSP expiration. It raised prices to reflect tariffs, which led to lost sales and lower planned purchases going forward. As Franklin Mfg President and Owner Jesse Taube reports: “We are in a vulnerable position to lose our current customers due to not being as competitive.”

Fusion Gourmet, a food importer in Rancho Dominguez, California that has paid $25,000 in tariffs, similarly raised prices and lost sales. According to Fusion Gourmet President Steve Liaw, job impacts are felt by workers in both the United States and Indonesia, it’s primary GSP source country.

  • In the United States: “Due to increased costs related to GSP, we are not able to increase our hiring for 2021. These additional costs directly impact our budget that we allocate towards seasonal hiring.”
  • In Indonesia: “We will also reduce our orders from factories that are in countries impacted by GSP. This lost revenue will negatively impact these factories which are usually 70+% women workers.”

A Simpler Time, which is based in Morrisville, North Carolina and also operates a retail store in New Orleans, Louisiana, reports how GSP expiration directly hurt wages for its American workers. According to A Simpler Time President Jeff King: “Normally [we] pay quarterly bonuses to employees, but have delayed them as we can’t pass all the increased costs on to customers.” It also didn’t replace a worker that left and reduced another’s hours due to a combination of higher import costs, supply chain issues, and retail sales that remain well below pre-Covid levels.

If you’re a company impacted by GSP expiration, please answer our very short survey on GSP expiration impacts to date (the source for all of the above examples). To further help the Coalition for GSP educate policymakers on who is hurt by expiration (and how), companies are strongly encouraged to:

Sourcing shifts from China to GSP countries: Christmas lights

We recently posted that GSP savings shattered previous records in October and that growth was strongest for products where the Trump administration has imposed new 10-25% tariffs on imports from China. One very clear example: Christmas lights, whose imports from China became subject to a 10% tariff on September 24.

For September/October, GSP imports of Christmas lights increased by $24 million compared to the previous year, while imports from China declined by $32 million. Similarly, the share of total U.S. Christmas light imports claiming GSP more than doubled to 19% in September/October 2018 from 9% during the same period in 2017.

Sourcing from GSP countries saved companies (and likely their customers) millions of dollars since they are not subject to either the 10% Section 301 tariff or the 8% MFN tariff that China already faced. Christmas lights make for a good example for a few reasons:

  1. Seasonal imports are concentrated from August-October, therefore shifts will have happened already (or may not be necessary until August 2019).
  2. Nearly all imports come from China (85% in 2017) or enter under GSP (12% in 2017), so there are few alternative sources to muddy trend analysis.

So what does a more detailed look at the data show? Imports under GSP jumped significantly – nearly double 2017 figures – in September and October:

And imports from China have dropped since tariffs were imposed:

Most interesting may be viewing the year-over-changes on the same graph:

Imports from China and under GSP were mostly unchanged in the first six months, and both rose in July and August as might be expected. But their paths diverged in September.

The $13 million increase in imports under GSP offset most of the $23 million decline in imports from China. In October, the $11 million increase in GSP imports more than offset the decline from China. That means for the two months combined, GSP increases offset about 75% of the decline in imports from China. (Overall tariffs on Christmas lights rose – A LOT – but GSP likely mitigated the increase by several million dollars.)

If you import from both GSP countries and China, or your GSP imports compete with those from China, please answer our new survey. We hope to collect information that could be relevant as the Administration reviews GSP-eligibility for major supplier countries such as India, Indonesia, Thailand, and Turkey.

State breakdown of $145 million in taxes paid through February 2018 due to GSP expiration

GSP benefits resumed a week and a half ago and importers must no longer pay tariffs on GSP-eligible goods. Yet it may be a while before tariffs are fully refunded.

The map below shows the overall value of GSP imports (in blue) and tax costs due to expiration (in red) by state during the first two months of 2018. These figures reflect imports that claimed GSP (as advised by CBP) and should be eligible for automatic refunds.