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.

GSP’s current authorization expires on December 31, 2020, and Congress must pass legislation renewing GSP this year for benefits to continue into 2021 and beyond. Companies that want GSP renewed should add their name to the free GSP supporter list.

By GSP savings, California was far and away the largest GSP beneficiary. California’s estimated $270 million in tariffs waved was nearly as much as the next four largest states – Florida, New York, Texas, New Jersey – combined.

While overall savings levels were lower, imports into Montana and Maine would face the highest average tariffs without GSP (10.9% and 10.6%, respectively). The high average tariff waived results from the dominance of travel goods imports, which can face tariffs up to 20.0% without GSP. GSP waives tariffs averaging about 7.0% on imports into Utah, Wisconsin, Arizona, and Colorado, well above the 5.0% national average.

U.S. companies saved about $180 million in tariffs on imports from Thailand – more than any other country – though GSP eligibility for about 1/3 of imports its products were removed in April 2020. Cambodia was the second most important country for U.S. savings at $169 million, following by Indonesia at $150 million. Despite being GSP-eligible for only 5 months, India was the fourth-most important country in terms of savings at $121 million. Like the states, countries such as Burma and Cambodia where travel goods are most important GSP products had the highest average tariffs waived.

Even before upward revisions, U.S. companies’ tax benefits from GSP showed massive increases from past years: American companies saved nearly $20 million per month more in 2017 because of GSP compared to just two years earlier.

Through the first half of 2018, GSP savings are up an additional 18 percent and on track to crack $1 billion for the year. While Congress renewed GSP through 2020 to give companies the certainty necessary to encourage such growth, the Trump administration has launched a number of country “eligibility reviews” that could raise taxes for American companies that depend on GSP – by a lot.

There are GSP reviews underway for India, Indonesia, Kazakhstan, Thailand, and Turkey. American companies saved $544 million last year due to GSP for those countries. Collectively, they accounted for 61 percent of GSP savings on imports from all countries.

Given the risk of lost GSP, we strongly encourage companies importing from those countries to sign up for our GSP supporter list and take our review impacts survey, which are both free.

In terms of specific revisions based on the new data, New Jersey saw the biggest jump in savings by value, followed by Florida, California, Georgia, and New York.

Montana saw the biggest jump in GSP savings by percent, followed by Utah, Maine, Florida, and Nevada.

For supplier countries, the largest revision in US savings came on imports from the Philippines, followed by Indonesia, India, Thailand, and Brazil.

New tariffs from GSP expiration in 2013 put Summit’s products at a disadvantage to doors imported from non-GSP countries. In total, Summit Specialty paid just a hair under $200,000 in extra taxes because of GSP expiration. As a result, Summit Specialty delayed both hiring additional workers and new capital equipment purchases, thereby halting its growth.

Photo by Lehigh Valley, PA [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

On Monday, President Donald J. Trump declared July 16-22 to be “Made in America” week and held an event at the White House highlighting American-made products. Yet such events often overlook the benefits of imports, including programs such as GSP, in creating those American-made products.

Take BTR International, a small business in New York City that imports engine-ready camshafts from Brazil. GSP eliminates the 2.5 percent tariffs those imports would otherwise face. GSP savings help BTR provide the best-possible prices to customers, including iconic American manufacturers such as Mack Trucks.

Mack is among the world’s largest manufacturers of heavy-duty trucks, engines, and transmissions. Founded in 1900, Mack has an engine plant in Hagerstown, Maryland and assembles all its trucks for the North America market in Macungie, Pennsylvania. Mack exports its trucks throughout North and South America, Australia, and Africa.

The indirect savings from GSP for Mack are emblematic of the broader automotive industry. In 2016, GSP eliminated $78 million in taxes on auto parts ranging from camshafts to wire harnesses to brakes parts and tires. Michigan, California, and Tennessee were the principal beneficiary states.

By eliminating such taxes, GSP provides the U.S. auto industry a competitive edge. (Our GSP Supporter List includes numerous companies importing auto parts.) Without it, the higher costs would trickle through the supply chain, from small importers like BTR to major producers like Mack and eventually to the end customers at home and abroad. Such cost increases could lead to diminished sales and a cutback in U.S. auto manufacturing capacity.

• total GSP imports, tariffs savings, and average tariffs waived on account of GSP in 2016;
• companies importing GSP-eligible products;
• top GSP imports by product type;
• top GSP source countries by tariff savings, and
• the extent to which recent GSP expiration periods prevented “real-time” user benefits.

GSP usage differs greatly between states, from the types of products they import to the dependence on suppliers in specific countries. For example:

• Colorado companies saved $4.5 million on imports of about $60 million, meaning average tariffs waived of about 7.5 percent. That was about twice the U.S. average and nearly triple the 2.6 percent average tariff waived in Louisiana.
• North Dakota‘s imports under GSP in 2016 were primarily food products (56 percent), whereas West Virginia‘s imports were auto parts (44 percent). In most states, a single product grouping accounted for at least a quarter of GSP imports.
• Iowa is among the most concentrated states in terms of source countries, with 94 percent of GSP savings on imports from just three countries (India, Brazil, and Thailand) in 2016. Florida is the least concentrated state, with less than half of GSP savings on imports from its top three source countries.
• Idaho importers have paid tariffs on GSP imports more often than not: nearly 60 percent of tariffs waived on imports into the state since 2011 came when GSP was expired, meaning companies paid up front and “hoped for the best” regarding refunds. Conversely, just 33 percent of New Hampshire‘s tariff savings came during expiration periods since 2011.

All reports are available for download, along with other state-specific info, on the state reports page. A sample of the Kentucky report is below.

Overall, GSP saved U.S. companies $472 million in the first eight months of 2016. GSP savings in 2016 are up about $40 million, or 9 percent, compared to the first eight months of 2015.

That comment was provided by Alex Livingston, President of Summit Specialty International in Alpharetta, Georgia, in response to our new GSP renewal impacts survey. The small business imports interior pine doors from Brazil that are used in new residential construction.

Like yesterday’s profile of Candace Abitbul from Sophia Foods, this is not the first time that Alex has provided information about the impacts of GSP on his company. Back in 2014, Alex reported that because of GSP expiration Summit could not “invest in either people or new equipment in a manner in which we would like,” while in early 2015 Alex reported that a retroactive GSP renewal would allow Summit “to hire another worker, give raises, and invest in additional inventory.”

GSP expiration cost Summit $198,218.03 in extra import taxes. Since GSP renewal, it has gone above and beyond previous predictions: Summit has hired two workers, gave its five employees raises, and started providing medical insurance.

These types of outcomes are possible when American companies can invest in their workers and operations instead of paying those “arbitrary and outdated tariffs.” As the scheduled GSP expiration approaches next year, importers must continue to remind Congress that they operate in the 21st – as opposed to the 19th – century economy.

Summit Specialty provided the above information in response to our GSP renewal impacts survey. If you have not done so already, please take a minute to answer these questions today. As always, all data will be kept confidential and no company-specific answers will be attributed unless permission is explicitly granted. You can find another company responses here and here and some preliminary survey response data here and here.

Overall, the value of GSP imports increased by 9 percent and the value of GSP tariff savings increased by 14 percent compared to June 2015. Some states, such as Florida and Kansas, saw much larger increases in GSP imports and savings compared to June 2015, as shown in the graphic below.

In Florida, GSP imports and savings both increased by about 50 percent compared to one year earlier. Ferroalloys from Georgia, jewelry from Bolivia, and plywood from Ecuador all contributed to Florida’s GSP increases.

In Kansas, GSP imports increased by 28 percent and savings from GSP by 53 percent compared to one year earlier. Pesticides from India, ceramic sanitary fixtures (sinks, tubs, toilets, etc.) from Thailand, and building stone from Brazil contributed most to Kansas’ GSP increases.

Imports from the Ukraine nearly doubled, led by increased imports of rare gases by companies in South Carolina. GSP eliminated about $560,000 in import taxes on truck tires in June, with more than $200,000 saved on imports into New Jersey alone.

If your company imports under GSP, be sure to answer our GSP renewal impacts survey here.

Overall, the value of GSP imports and tariff savings both increased slightly compared to April 2015. Some states, such as South Carolina and New Hampshire, saw very large increases in GSP imports and savings compared to April 2015, as shown in the graphic below.

In South Carolina, GSP imports increased by 49 percent and savings from GSP by 48 percent compared to one year earlier. Plastics from Brazil, valves from Turkey, and motorcycles from Thailand contributed most to South Carolina’s GSP increases.

In New Hampshire, GSP imports increased by 317 percent and savings from GSP by 273 percent compared to one year earlier. Sporting goods from Thailand, optical devices from Sri Lanka and the Philippines, and parts for meters from India contributed most to New Hampshire’s GSP increases.

Imports from Bolivia jumped by 60 percent, led by increased imports of tungsten concentrates by companies in Nevada. GSP eliminated about $821,000 in import taxes on sugar and nearly 70 percent of those imports went to California.