From January-July 2021, American companies paid at least $565 million in extra taxes as a result of GSP expiration. Imports into 36 states (plus Puerto Rico) paid at least $1 million in tariffs from January-July 2021 due to GSP expiration. The map below shows estimated tariffs paid for products claiming GSP by state.

July was the most expensive month of GSP expiration yet for 12 states: Georgia, Hawaii, Iowa, Kansas, New Hampshire, Rhode Island, South Carolina, Utah, Vermont, Virginia, Washington, and Wisconsin. In Rhode Island, tariffs costs in July were more than the previously three months combined. Tantalum metals used primarily to manufacture electronic components from Kazakhstan and Christmas lights from Cambodia – the two products driving the Rhode Island increase – show the diverse impacts of GSP expiration.

GSP expiration costs have a direct, negative impact on American workers:

• “GSP can be the difference between making a profit or a loss and without profits we obviously can’t increase wages and benefits” says Charlie Smith of BROSCO, a 4th generation, family-owned millwork distributor in Massachusetts and Maine. “Continued losses put all of our 360 workers’ jobs and livelihoods at risk.”
  
• “We are having challenges staying competitive“ says Ajay Kochhar of A&S Distributors in Salida, California. The 7-worker company has paid over $60,000 in extra taxes on food products from Fiji because of GSP expiration. “We can’t hire and give employees full benefits as this is a major increase.”
  
• “The tariffs when added to the rapidly escalating costs of containers have been devastating” says Sandra Colyer of Lily Koo LLC in Jamestown, North Carolina. “Employees laid off due to Covid are slowly being brought back, but return to work would occur more quickly if money was not being spent on tariffs.”

It is critical that Congress renew GSP – with refunds for tariffs paid – as soon as possible. We strongly encourage GSP importers hurt by expiration to answer our new survey here. As always, no company-specific details will be published without permission.

While GSP normally helps lower average tariffs on many of these products, the current expiration means tariffs in 2021 are now even higher!

Take bicycles. The graphic shows average tariffs of 15% in 2020, but the average tariff paid in the first half of 2021 is over 22% – in part to millions of dollars in new tariffs paid on bicycles from Cambodia because of GSP expiration. In response to the Coalition for GSP’s ongoing survey, bicycle company SPECIALIZED reported raising prices to U.S. consumers because of the extra tariffs. About 75% of survey respondents similarly report raising prices to cover tariff costs.

Or gym bags. The graphic shows average tariffs of 23.5% in 2020, but the average tariff paid in the first half of 2021 is more like 28%. GSP expiration has led to tens of millions of dollars in extra tariffs on duffel bags that weren’t assessed in 2020. Many of these products left China for GSP countries to avoid high tariffs, but then faced higher tariffs due to GSP expiration anyways.

Musical instruments. Rulers. Phone cases. Backpacks. Sports equipment. Colored pencils. Pens. Water bottles. All of those products (and many others) now face extra tariffs in 2021 because Congress let GSP expire on December 31, 2020.

Congress should renew GSP immediately so companies can stop raising prices on necessary items such as back-to-school supplies. If you’re a company impacted by GSP expiration, please answer our impact survey here. No company-specific details will be published without explicit permission.

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.

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.

Last week, the House passed GSP renewal legislation by a vote of 400-2. Though Senate procedural rules make a stand-alone vote in the Senate unlikely, the expected result would be similar. (The last Senate vote was 97-1.) Despite overwhelming support in the House and Senate – and Administration support for a 3-year renewal – American companies and workers continue to suffer while waiting for GSP renewal.

Take Montana Fly Company (MFC) in Columbia Falls, Montana, a town of about 5,000 people between Flathead Lake and Glacier National Park. MFC imports artificial fishing flies from Cambodia that face tariffs of 9% without GSP. High tariff rates mean high expiration costs for MFC, which generally saves between $10,000 and $20,000 per month from GSP. Adam Trina, MFC Founder and President, had this to say about the lapse in GSP benefits:

GSP expiration immediately impacted Montana Fly’s business. Fishing season is over and as a seasonal business, cash flows are extremely important. All resources must go toward daily operations and the building of inventory for the following season. We laid off 3 workers here in Montana, one from higher-level management and 2 mid-level employees. We also had to let go 8 people in Cambodia.

We need to find more areas to cut as our total duty in 2018 will be around $200,000. Due to the duration of the previous GSP expiration, we can’t afford to wait around hoping GSP renewal will get passed, so we have taken and are taking immediate action. 

For MFC, which had 27 US employees in late 2017, the layoffs represent about 10% of its workers. Large companies may have the financial resources to absorb tariff costs while waiting for Congress to act, but that is not feasible for small businesses like Montana Fly. It simply isn’t possible to come up with $10,000 to $20,000 a month without cutting back significantly in other places, such as as payroll.

The longer Congress waits to act, the more uncertainty and disruption it causes for companies and workers alike.

Is GSP expiration similarly impacting your company? If so, let us know how by completing this form. As always, no company-specific information will be published without explicit permission.

Based in Plano, Texas, Custom Direct is a US supplier of luggage, bags and cases with 10 employees. The company works with manufacturers in Cambodia that generally qualify for duty-free treatment under GSP. The company hasn’t paid any extra import tariffs due to GSP expiration, but the costs are quite real. According to Custom Direct’s CEO [emphasis added]:

We lost our largest project of the year, the opportunity to supply 2.5 million eyeglass cases to a major US customer as part of a Q-1 project. We were the successful bidder and awaiting the purchase order when we became aware that Congress had failed to renew GSP.  

The duty on cases would have added 17.6% to our cost of goods which we could not simply “hope” to recoup some day if GSP were to be re-instated. We had no choice but to withdraw and the business went to a supplier in China instead. We are still in the running for Q-3, but without GSP allowing us to partner with a Cambodian manufacturer, the project will go to China again.

The loss of business made us delay plans to hire 6 people in Texas and adjust revenue forecasts downward. Our US warehouse subcontractor also delayed plans to hire additional American workers to handle marking and labeling, packing, and distribution of the eyeglass cases. We are a small business and the loss of such a large client is perilous to our bottom line.

Custom Direct is a textbook example of why even retroactive renewals that refund tariffs paid can’t “make companies whole.” There are no tariff refunds for sales that were never made – something we highlighted on Tuesday as well. The longer Congress allows GSP to remain expired, the greater the risk of major losses for companies like Custom Direct that must compete against suppliers in countries like China that are not impacted by GSP expiration.

Is GSP expiration similarly impacting your company? If so, let us know how by completing this form. As always, no company-specific information will be published without explicit permission.

GSP expiration in 2013 led to an estimated $1.5 million in sales for Kona, which also paid nearly $600,000 in tariffs. As Kona’s Chairman Jacob Heilbron said in 2014:

“We’re unable to raise prices during our model year so the loss of profit is absorbed into our bottom line. We would like to hire new U.S. based personnel for our R&D/Product Development team but are waiting until GSP is renewed.”

While it took nearly a year to receive all of its tariff refunds, Kona took immediate steps to invest and hire new workers following GSP renewal in 2015. In the 30 days after GSP was renewed (but before benefits kicked back in), Kona hired a senior engineer and an industrial designer and had plans to hire a new product manager the next month. It has hired two more workers since and now has 32 employees, a nearly 20 percent increase over early 2015 before Congress renewed GSP.

Our Kona profile page has more details about the importance of continued GSP benefits to the company (also available as a one-page PDF here or below).

Kona is just one of the GSP importers sharing how GSP allows its businesses and workers to thrive on our Company Profiles page.

Overall, the value of GSP imports and tariff savings both increased by more than 10 percent compared to May 2015. Some states, such as Arkansas and Rhode Island, saw very large increases in GSP imports and savings compared to May 2015, as shown in the graphic below.

In Arkansas, GSP imports and savings both increased by 37 percent compared to one year earlier. Vanadium oxides and hydroxides from South Africa, firearms from Turkey, and transmission parts from Thailand contributed most to Arkansas’ GSP increases.

In Rhode Island, GSP imports increased by 79 percent and savings from GSP by 145 percent compared to one year earlier. Costume jewelry from Thailand, glass fibers from Sri Lanka, and metal picture frames from Turkey contributed most to Rhode Island’s GSP increases.

Imports from Cambodia jumped by 121 percent, led by increased imports of window blinds by companies in California. GSP eliminated about $109,000 in import taxes on buses in May and has waived more than $400,000 on imports of buses in the first five months of 2016.

GSP benefits can be found all around us – if you’re willing to check out the “Made in” labels. Of course, the ongoing GSP expiration has raised costs for importing all of those everyday products. Between August 2013 and March 2015, GSP expiration increased import taxes on consumer goods by about $256 million. Add in food products and the total climbs to about $400 million.

A new addition to the family means lots of new tags to examine – many of them from GSP countries – such as those pictured below.

Left: Indonesian cotton shirt (19.7 percent import tax); Center: Indian Gerber Onesie, Indonesian plaid bodysuit (8.1 percent import tax each); Right: Cambodian crab tee shirt (14.9 percent import tax)

Unfortunately, while purchased from GSP countries, these products are excluded from GSP because of statutory exclusions for apparel. These exclusions are unlikely to change, as apparel is considered a sensitive product. And it is American families that pay the price, because clothes for very little people have very big (hidden) taxes baked into the price – up to almost 20 percent on the products shown above.

Over the same period that GSP-eligible everyday products faced $400 million in taxes because of expiration, taxes on (ineligible) baby clothes alone from GSP countries totaled another $128 million. The average tax was 11.1 percent. Other apparel products face similarly high tariffs. Even the baby is shocked (left) and disappointed (right) at the high taxes on clothes that he will outgrow after just a few wearings!

While GSP benefits for apparel may be a pipe dream, there is a glimmer of hope for American families and workers looking to save even more money from GSP.  The legislation passed by the Senate Finance Committee that would renew GSP also includes provisions known as GSP UPDATE, which would open the door to GSP benefits for travel goods such as backpacks, luggage, and phone cases. The House version of the bill does not include the GSP UPDATE provisions, so it remains to be seen whether they are enacted into law.

Of course, all of these savings are hypothetical so long as GSP itself remains expired. Let’s hope Congress can act soon to renew GSP and expand its coverage. American families will benefits, even if they don’t take the time to read all the “Made In…” labels.

This post is part of the 4th Annual “Imports Work for America Week.“ For more information visit the Imports Work website.

Kona isn’t the only new company calling on Congress to renew GSP before it expires on July 31. Other new additions include:

• Deringer-Ney, based in Vernon Hills, Illinois (10th District) with additional locations in Bloomfield, Connecticut (1st District), Blaine, Minnesota (6th District), and Marshall, North Carolina (11th District), which imports from India;
• Mullican Flooring, based in Johnson City, Tennessee (1st District) with additional locations in Norton, Virginia (9th District), Ronceverte, West Virginia (3rd District), and Holland, New York (27th District), which imports engineered wood flooring from Indonesia, and
• Von Roll USA, located  in Schenectady, New York (20th District) with additional locations in New Haven, Connecticut (3rd District), Douglasville, Georgia (13th District), Monmouth Junction, New Jersey (12th District), and Cleveland, Ohio (9th District), which imports mica flooring from Brazil.

If you lost track, those companies operate in 12 states and 14 congressional districts – and they represent just four out of the 160+ American companies and associations on the Supporter List.

Not on the list but import under GSP? Make sure to add your name for FREE here so that Congress knows that you need it to renew GSP before it expires on July 31.