It should go without saying: if policymakers want U.S. companies to buy less from China and more from other countries, they shouldn’t also raise tariffs on those other countries. But since imposing Section 301 tariffs on China, that’s exactly what they did by:

1. Ending GSP benefits for major countries (e.g., terminating GSP for India and Turkey in 2019, suspending half of Thailand’s benefits in 2020; result: $800+ million in extra tariffs);
   
2. Ending GSP benefits for major products (some Brazilian chemicals/countertops and Argentine essential oils in 2018, jewelry from Indonesia and plywood from Ecuador in 2020; result: about 1/3 of all “GSP eligible products” are now excluded due to similar decisions), and
   
3. Letting the entire program lapse on December 31 (result: nearly $500 million in extra tariffs in the first half of 2021).

Given those actions, it should be no surprise that companies are abandoning suppliers in GSP countries to buy more from China. It is impossible to make long-term sourcing plans based on GSP when tariff benefits for your country, or product, or the entire program, may lose benefits at any time.

It doesn’t have to be this way. Congress can help U.S. companies shift supply chains by renewing GSP (for a long time) and updating product rules so that GSP countries become more viable alternatives to China. Or it keep tariffs on China’s competitors high by letting GSP remain expired.

We are a small, family-owned business that has been manufacturing, importing, and distributing poly bags since 1876 (142 years). Sandbags from India are a major part of our business – the majority of which end up being sold through our distributors to government municipalities for flood relief.

This year, we are worried that we have no choice but to raise our prices to factor in the increased duty, as the unrest in Washington seems to be at an all-time high, and our confidence in a retroactive renewal is not as strong as it has been in previous years.

While we continue to navigate this situation, we have put several expansion plans for 2018 on-hold, including hiring additional sales and operations staff for our Cranbury, NJ facility.

Higher costs and uncertainty about renewal make any big decisions difficult, particularly for small businesses like Halsted. Decision-making becomes harder every day as new shipments arrive and the amount of taxes paid grows, making it critical for Congress to pass GSP renewal legislation quickly.

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.

As B&C President Bengt Bruce noted at the time:

“We made a commitment to manufacture in America, but right now distributors are turning away from us in favor of suppliers from China and the Czech Republic that are not impacted by GSP expiration. Retroactive GSP renewal would help us finish the new plant and expand our American workforce.”

Whether talking to reporters or on the Hill for meetings, we often get the same question: “How long of a GSP extension would you like to see?”

Our answer is always the same: “As long as possible.” 

Yet more important that what we want is why we want it.  Put simply, history shows that long-term renewals are the key to increasing GSP utilization.  Take a look at the chart above and a couple things jump out:

• There’s a whole lotta pink, meaning importers frequently (and for extended periods of time) had to pay tariffs after Congress allowed GSP to expire;
• GSP imports tend to fall during those pink-shaded periods, and
• GSP imports soared after Congress passed a 5-year renewal in 2002.

This series of short-term extensions and retroactive renewals wasn’t always the norm.  The Trade Act of 1974, which created the GSP program, included an initial 10-year authorization. The Tariff and Trade Act of 1984 included an 8.5-year extension.

After nearly 20 years of uninterrupted operation, things got dicey.  Between July 1993 and July 2002:

• GSP was allowed to expire 7 consecutive times it was up for renewal;
• Companies paid tariffs nearly 40 percent of the time on “duty-free” imports, and
• GSP imports fell because of the uncertainty.

By contrast, as a result of the new certainty provided by the long-term renewal in 2002, GSP imports nearly doubled by the end of 2006. 

History repeated itself in 2011.  GSP imports were recovering nicely from the 2008-2009. However, the first expiration in almost 10 years led to an immediate, steady decline in GSP imports – a trend that reversed itself as soon as Congress renewed GSP in October

As we talk about GSP renewal in 2013, we can’t forget the lessons of the past. Lesson #1? American companies don’t just want a long-term GSP renewal, they need one.