GSP benefits have become even more important in recent years since Altus Brands completely stopped buying this product from China due to 25% Section 301 tariffs. In 2020, GSP saved Altus Brands over $25,000 in eliminated tariffs. The company’s imports also further GSP’s development goals: it purchases from a factory that offers benefits and higher pay than other local factories. It’s good for workers in the Philippines and the United States, since the high-quality products command a higher price and help support other Made in the USA product lines.

But GSP expiration threatens all of this. Altus raised prices to cover the $14,000 (and growing) in extra tariffs paid. It has lost sales at home and in export markets (e.g., Canada, Germany, and Russia), which in turn led to reduced purchases from the Philippines.

According to company president Gerand Lemanski, it could get worse yet: “Without renewal of GSP my product is not competitive in the US market and I will have to cease selling this product within a year. That will result in letting one production person go.”

Unfortunately, Congress recently recessed until mid-September. Altus Brands’ experience shows why it must make GSP renewal an immediate priority when it returns.

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.

• Employ anywhere from 1 to 30,000 US employees. Small businesses dominate, with about 2/3 of companies reporting 12 or fewer workers.
• Saved anywhere from $5,000 to $3 million because of GSP in 2017, and bigger company ≠ bigger savings. The top “saver” was an SME; while 3 of the top 6  were among those with 12 or fewer workers.
• Are headquartered in 17 states and 39 different congressional districts. New supporters come from Massachusetts and Florida and Southern California and Washington State – and everywhere in between.

Here are some of the companies that granted permission to share the details of their GSP use:

• Lawrence & Co. in New Bedford, Massachusetts has 3 employees. GSP saved it $6,000 in 2017 on imports of mica products and leather goods from India.
• RV Industries in Buford, Georgia has 30 employees and saved $200,000 in 2017 on imports of coconut products from Thailand and the Philippines. RV Industries also exports to both Canada and Mexico.
• Miami Chemical in Miami, Florida is among the small business with big GSP savings. GSP saved the 12-person company about $1 million on imports of chemicals from India, Thailand, and Turkey.
• Pioneer Square Brands‘ 110 employees makes it among the larger new supporter list companies. The Seattle, Washington-based company saved $250,000 on imports of educational accessories from Cambodia.
• Colorado Angler Supply in Aurora, Colorado has 6 employees and saved $5,000 in 2017 on imports of fishing tools and accessories from India. It also exports to Canada and South America.

It’s not just new companies: the International Bottled Water Association and the Society of American Florists both joined the supporter list this month as well.

In short, GSP supporters are as diverse as the products they import. It might be hard to find something that ties these 7 organizations together beyond their support for GSP renewal, which may help explain bipartisan support in Congress too.

But it’s hard to pass any legislation these days, so we’re always looking for new examples of how GSP benefits companies and workers throughout the United States. If your organization benefits from GSP and is not yet on the free supporter list, please take a moment to add it here. We also have an open-ended survey where companies can share specific impacts of GSP expiration here.

Who benefits the most from GSP? Globally engaged small businesses. Over 80 percent of the GSP supporter list companies have 100 or fewer employees. The typical company has 15 employees and saved $100,000 in 2016 – a huge amount for companies of that size. GSP savings improve US export competitiveness as well: 43 percent of these GSP importers export.

Tyoga Container Company in Tioga, Pennsylvania, one of the newly added GSP supporter companies, meets nearly all of those criteria. The 78-employee company imports dunnage air bags from India and Turkey and GSP saved it $126,000 in 2016. While Tyoga does not export the products directly, “dunnage” bags are specialty products designed to hold cargo in place during shipping, meaning GSP savings further reduce costs for domestic shippers and U.S. exporters alike.

If your organization cares about GSP renewal and is not yet on the list, please take a moment to add it here now. Adding a name is free and will help the Coalition for GSP’s efforts over the coming 2 months to avoid another costly lapse in GSP benefits.

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.

GSP expiration in 2013 had a snowball effect familiar to many small business users of the program: raising prices to cover the new tariffs led to lower sales. Lower sales resulted in less money available to purchase new inventory, which in turn led to even lower sales. Eventually, Aid Through Trade was forced to freeze hiring and delay necessary equipment updates.

All for what many might consider to be modest tariffs of $30,000 extra over two years. Yet seemingly modest amounts can make a huge difference for small businesses like Aid Through Trade.

With GSP back in place, Aid Through Trade was able to hire a new worker in Maryland and give thousands of dollars in bonuses to its staff. It also invested in new technologies as sales have returned to pre-2013 levels.

Like many GSP program users, Aid Through Trade is both importer and exporter. (About 45% of GSP Supporter List companies export.) Aid Through Trade exports products that enter duty-free under GSP to Europe.

Yesterday, we demonstrated why a focus on bilateral trade deficits will provide misguided (at best) or counterproductive and harmful (at worst) lessons to policymakers. In short, companies contribute to bilateral trade deficits with some countries and bilateral surpluses with other – but a report on bilateral deficits will almost never capture those surpluses. It’s even more complex than that – anyone who says the global trade is simple is tricking you or themselves – and today we’ll use the example of Xpres LLC in Winston-Salem, North Carolina (who we wrote about a few weeks back).

To recap our original post: Xpres imports blank ceramic mugs (e.g., coffee mugs) from Thailand under GSP. Mugs are then customized at its North Carolina headquarters and sold throughout the United States and exported to the United Kingdom. Xpres competes primarily against finished mugs (i.e., they require no further customization) imported from China. Refunds and lower tariffs associated with GSP renewal in 2015 have allowed Xpres to invest in its N.C. facility and hire 17 new workers – or about 60 percent employment growth – over the course of a year and a half.

Back to the misguided focus on bilateral trade deficits: what if the United States decided it must cut the trade deficit with Thailand? Furthermore, what if it decided that banning coffee mug imports was the best policy to achieve that goal? What sort of unintended consequences might play out and would anyone be happy with the results?

Banning coffee mug imports from Thailand presumably would shrink the bilateral deficit, but at what cost? It would likely increase the trade deficit with China as more finished mugs are imported instead, and shrink the trade surplus with the UK as Xpres no longer has products to export there. Much more importantly, such a policy would pose real risks to the North Carolina jobs that depend on customizing and selling those Thai mugs.

In a vacuum, it’s easy to see how policies to shrink bilateral trade deficits could be viewed positively. Yet even successful efforts to reduce bilateral deficits may have no effect on overall trade balances. And as the Xpres example clearly shows, pursuing such policies puts American jobs at risk.

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.”

The companies are based in 9 different states and all small businesses. In fact, all have 40 or fewer employees and the typical one has 15 workers.

None of the companies reported eye-popping GSP savings – generally $50,000 or less in 2016 – but those savings are significant for small businesses like dZi Handmade. dZi has 10 employees and saved about $20,000 last year on imports of jewelry, holiday and religious items, incense, wind chimes, and toys from India and Nepal.

Despite their small size, companies are generally both importers and exporters. For example, NOVICA imports from Brazil, Ghana, India, Indonesia, and Thailand under GSP while exporting from the United States to Australia, Canada, France, Germany, Hong Kong, Mexico, New Zealand, Singapore, and the UK. Collectively the new supporter list companies reported exporting to 16 countries, with Canada being the most common export destination.

The next potential GSP expiration is less than 9 months away. If you import under GSP, be sure to join our free GSP Supporter List so we can continue making the case for GSP renewal well in advance of the pending expiration date.

GSP Supporter List companies added the week of April 3, 2017:

• A Simpler Time Inc. in Morrisville, North Carolina
• dZi Handmade in Easthampton, Massachusetts
• Eppco Enterprises Inc. in Cleveland, Ohio
• Ganesh Himal Trading LLC in Spokane, Washington
• Mendelson & Associates, Inc. in Los Angeles, California
• MG Golf in Irving, Texas
• Nova Gas Technologies, Inc. in North Charleston, South Carolina
• NOVICA in Santa Monica, California
• S.N.K. Enterprises, Inc. in St. Louis, Missouri
• TopFlite Manufacturing in Miami, Florida

(If you have not done so already, please answer the GSP renewal impacts survey here.)

Yet other companies, such as Novita in Monrovia, California, are still working to overcome the deep losses caused by GSP expiration. Novita imports jewelry from Indonesia that it sells to manufacturers, wholesalers, and retailers in the United States, Canada, Mexico, and South Africa.

While GSP was expired, Novita was forced to lay off 3 of its 17 workers. For the remaining 14, overtime was cut and salaries were reduced (or promised raises not given). Officers used personal loans and credit lines to loan the company funds so that it could continue paying bills. According to Vice President George Nazarian, Novita contemplated shutting down completely on account of GSP expiration.

Saying that GSP is crucial for Novita is a major understatement, but even a year after the retroactive renewal the company is not “whole” again:

• the $2 million in tariffs paid during expiration were refunded, but the $250,000 in interest payments to banks to keep the lights on are gone forever;
• the 14 remaining employees have received raised, but the 3 positions lost have not been refilled, and
• sales of GSP-eligible goods have increased over the past year, but they cannot “undo” the lost sales over a 2-year period.

And that is the reality of GSP expiration: at best it is a speed bump that slows the growth of small businesses like Summit and Sophia Foods. The other end of the spectrum is much worse. Novita was able to avoid the worst of potential outcomes, but the lingering negative effects of GSP expiration show why it is so important for Congress to renew GSP well before its scheduled expiration at the end of 2017.

Novita 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, here, and here and some preliminary survey response data here and here.

“Despite our attention to design, color, and style, many retailers consider our products to fall under the commodity goods umbrella (very basic) and as such, will not pay increased costs. Margins are crucial to us, and lack of GSP really hurt.”

The company ended up paying about $90,000 in tariffs while GSP was expired. Like many others, Evco still waiting on some of those refunds a full year after GSP went back into effect. With GSP back in place, the company no longer has to absorb the tariff costs and can shift its focus back to where it belongs: design, color, and style.

EVCO 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.