Led by Representatives Neal Dunn (R-FL) and Jake Auchincloss (D-MA), both members of the House Select Committee of the CCP, the letter’s large and diverse group of signers demonstrates strong support for a renewed (and improved) GSP program across the political spectrum. Letter signers include:

• 34 Republicans and 32 Democrats from 30 different states
• Nearly all members of the Select Committee on the CCP, including Chairman Mike Gallagher (R-WI) and Ranking Member Raja Krishnamoorthi (D-IL)
• The chair and/or ranking member from numerous other House committees

The letter highlights the critical role GSP can play in helping U.S. companies diversify supply chains by providing “tariff advantages as high as 45 percent for key products compared to China.” It also notes that “China is benefiting significantly from GSP expiration, which has led to over $2.5 billion in extra tariffs on $45 billion in imports from China’s developing country competitors.”

The letter states that “Legislation to renew GSP, including smart changes to make GSP countries more viable alternatives to China, would enjoy broad, bipartisan support.” For example, more than 50 House Members signed a bipartisan letter supporting updates to GSP’s “competitive need limit” (CNL) rules in the last Congress. CNLs can terminate duty free treatment for a specific product if imports from a GSP country increase too much, which in turn can disincentivize shifting too much trade outside of China.

What they are saying:

“With the Chinese Communist Party becoming more aggressive each day, reducing America’s reliance on China is more critical than ever,” said Congressman Neal Dunn. “China benefits from the expiration of the GSP program, and our companies pay the price. We know GSP works. We know that it has bipartisan support. Legislation to renew the program is long overdue.”

“GSP supports a strong middle class,” said Congressman Jake Auchincloss. “Renewal of the GSP program would facilitate supply chain shifts out of China, spur investments in partner and allied countries, and strengthen American businesses.”

“Congress clearly wants American companies to buy less from China, but imposing billions of dollars in extra tariffs on other countries due to GSP expiration makes that much harder” said Dan Anthony, Executive Director of the Coalition for GSP. “We thank Congressmen Dunn, Auchincloss and the other signers for demonstrating the bipartisan support an ambitious GSP renewal bill would enjoy. GSP is a proven means for helping American companies and workers remain competitive while building diverse, resilient supply chains.”   

“We had an advantage from no duties on Indonesian jewelry from GSP, but since it has not been renewed some customers are canceling purchase orders and buying direct from China,” said George Nazarian, owner of small business Novita in Monrovia, California. “We’ve taken on a huge debt to pay the tariffs, and if GSP is not renewed soon we have no choice but to close our 40-year old family business.”

“We moved production from China to the Philippines because GSP tariff savings more than offset the higher unit costs,” said Matthew Cagle, owner of Rig’Em Right Outdoors, a family-owned business in Morehead City, North Carolina. “Now we pay higher prices plus added duties, so our costs are MUCH higher. With rising costs of supplies, warehousing, shipping and labor in the US too, we simply have no choice but to consider moving production back to China.”

“We lost our two largest customers because funds needed to promote our product and maintain inventories were instead used to pay tariffs,” said Laurie Sebestyen, co-owner of Mike’s Curry Love in Boise, Idaho. “The ripple effect is overwhelming and we’re on the verge of throwing in the towel. “We never imagined that GSP renewal could take so long.”  

“GSP expiration’s added 10% tariff on our goods from Thailand has forced us to source more from China, which continues to lead the world in low-cost production of ceramic mugs,” said Jan Reid, CEO of small business Xpres LLC in Winston-Salem, North Carolina. “Congress says they want companies to buy less from China, but without GSP the numbers just don’t work.”

“There is no question that the expiration of GSP has caused us to rethink our production outside of China,” said Lawrence Mikuta, Vice President of Sourcing & Production at HOBO Bags in Annapolis Junction, Maryland. “The GSP tariff savings are critical to offset the challenges working in those countries, such as longer development and lead times and higher minimum purchases, compared to China.”

Fun, old-fashioned family Christmas lights have faced up to $65 million in extra tariffs due to GSP expiration. Those high costs are the result of a few factors: 1) regular tariffs on Christmas lights are high (8%); 2) U.S. imports of Christmas lights from the world are at an all-time high; and 3) GSP countries have become the dominant suppliers as companies seek alternatives to Chinese suppliers, which face 33% tariffs (8% regular tariff + 25% Section 301 tariff).

If U.S. policymakers want to see shifts out of China, letting GSP expire is a no good, rotten way to show it. As recently as 2017, China accounted for $399 million out of $472 million (84%) of all U.S. Christmas lights. Since GSP expired on December 30, 2020, American companies have imported over $830 million in Christmas lights from GSP countries. That works out to almost $7 in imports from GSP countries for every $1 from China. But because GSP expired, each shipment of twinkling holiday cheer gets hit with an 8% tax. Bah humbug, indeed.

GSP renewal shouldn’t be hard: Congress isn’t developing a non-chloric, silicon-based kitchen lubricant here. In fact, GSP’s support is so broad and bipartisan that no sitting Member of the House of Representatives voted against GSP renewal when it last came up in 2018. And yet GSP expiration is about to enter year 3 and American companies already have paid well over $2 billion in extra tariffs.

If Members of Congress are looking for any last-minute gift ideas for American companies, renewing GSP is a good one. Short of full renewal, passing the bipartisan H.R. 8906 would refund over $2 billion to companies that have been waiting on Congress to do something – anything – that provides GSP tariff.

You can buy a whole lot of above-ground pools or Jelly-of-the-Month club memberships with that kind of holiday bonus.

“We had a slight increase in bike sales prices but not enough to cover the outrageous tariff rates,” reported Woombikes’ Jesse Rendon. “Given the current economic crises we are in, having to pay additional fees for tariffs is like putting salt on a wound.”

Founded in 2014, Woombikes already has grown to 60 employees. It was named to the Inc. 5000 fastest-growing private companies in 2019, 2020, and 2021. Yet millions of dollars in new tariffs hurt, and not just Woombikes. Coalition for GSP data shows over $24 million in tariffs paid on bicycles due to GSP expiration from January 2021-April 2022. Expiration costs are accelerating: year-to-date tariffs on bicycles (generally) are 163% higher in 2022 than 2021, and tariffs on children’s bikes specifically are 201% higher.

Congress can help by passing retroactive GSP renewal legislation ASAP. According to Rendon, “Having the $1.9M refunded will allow me to pay down my debt, as well as hire new employees to scale the company to support our current growth. We also will be able to offer more benefits like company matching for our new 401(k) plan and possibly bonuses for our employees.”

If you’re a GSP importer, please help by answering the survey/sharing your story here. No company-specific information is shared without permission (which Woombikes granted). Even if responses cannot be shared publicly, they help inform the Coalition for GSP’s conversations with policymakers about the importance of renewing GSP.

While is it positive that both the America COMPETES Act and the USICA bill contain provisions that would renew GSP and refund tariffs paid to date, the GSP Coalition has serious concerns about how some of those provisions may effect the long-term viability of the GSP program, both for workers and companies in developing countries and the United States.

There are several apolitical areas where the USICA language is clearly preferable to the America COMPETES Act language:

• The America COMPETES Act reauthorizes GSP for two years less (December 31, 2024 vs January 1, 2027) than USICA, creating more uncertainty for program users in GSP countries and the United States.
  
• The America COMPETES Act lacks new provisions in the USICA language requiring public review and comment before punitive actions against countries can be taken, a basic good governance issue to prevent abuse of the (current and proposed) eligibility criteria by some unknown future Administration.
  

The are several areas where the America COMPETES Act language, no matter how well-intentioned, presents greater risks of lost GSP (and AGOA) even if countries make good-faith efforts to comply:

• A recent Progressive Policy Institute (PPI) report notes that, under proposed criteria to “effectively afford” labor rights and/or “effectively enforce” environmental obligations found in the America COMPETES Act, program administrators “may find it necessary to remove most beneficiary countries from the system (or at least most of the low-income and least-developed countries unable to fully implement standards which lack provisions for good-faith but only partially successful efforts).” (emphasis added)
  
• Policy impacts may not be limited to GSP benefits: the PPI report notes widespread GSP loss “would also depopulate AGOA, since a core AGOA eligibility rule is qualification for GSP.“ Other U.S. programs, such as the Development Finance Corporation, currently require GSP eligibility for funding too. From the development perspective, it would be a truly perverse outcome if countries making good-faith efforts lose GSP anyways over a lack of resources, which in turn results in even less resources for trying to raise standards.
  
• The PPI report includes several useful examples of how enforcement can harm those that criteria are meant to help, such as when Madagascar lost AGOA under a “rule of law” provision that may be added to GSP, “effectively punished the young women in the garment industry benefiting from AGOA for the irresponsibility of national political leaders, but had little effect on the coup-makers.“
  

The America COMPETES Act missed an opportunity to incorporate bipartisan GSP changes such as the “CNL Update Act” introduced by Ways & Means Members Stephanie Murphy (D-FL) and Jackie Walorski (R-IN):

• The CNL Update Act would help promote a race-to-the-top on trade by clearing stating the Sense of Congress that administrators should seek to preserve GSP benefits for “good actors” and trade clearly furthering GSP’s development goals even if some punitive actions are deemed warranted under the eligibility criteria.
  
• The CNL Update Act would better-incentivize countries to meet eligibility criteria by raising the threshold at which non-sensitive products may lose GSP benefits (even if there is no U.S. production) and stating that administrators “should” restore GSP benefits for non-sensitive products below the new thresholds (an action that is allowed but almost never taken under the current statute).
  

Fortunately, none of these issues are insurmountable:

• The GSP provisions in USICA, which were included in an amendment that passed 91-4 last year, shows the opportunity for bipartisan compromise in areas such as adding environmental and women’s economic empowerment issues to GSP.
  
• The PPI report suggests some tweaks – not wholesale revisions – that could help ensure the likely outcomes of GSP changes match the stated goals of those changes (and that criteria don’t harm those they are meant to help).
  
• The Murphy-Walorski bill provides useful additions to both the USICA and America COMPETES provisions that would improve GSP for workers and companies in GSP countries and the United States.
  

The Coalition will continue working with Democrats and Republicans in both the House and Senate on compromise GSP reauthorization legislation that promotes a race-to-the-top on trade.

The China/Section 301 diversion is real. So far in 2021, GSP imports are up 12% for products where Chinese imports face Section 301 tariffs but down 7% for products where Chinese imports don’t face any new Section 301 tariffs. It is impossible to know how much more GSP imports might be up (or Chinese imports down) if GSP expiration hadn’t forced American companies to pay tariffs for those products too. We wrote about how GSP renewal must be a part of any “China trade” conversation here.

Imports into 38 states (plus Puerto Rico) paid at least $1 million in tariffs due to GSP expiration. The map below shows estimated tariffs paid for products claiming GSP by state.

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.

The letter was led by House Ways and Means Committee Members Suzan DelBene (D-WA) and Brad Wenstrup (R-OH) and letter signers include:

• 43 Democrats and 32 Republicans in 34 different states
• 19 Ways and Means Members (10 Democrats and 9 Republicans)
• 7 of 11 Democrats and 5 of 8 Republicans on the Ways and Means Trade Subcommittee

“The letter shows that strong, bipartisan support remains for win-win outcomes on trade, such as restored GSP for India” said Dan Anthony, Executive Director of the Coalition for GSP. “Program users are hopeful the letter will help advance U.S.-India discussions as well as refocus attention on the need for Congress to renew GSP.”

The letter supports a framework to restore GSP soon after Congress renews the program if there can be tangible progress on resolving market access issues that led India to lose its GSP back in 2019.

But the facts show that restored GSP for India would help American workers, manufacturers, farmers, etc. in its own right:

• Americans have paid up to $800 million in extra tariffs due to lost GSP for India. For example, one of the categories facing the most tariffs are agricultural chemicals, hurting both the manufacturers that turn bulk products into retail forms and the farmers that must pay more for the end product. One repeated refrain from companies: tariffs didn’t move sourcing out of India, but higher costs led importers to scale back expansions or other domestic manufacturing plans. In part because…
  
• Tariffs from lost GSP for India disproportionately harms American manufacturers. Over 75% of (previously) GSP-eligible imports from India are raw materials, components, and parts used to produce other things in the United States. For the current GSP countries, the figure is closer to 50%. The imports-as-inputs shares are even higher in big manufacturing states such as Texas (83%), Ohio (84%), Pennsylvania (89%), and Michigan (95%). Lost GSP for India make American manufacturers less competitive in the US and export markets.
  
• The pain appears very one-sided – on the wrong side – as imports from India are rising (likely due to China tariffs). Americans are paying more and scaling back investments, but imports of (previously) GSP-eligible imports from India are up 20%+ compared to before GSP was terminated. Why? Probably because 92% of those imports would face Section 301 if imported from China. New 4% tariffs on India don’t seem so bad compared to 25% tariffs on China for similar products. Imports from India of products facing 25% when imported from China have driven recent import growth.
  
• India is still very much a developing country, and Covid has made the situation worse. According to the World Bank, in 2019 India’s per capita income was just $2,120 – about the same as Ghana, Nigeria, and East-Timor. According to Pew Research, the number of people in India with incomes of $2 or less a day increased by 75 million, with a total of 134 million now living on less than $2 a day. Another 1.162 billion people in India – 3.5 times the entire US population – live on between $2-10 per day.

Some facts on GSP expiration:

• American companies paid at least $760 million in extra taxes from January to September 2021 due to GSP expiration. The breakdown of tariffs paid by state is available here.
  
• Tariffs due to GSP expiration primarily affect small businesses. Past research has shown the typical GSP importer has 10-15 employees and saves $100,000-$200,000 annually as a result of the GSP program. Small businesses – often supplying niche products – dominate the over 300 American organizations that sent a letter to Congressional trade leaders urging retroactive GSP renewal in late September.
  
• Retroactive GSP renewal would provide meaning relief to companies dealing with supply chain disruptions, higher freight costs, and other inflationary pressures. While tariffs are not the driver of these issues, refunding tariffs paid would help small businesses in particular that do not have the resources to pay tariffs without passing the costs along in the form of higher prices.

From January-September 2021, American companies paid at least $763 million in extra taxes as a result of GSP expiration. Imports into 38 states (plus Puerto Rico) paid at least $1 million in tariffs due to GSP expiration. The map below shows estimated tariffs paid for products claiming GSP by state.

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.

From January-August 2021, American companies paid at least $666 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.

August was the most expensive month of GSP expiration yet both nationally and for 15 states: Alabama, Delaware, Georgia, Hawaii, Idaho, Maryland, Minnesota, Montana, New York, North Carolina, Oklahoma, Pennsylvania, South Carolina, Texas, and Washington. Tariffs paid on imports into Minnesota were 84% higher than any previous month. For Pennsylvania and Georgia, tariffs paid were 53% and 27% higher than any previous month, respectively.

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.