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.

No similar linear diaphragm pumps are manufactured in the United States, though competitors in China often try to copy Hiblows design and sell for lower prices. Hiblow’s operations also exemplify GSP’s original development goals: workers at the Philippines factory receive competitive wages, bonuses and family outings throughout the year, and private health insurance benefits. GSP is one tool that helps Hiblow workers in the United States and the Philippines stay competitive in the global market.

GSP benefits have helped Hiblow mitigate Covid-19 impacts, particularly a 500% increase in freight costs. Ocean shipping delays meant Hiblow had to use air freight to get its product American manufacturing customs in time.

If GSP expires, Hiblow will need to recoup $400,000 “from somewhere.” That is likely less money spent with local vendors, for conferences, for marketing and advertising materials and – most importantly for policymakers – by freezing any new hires. That is bad news at a time when there are 10 million fewer American jobs than than there were earlier this year.

Watch Hiblow President Tim Smith explain how “renewing GSP is imperative to us to grow our business and hire more people in 2021 and beyond.”

If you’re a GSP importer, submit your own video testimonial here.

To be clear: they’re not paid by the countries and haven’t achieved any other U.S. policy goals and won’t be refunded if benefits are reinstated. They’re just $500 million in new taxes on U.S. companies at a time of unprecedented economic collapse and job losses.

Above is the breakdown of estimated tariffs paid by state. Imports into California and New Jersey have faced about $50 million in new tariffs each. Companies in traditional – or newfound – election battleground states Texas, Georgia, Florida, Pennsylvania, Michigan, and Ohio were all in the top 10 of tariffs paid, collectively paying up to $168 million in extra taxes.

And the taxes paid continue to climb.

The bulk of taxes – up to $366 million from June 2019 to August 2020 – have been paid on imports from India. The typical GSP importer from India had 14 employees and saved $100,000 per year. The burden falls overwhelmingly on small businesses struggling to make it through the pandemic, not the large multinational that can rapidly shift sourcing to suppliers in other countries. A report from April 2019 profiled many U.S. companies that would be hurt by termination for India (and others).

Up to $111 million in tariffs have been paid on imports from Turkey from May 2019 to August 2020. In similar comments submitted as part of the Turkey review, we noted the typical GSP importer from Turkey had 14 employees and saved about $150,000 annually. The Turkey review was launched over “market access” issues, but there were no known discussions about resolving issues. Instead, Turkey was “graduated” for sufficient economic development despite just entered a recession and having a GDP per capita that has now fallen in 5 consecutive years (the metric used to determine if countries should be graduated from GSP automatically).

Up to $23 million in tariffs have been paid on imports from Thailand from May 2020 to August 2020. Importers from Thailand tend to be a little bigger – but far from large! – with the typical importer having 28 employees and savings $183,000 annually under GSP. Most unhelpfully, the product facing the most tariffs appear to be face masks. Higher tariffs on face masks may not have seemed like a big deal when Thailand’s partial suspension was announced in October 2019, but we’re in a very different world with mask imports surging due Covid-19.

Potential GSP renewal legislation is highly unlikely to address country-specific issues, but the impacts from terminations are no less real for American companies than the prospects of expiration. If Congress considers changes to the GSP programs in the future, ensuring importers interests are not ignored in the country review processes should be a top priority.

While California is far-and-away the #1 state for GSP savings, Texas edges it out for most tariffs paid this year due to country suspensions – companies in each state have paid up to $18.6 million in extra taxes. Companies in New Jersey are not far behind, having paid up to $18.2 million in extra taxes due to country suspensions.

The costs are driven by different Trump administration actions. Texas is the top state in tariffs paid due to India’s suspension, New Jersey has paid the most due to Turkey’s suspension, and California has paid the most due to Thailand’s partial suspension. The table at the very bottom shows tariffs paid, by country suspension and total, for all states.

Including the tariffs paid due to suspensions, both in 2019 and 2020, drastically changes the state savings trends. Instead of the sea of dark red states with declines of over 20% shown yesterday (and below, right), only a 5 states are likely to have seen such declines without country suspensions. Similarly, there would be savings growth for states in every region of the country instead of limited to the Mountain West.

Swings states, including big states not traditionally in play in Presidential or Senate elections, account for some of the biggest dollar swings. Without country suspensions:

• Texas companies’ savings would’ve increased up to $2.4 million instead of declining by $12.7 million, a $15+ million swing
• Georgia companies’ savings would’ve increased up to $3.1 million instead of declining by $5.8 million, nearly a $9 million swing

In more traditional swings states, maintaining full GSP eligibility for all countries would have mitigated declines likely associated with the Covid-19 pandemic. For example:

• Florida companies’ savings would’ve declined by $4.3 million instead of $12.6 million, an $8+ million swing
• Pennsylvania companies’ savings would’ve declined by $350,000 instead of $8.2 million, nearly an $8 million swing
• Michigan companies’ savings would’ve declined by $3.2 million instead of $8.2 million, an $5+ million swing

Swings were even bigger on a percentage basis in states where GSP savings are traditionally lower:

• Instead of declining by 47%, New Mexico companies’ savings would’ve increased by up to 161%, a 200+ percentage point swing
• Instead of declining by 60%, Minnesota companies’ savings would’ve increased by up to 17%, nearly an 80 percentage point swing

These are real costs to real American companies and workers – many in places that will be hotly contested in the 2020 elections – on top of the challenges related to the Covid-19 pandemic and economic fallout. In addition to congressional reauthorization of GSP, administration decisions to restore lost GSP eligibility would provide significant benefits to struggling American companies.

The top states by GSP savings have been fairly consistent over the years. California accounts for more than a quarter of GSP savings – about as much as the next 4 states (Florida, New York, Texas, New Jersey) combined. Washington and Tennessee have moved into the top 10 states in 2020, replacing Pennsylvania and North Carolina.

Savings are down sharply, from $555 million in 2019 to $407 million in 2020. The map below shows the widespread declines, with the Mountain West being a notable exception. Washington, Idaho, Wyoming, Utah, Colorado, and Arizona form a string of growth states from the Canadian to Mexican borders. Colorado’s savings increased over 150% from 2019, largely driven by a jump in backpack imports. Massachusetts is the only other state where GSP savings are up in the first half of 2020.

Savings declined by over 40% in more than 20 states, including a whopping 78% in Vermont. GSP savings also declined by 67% in Montana and Oklahoma, 63% in North Dakota, 61% in Michigan, 60% in Minnesota, and 52% in West Virginia.

Declines are NOT due to Covid-19. American companies have paid up to $183 million in extra tariffs in 2020 due to GSP suspensions for India, Turkey, and Thailand. In the first half of 2019, tariffs paid due to suspensions (India and Turkey only) were about $35 million. Add those potential savings to actual savings in both years, and the first half totals were nearly identical ($590 million) in spite of Covid-19-related declines. Our next post will dig into state-by-state costs in 2020 associated with the suspensions.

In a major shift from 2018, consumer goods were the largest category of GSP imports by both value ($6.6 billion) and savings ($512 million). Consumers goods accounted for 32% of total GSP imports, up from 24% the prior year. Because average tariffs (without GSP) are much higher (7.7%), consumer goods accounted for about half of all GSP savings. Expanding GSP to cover travel goods in 2016/2017 has led to steadily increasing consumer goods imports over the last several year.

Industrial materials ranked second among GSP products both by import value ($6.0 billion) and estimated tariff savings ($256 million). Industrial materials were the largest GSP imports, usually by a wide margin, in each of the last 10 years. The reason industrial materials slipped to #2 is clear from the “top countries”: 5 months of GSP for India eliminated more tariffs on materials used by American manufacturers than full-year GSP for any other country.

Agricultural and food products ranked third among GSP products by import value ($2.9 billion) and estimated tariff savings ($116 million). Among the more surprising data points: Ecuador was the second-largest source of food and agricultural products in 2019 by the value of GSP savings, primarily on tropical plants such as taro, mangoes, and guavas.

Capital goods ranked fourth among GSP imports by value ($2.8 billion) and savings ($83 million) in 2019. Despite similar import values, GSP savings on capital goods were much lower than GSP savings on agricultural and food products due to lower average tariff rates (3.0% versus 4.0%, respectively). India was the second-biggest source country in terms of tariff saving on capital goods, again demonstrating how American manufacturers are bearing the brunt of the decision to end GSP for India.

Autos and parts ranked fifth among GSP imports by value ($2.3 billion) and savings ($66 million) in 2019. Passenger vehicles are not eligible for GSP, so imports tend to be concentrated among parts such as engines, tires, and wire harnesses. Not surprisingly, states with a heavy automotive presence such as Michigan and Tennessee are among the top importers by GSP savings on these components and parts.

GSP imports were up by 15 percent – and tariffs savings were up by 17 percent – compared to a year earlier. Some states such as Nebraska and Maryland saw much larger increases in GSP imports and savings compared to the previous year, as shown in the graphic below.

GSP saved Nebraska companies $105,000 thousand in June, up $42,000 (68 percent) compared to one year earlier. Activated carbon from the Philippines, copper alloys and rubber stoppers from India, and aluminum frames from Thailand contributed most to Nebraska’s GSP increases.

GSP saved Maryland companies $2.1 million in June, up over $450,000 (28 percent) compared to one year earlier. Silicon from Kazakhstan, carbides from South Africa, and zinc from India contributed most to Maryland’s GSP increases.

In addition to Nebraska and Maryland, companies in 17 other states saw GSP savings increase by at least 20 percent, including: Alabama, Alaska, California, Colorado, Delaware, Indiana, Louisiana, Maine, Montana, Nevada, New Hampshire, North Carolina, Pennsylvania, Texas, Virginia, Washington, and Wisconsin.

Savings on GSP imports from Lebanon increased by 58 percent compared to June of last year. Illinois companies’ purchases of nuts accounted for nearly $250,000 of the GSP imports from Lebanon. GSP eliminated about $471,000 in import taxes on steering wheels in June, with more than a fifth of those savings on imports into Michigan.

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.

In total, 75 GSP supporter list companies are headquartered in Districts with a new House Member. Nearly two-thirds of new House members have at least one GSP supporter list company based in their district, but some have many more:

• Representative Bonnie Watson Coleman (D, NJ-12) has eight constituent companies urging GSP renewal. These include Howard Berger Co. in Cranbury; Sinopack USA in East Brunswick; iTi Tropicals in Lawrenceville; Privi Organics and Oceanic Linkways in North Brunswick; Meck Pharmachem in Plainsboro, and Kas Rugs and GJ Chemical in Somerset. The companies import a range of products – from food ingredients to stone products to chemicals to carpets to janitorial equipment – from seven different countries under GSP. Combined, they save millions of dollars annually when GSP is in effect.
• Representative Bob Dold (R, IL-10) has seven constituent companies urging GSP renewal, including major manufacturers like Brunswick Corporation and Tenneco. Other GSP importers in the District include UTAS-USA in Des Plaines; BarrierSafe Solutions in Lake Forest; Aladdin Gold Creations in Northbrook; World Kitchen in Rosemont, and Deringer-Ney in Vernon Hills.
• Representative Mimi Walters (R, CA-45) has six constituent companies urging GSP renewal. These include Hampton Products International in Foothill Ranch (which joined the supporter list today); Felt Bicycles, Transpacific Foods, and American Electric Cord in Irvine; Estas USA Camshaft in Lake Forest, and Cipriani Harrison Valves in Rancho Santa Margarita.

These list goes on: Representative Norma Torres (D, CA-35) has five GSP supporter companies based in the District; Representative Barry Loudermilk (R, GA-11) has four; Representatives Ted Lieu (D, CA-33), Seth Moulton (D, MA-6), and Dave Trott (R, MI-11) have three each, and eight more (5 Rs, 3 Ds) have two constituent companies urging GSP renewal.

This bipartisan group of freshman lawmakers might not agree on much else, but they’d all do well to push for an immediate, retroactive GSP renewal. New constituents are counting on them.

Michigan companies imported an estimated $764 million under GSP in 2011, saving them on average 3.0%. India was the most important source of GSP imports, accounting for about 27 percent of the tariff savings. Engine parts were Michigan’s top import under GSP in 2011 and would have faced average tariffs of 2.5% without GSP.

Yet GSP is set to expire on July 31, 2013, and companies could face tariffs higher tariffs starting on August 1 if Congress does not pass legislation renewing GSP. When GSP expired at the end of 2010, American companies paid nearly $2 million per day, every day, until Congress finally acted 11 months later!

This graphic shows just some of the negative impacts from the last GSP expiration. It also helps explain why more than 335 companies and associations – including at least 14 in Michigan – joined the 2011 GSP Supporter List urging renewal of the program when it last expired.

Are you a Michigan company that would be hurt by GSP expiration? If so, please take 30 seconds to let Congress know by adding your name to our free 2013 GSP Supporter List right now.