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.

Any discussion of improving competitiveness through trade – especially as it relates to diversifying supply chains away from China – must include GSP renewal. China is excluded from GSP, and many GSP countries are natural alternative suppliers to China. By eliminating tariffs on China’s competitors, GSP makes them more viable alternatives to low-cost Chinese producers.

There are no two ways about it: loss of GSP makes Chinese producers more competitive. This is especially true for products where Section 301 tariffs on China may lead U.S. companies to seek alternative suppliers given the near-perfect overlap of products included on the Section 301 lists and GSP-eligible lists. And it’s not just about expiration, the dynamic applies to all types of GSP losses.

For example, while Section 301 tariffs covered just 54% of U.S. imports from China from January-September 2021, during the same time period the products on Section 301 lists accounted for:

• 96% of the estimated $763 million in extra tariffs from GSP expiration
• 97% of the estimated $318 million in extra tariffs from individual GSP product exclusions (e.g., competitive need limitations or “CNLs”)
• 90% of the estimated $312 million in extra tariffs due to lost GSP for India

Imposing an extra $150 million per month in tariffs on China’s competitors is a funny strategy for helping American companies move supply chains out of China. Backpacks are a good example of how that strategy has failed. After GSP benefits were extended to backpacks in 2016, GSP imports steadily gained market share. The Section 301 tariffs supercharged the trend – with gains now directly at the expense of China – but GSP expiration at the end of 2020 stopped both GSP imports’ rise and Chinese imports’ fall.

“GSP” and “China” issues don’t exist in a vacuum and therefore shouldn’t be treated as such. Here’s what should be done:

1. Congress should renew GSP as soon as possible. GSP expiration cost American companies at least $763 million in extra tariffs through September, and they’re likely to top $1 billion in 2021 if not renewed this year.
   
2. As part of renewal, Congress should amend GSP rules (e.g., CNLs) to keep as much trade under the program as possible. The more tariff benefits to GSP countries, the greater the incentives to leave China (and comply with eligibility criteria, as discussed here).
   
3. The Administration should make restoring GSP for countries such as India a priority. In November, 75 House Members sent a letter supporting just that, and a U.S.-India joint statement said the U.S. would consider restored GSP. Talks should move as quickly as possible.

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.

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.

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.

In the first six months of expiration, American companies paid at least $480 million in extra taxes as a result of GSP expiration. Companies in 34 states (plus Puerto Rico) paid at least $1 million in tariffs from January-June 2021 due to GSP expiration. The map below shows estimated tariffs for products claiming GSP paid by state in that period.

June was the most expensive month of GSP expiration yet for 12 states: Alabama, Colorado, Delaware, Iowa, Maine, Maryland, Minnesota, New Hampshire, Ohio, Oklahoma, Rhode Island, and South Carolina. For Alabama, Colorado, and Delaware, each new month has been the most expensive one yet (e.g., June was more than May, which was more than April, which was more than March…).

The data on tariffs paid is a conservative estimate, and the real figure likely is higher. Why? Estimates only capture products that continued to claim GSP despite expiration. Yet imports of many products that traditionally get GSP have not claimed it in 2021. Tariffs paid on those imports still would be eligible for refunds in the event of a retroactive renewal, but importers would need to file manual requests.

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. Companies that want to help the Coalition for GSP educate policymakers on the importance of GSP should also join the Coalition for GSP and/or add their name to the free GSP supporter list.

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.