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 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.

The map below shows the overall GSP imports and savings by state from January to August.

The map below shows the overall GSP imports and savings by state from January to July.

Based on its response to our new GSP renewal survey, Fab-Line paid about $350,000 in additional taxes while GSP was expired. As President Patrick Canning reported a year ago, the new taxes forced the company to lay off one employee put two new hires on hold. The planned sales and service expansion remained on hold due to lack of funds. Until now.

GSP renewal was the catalyst Fab-Line needed: it has already hired a new service manager and a new regional manager. And it has not even received all of its refunds yet. GSP renewal also means improved margins on all of Fab-Line’s sales that could be used to fund future growth.

These are the types of stories that importers must share to start building the case for GSP renewal in 2017. If you haven’t done so already, please answer our new GSP renewal survey here.

You can view our other post-renewal profiles:

• The Cannon Group
• Kona Bicycles
• Primetac
• Thompson Traders

Take Thompson Traders in Greensboro, North Carolina, which manufactures and sells hand-hammered copper sinks for kitchens and baths. GSP expiration hit at a terrible time: just as the small but growing company reached a positive cash flow.

This past January, Thompson Traders reported reducing payroll by 8 people because of GSP expiration. Those people accounted for 40 percent of Thompson Traders’ staff. Expansion plans were put on hold. Remaining employees in the profit-sharing plan were affected by lost bonuses and raises. Yet GSP renewal and refunds coming for the extra taxes is changing that.

According to Thompson Traders President Fred Starr, the company is initiating a major new product line in a new market. This is just one part of the company’s plan to reinvest all taxes returned through GSP reinstatement in new business opportunities – all of which means new jobs and higher pay possibilities for its workers.

About a 100 miles west down Route 40 in Hickory, North Carolina, Scott Ferguson of CCS USA is also optimistic. His company  provides precision tooling and die parts to the aerospace industry. According to Scott:

“The reinstatement of the GSP program will save my company $2000 – $3000 or more per week. This will allow us to be much more competitive and build the business to the point that additional employees will be required.”

Down Route 85 from Greensboro, Strategic Sales Partners in Fort Mill, South Carolina saved $7,500 on the first day that GSP went into back into effect. The company works with manufacturers, both in the United States and overseas, to provide sustainable building products such as doors, decking, and fencing.

If your company is benefiting from GSP renewal, we want to hear from you! We love receiving detailed info like that from Thompson Traders (and Primetac and Kona Bicycle previously) and quick notes like those from CCS USA and Strategic Sales Partners alike.

It’s never too early to start building the case for GSP renewal in 2017.

Just as the arrival of September means something different for each person, the way GSP expiration impacts specific companies can also vary greatly. Past research has shown that the overall cost to American companies is about $2 million per day. We won’t know the actual value for the first month of expiration until the August trade data are released in a month or so, but we can look at responses from our August recess survey to some of the company-specific impacts.

For some, expiration was felt immediately. Vortex Optics in Middleton, Wisconsin paid $150,000 in new taxes while Congress was out of DC in August, and expects to pay another $100,000 this month if GSP remains expired. Those taxes are “putting a severe financial strain” on the 100+ employee business according to Vortex Optics President Daniel Hamilton.

For others like Far East American, a Los Angeles-based importer of tropical plywood, GSP expiration hasn’t hurt…yet. Far East American didn’t import any (previously) GSP-eligible shipments in August, but the company expects to pay more than $250,000 in tariffs in September because of GSP expiration.

Finally, there are others for which GSP expiration means no imports at all. One company in Florida (that wishes to remain anonymous) must bid in the next two weeks on business for 2014. Without GSP in place for imports from Indonesia, it cannot match prices of similar goods from China and Vietnam. As a result, GSP expiration likely will cause the two-person company to lose out on a $2 million contract – a huge deal for a very small company!

These are just a handful of the survey responses, and we’ll post more in the coming days and weeks. If you’re a GSP importer, please fill out this survey so we know how expiration is impacting your company (as you can see above, there’s an option to remain anonymous).