The responses to date clearly illustrate why Congress must act sooner rather than later to renew GSP and provide businesses the certainty required to plan for 2018 and beyond. For example:

• 15 percent of respondents report that any new orders placed now will be delivered in 2018 and could face tariffs if Congress does not renew GSP;
• 56 percent of respondents will be “past the point of no return” for 2017 deliveries by the time Congress returns from the August recess, and
• 100 percent of respondents must place orders for 2017 before November 15, meaning that cannot know whether orders will face new taxes if Congress waits until December to act.

The charts at the bottom show the breakdown of responses to date. Like Oxan Inc and Kervan USA, the potential expiration at the end of the year if forcing companies to make tough decisions now.

Bill Dull from Triad Magnetics in Perris, California reported that GSP provides a competitive edge against ‘made in China’ products, since most of its competitors manufacture finished goods there. However, the company is bidding on business for 2018 under the assumption that GSP will not be renewed. In several cases, it has received feedback that it will not be awarded the business due to the higher prices.

Kelly Weinberger from WorldFinds in Westmont, Illinois reported plans to bring in its Spring 2018 product early because of the possibility of GSP expiration. However, this will have a major effect on cash flow since it will not ship – and therefore get paid for – the product until much later.

One company that requested anonymity reported that it will place an order in September for delivery in 2018 that will face over $1 million in extra taxes if Congress fails to renew GSP. Whether Congress renews GSP between order placement and delivery will have a huge impact on the companies 2018 plans. If Congress renews GSP, it will open a new location in Los Angeles that will employ 10 workers. If Congress does not renew GSP, it will not open the Los Angeles location and may need to shut down a New Jersey location that employs 8 workers.

With each passing day, more GSP users are put into a position of having to guess about important pricing issues. Congress can eliminate that uncertainly by passing immediate legislation extending the GSP program beyond December 31.

We plan to update the chart below as more companies respond, so please take a moment to answer the VERY BRIEF survey here. (Please note: company-specific information will not be used without explicit permission, as was provided by each of the companies mentioned above.)

Whether talking to reporters or on the Hill for meetings, we often get the same question: “How long of a GSP extension would you like to see?”

Our answer is always the same: “As long as possible.” 

Yet more important that what we want is why we want it.  Put simply, history shows that long-term renewals are the key to increasing GSP utilization.  Take a look at the chart above and a couple things jump out:

• There’s a whole lotta pink, meaning importers frequently (and for extended periods of time) had to pay tariffs after Congress allowed GSP to expire;
• GSP imports tend to fall during those pink-shaded periods, and
• GSP imports soared after Congress passed a 5-year renewal in 2002.

This series of short-term extensions and retroactive renewals wasn’t always the norm.  The Trade Act of 1974, which created the GSP program, included an initial 10-year authorization. The Tariff and Trade Act of 1984 included an 8.5-year extension.

After nearly 20 years of uninterrupted operation, things got dicey.  Between July 1993 and July 2002:

• GSP was allowed to expire 7 consecutive times it was up for renewal;
• Companies paid tariffs nearly 40 percent of the time on “duty-free” imports, and
• GSP imports fell because of the uncertainty.

By contrast, as a result of the new certainty provided by the long-term renewal in 2002, GSP imports nearly doubled by the end of 2006. 

History repeated itself in 2011.  GSP imports were recovering nicely from the 2008-2009. However, the first expiration in almost 10 years led to an immediate, steady decline in GSP imports – a trend that reversed itself as soon as Congress renewed GSP in October

As we talk about GSP renewal in 2013, we can’t forget the lessons of the past. Lesson #1? American companies don’t just want a long-term GSP renewal, they need one.