GSP Expiration Leads to Irreversible Losses for US Companies, Says Advocate
U.S. companies are facing mounting costs and sometimes irreversible losses as the Generalized System of Preferences remains expired, but there is still no clear path forward on renewal of the program, said Coalition for GSP Vice President Dan Anthony on Sept. 16. Lawmakers and analysts are losing touch with the ill-effects of expiration as the “action-forcing event” of expiration has long passed, he said. U.S. companies pay nearly $2 million daily in higher import duties, and since expiration, companies have paid roughly $700 million in duties on goods that GSP allows to enter the U.S. duty-free, according to a study released on Sept. 16 by the coalition (here).
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The majority of the about 240 companies, most of which employ fewer than 100 people, surveyed for the study report decreased sales, often because they are importing less product, said the study. Many lawmakers assume retroactivity will be included at some point in renewal legislation so the drive to renew lacks urgency, said Anthony. But companies are forced to deal with the added costs now, even if legislation eventually includes a retroactivity provision, he said. “[The companies] either try to raise their prices to offset the costs or they are simply unable to bring in product with a tariff on it and have it be competitive,” said Anthony, speaking at the National Foreign Trade Council. “That’s much more a commodity issue. So if you’re dealing with chemicals, plastics, anything like that, you’re not setting the price. The market sets the price and you bring it in or don’t bring it in.”
The coalition struggled with getting companies to go on-the-record when sharing their experiences, because of the fear that disclosing those details will make them more vulnerable in the market, said Anthony. Often times, the prohibitive costs are allowing Chinese manufacturing to find customers that previously dealt with U.S. companies, he added. “If you’re looking at American manufacturers and how to help them, raising their cost of business is not the way to do it,” Anthony said, mentioning one importer surveyed who had to sell a company because GSP expiration devastated profits. But GSP imports, while critical to companies who use the program, only account for roughly 0.5-1 percent of total U.S. imports.
Renewal legislation could be put in any trade omnibus package, observers have said for months. Movement on Trade Promotion Authority and all other large trade bills is limited, if non-existent, however. Sen. Tom Coburn, R-Okla., torpedoed an attempt to renew GSP last July over opposition to a funding mechanism (see 13073016). Offsets for GSP can generally only come from customs users fees, but the funding is less of a concern if renewal is included in an omnibus, said Anthony. More than two-thirds of the companies surveyed in the study said they can’t purchase the GSP-eligible products in the U.S. market. -- Brian Dabbs