$700 Million Might Be Coming for Tariff-Hit Importers

Date: Thursday, September 22, 2022
Source: Sourcing Journal

The House of Representatives introduced new legislation that could spell relief for American importers.

On Monday, lawmakers proposed the Generalized System of Preferences (GSP) “Refund-Only” Bill, which would return more than $700 million in tariffs paid by U.S. companies that have imported luggage, handbags, backpacks, cases, wallets and other travel gear and accessories since the trade program lapsed on Dec. 31, 2020.

The program has historically seen bipartisan and bicameral support, according to AAFA president and CEO Steve Lamar, who encouraged Congress to quickly pass H.R. 8906 “to support American companies that are committed to the values of the GSP program, and to help mitigate the costs faced by our nation’s supply chains.” Refunding tariffs on products that would have entered the country duty-free under GSP will help U.S. companies “to focus their attention” on ongoing supply chain issues and “enables companies to keep workers employed,” Lamar said.

“While long-term renewal of the GSP program is still a top priority, this bill would provide companies with stop-gap relief as they continue to support the American economy,” he added.

Instituted as a part of the 1974 Trade Act, the GSP is the oldest and widest-reaching trade preference program, covering 119 countries and territories and 3,500 products. It removes tariff barriers on commodities from developing economies to build up industries and create jobs. It also offers an alternative to China sourcing. The GSP requires that covered nations comply with worker rights standards and protect the intellectual property of their trade partners in order to maintain duty-free status.

Lawmakers have a history of authorizing tariff repayments when previous programs lapsed, according to AAFA vice president of trade and customs policy Beth Hughes. “When GSP has been reauthorized in the past, one of the pieces of it is refunding importers,” she said. The proposed “Refund-Only” bill would act as a “band-aid, not a solution,” while Congress works to reinstate the GSP.

“Congress needs to resolve a lot of issues within GSP with regard to the eligibility criteria,” Hughes said, noting that legislators want to revamp provisions related to in-country worker rights, environmental stewardship and compliance with climate-change policy. But in the meantime, AAFA members importing travel goods from former duty-free partners are paying an average of 16.6 percent in tariffs, and have been for nearly two years, she said. The majority of those importers are small businesses, and the uncertainty about their sourcing partners’ future trade status is keeping them from hiring workers, developing new product lines, and planning for future seasons.

AAFA members aired their concerns to the trade group on Tuesday. “They’ve heard the message that they need to diversify their supply chain, and going to GSP countries was a logical choice, but now they don’t even have that certainty,” Hughes said. The recent instability of trade preference programs has added new challenges to inventory planning. “That inability to plan for the future was one of the key things I heard yesterday from these companies—the uncertainty is costing them a lot,” she said.

Inaction surrounding GSP and the Miscellaneous Tariff Bill (MTB) could end up pushing importers back into business with America’s greatest competitor. “In not having [these policies] in play right now, you might see companies kind of look back to China, and I think that’s across all industries and sectors,” Hughes said.

H.R. 8906 has a good chance of advancing during the lame duck session following the November midterm elections. “In the past we’ve seen GSP and MTB attached to larger packages, and it just so happens there are tax extenders and things like that that I’ve heard are likely to be voted on, so there’s opportunity there,” Hughes said.


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