Time for U.S. Senate to Act on GSP Renewal!

Earlier this week, we at NACD launched a grassroots alert on our Chemical ReACTions website requesting that our members contact their U.S. Senators urging them to support Generalized System of Preferences (GSP) renewal. Since its implementation in 1976, GSP as a trade program has benefited American companies and workers by cutting tariffs (i.e., taxes) on nearly 5,000 imported products. But it expired Dec. 31, 2017, costing American companies including dozens of NACD members millions of dollars a day while they wait for Congress to renew it.

In 2016, the program saved American companies about $730 million in taxes. Most products imported under the GSP program are raw materials, components, and parts used by American manufacturers and farmers to produce other goods in the United States. These imports, often not available in the U.S., help American manufacturers and workers compete in today’s economy.

To find out the impact on the chemical distribution industry, we asked John Dunham & Associates to conduct an analysis on Congress’ lapse in renewing the GSP program. They found:

• Chemicals imported under GSP account for about 31.5 percent of imports and 2.1 percent of the entire chemical market in the United States.  Even distributed evenly across the entire market, the cost of not having this program in place leads to a price increase on chemicals of 89 cents per ton on average or about 98 cents per ton at the purchaser level. While this may not seem like a lot, as prices rise, demand for our members’ products will begin to drop.
   
• Assuming the “Most Favored Nation” tariff rate applies to items formerly included under GSP, over $18.6 billion in chemical products will now be subject to a tariff, ranging from 0.1 percent to 6.5 percent.
   
• One Canadian-based NACD member is already feeling these effects. If they purchase a certain resin imported from the U.S. and try to export it back, they face a 6.1 percent tariff. Because they were not the original importer into Canada, Customs does not allow them to use NAFTA for American-origin goods. The best option to lower the duty and bring an American product back into the U.S. is through GSP.
   
• Based on the increased tariff rates, products imported duty-free under GSP would now be subject to an annual tariff of $913.6 million, which would be equal to a price increase of 4.7 percent on these products.
   
• This price increase will result in 439,486 tons of reduced sales, or a reduction of about 0.64 percent in chemical sales. 
   
• This would lead to a total of nearly 1,500 lost jobs and $88.6 million in lost wages.
   
• The cost to the American economy in the chemical distribution industry could be nearly $272.0 million.

As you can see, GSP has an enormous impact on both chemical distributors and the American economy as a whole. Congress would be making a huge mistake if they don’t renew this program.

The good news is, on Feb. 13 the U.S. House of Representatives passed H.R. 4979 to renew the GSP program. Now, the Senate must act by supporting a long-term GSP renewal. I strongly encourage you to help make this a reality by visiting the association’s Chemical ReACTions website and sending your Senators a letter supporting GSP. 

It's clear what a critically important economic driver the GSP trade program is to the chemical distribution industry. It’s time for the Senate to follow the House’s lead and approve long-term GSP renewal legislation today!