Coach Inc., Luen Thai USA and other travel goods manufacturers are pushing to expand a U.S. trade program that grants duty-free exports to developing countries.
The U.S. Generalized System of Preferences program, enacted in 1974, currently exempts travel goods, but the new bill, dubbed the GSP Update Act, would extend the program to this sector. The GSP bill was introduced to the House last Wednesday by Ander Crenshaw (R., Fla.) and Adrian Smith (R., Neb.).
“Upon passage, travel goods, such as the purses, briefcases and backpacks, could be considered for approval as duty-free products by the U.S. Trade Representative,” said Crenshaw. He added, “The bill would give the travel goods industry viable market alternatives to China, which is not a GSP country.”
The rising cost of goods in China, it seems, is the major motivator of the bill’s sponsors. The cost of Chinese labor has risen as much as 20% this year, but for lack of viable competitors, China has remained the principal supplier of travel goods to the U.S.
Rick Helfenbein, president of Luen Thai USA, said the bill would “level the playing field” and “allow countries like the Philippines, Cambodia, Indonesia and Thailand–all GSP-eligible countries–to participate.” Because China is ineligible for GSP-status, its developing competitors would have a significant price advantage–taxes on travel goods imports to the U.S. are sometimes as high as 17.5%.
“It gives us the opportunity to go into other markets and try to develop the industry,” said Angus McRae, executive VP of operations at Coach. “It has been very centralized in the Chinese marketplace. What we are looking to do is diversify out of China…a market where prices are increasing quite rapidly at the moment.”
“One of the logical alternatives is the Philippines,” said Helfenbein, noting the number of factories already established there. He also named Cambodia as a logical alternative.
If the bill passes, companies and countries would still have to petition the U.S. Trade Representative office to request that newly eligible items be added to GSP. Once the produce is approved by the U.S. International Trade Commission, the duty-free benefits would apply to all GSP-eligible countries.