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U.S. Senate to Review GSP Update Act; Historic Opportunity for Travel Goods

Already introduced by the U.S. House of Representatives, the U.S. Senate will now review the GSP Update for the Production Diversification and Trade Enhancement Act (H.R. 2139), commonly referred to as GSP Update 2013. Many believe the legislation, once passed, could produce historically significant results for U.S. trade, particularly for travel goods like handbags, luggage and wallets. U.S. Senators Mark Begich (D-AK) and Roy Blunt (R-MO) introduced the bill today.

The primary intent of GSP Update 2013 is to revise the current Generalized System of Preferences Program (GSP) in order to make travel goods, formerly excluded from GSP coverage, eligible for duty-benefits. Currently, most travel goods–a category composed of bags, business cases, wallets and various leather goods–are omitted from the official GSP list of eligible products due to a statutory ban.

The problem with the exclusion of travel goods from the GSP list, according to advocates of GSP Update 2013, is that the vast majority of these products are manufactured in China, not itself among the 128 nations covered by the GSP program. If passed, the new legislation would open up the travel goods market, creating new manufacturing opportunities for GSP eligible nations like Brazil, the Philippines, Thailand and Cambodia. Also, GSP Update 2013 is designed to provide protections for the few travel goods manufacturers that remain in the U.S. by excluding those specific goods they produce from eligibility and by mandating the government to execute an extensive review of any new goods suggested for future inclusion.

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Michele Marini Pittenger, president of the Travel Goods Association, has spoken forcefully in favor of GSP Update 2013. “The legislation is a win-win for the U.S. travel goods industry, American consumers and developing countries,’ she said. “The legislation recognizes that 99 percent of all travel goods sold in the United States today are imported.”

Pittenger explained that the sum result of the current GSP exclusions is the imposition of a furtive tax on travel goods for American consumers. “That means Americans buying luggage for their families or backpacks for their kids for school must pay a hidden, regressive tax on their purchases,” she argued. “In these uncertain economic times, this legislation would not only provide American families with a tax cut, but would support the more than 100,000 U.S. workers employed in the U.S. travel goods industry today.”

In fact, the U.S. imposes considerable tariffs on these goods, which often carry a duty in the range of 15 to 20 percent. These assessments are far higher than what is typical for imported goods as a whole, the average of which is 1.2%. Also, GSP countries collectively account for a modest 5 percent of travel good imports to the U.S., a meager share in comparison to China, which manufactures more than 80 percent of these goods. The total value of all travel goods imports to the U.S. in 2011 was $8.87 billion.

The GSP program was originally enacted as part of the Trade Act of 1974 in response to concerns expressed by the signatory nations to the General Agreement on Tariffs and Trade (GATT) that developing countries were being excluded from the benefits of free trade agreements with wealthier nations. The purpose of the program was to unilaterally extend special trade benefits to these nations, always pinpointing specific areas of commerce or products for eligibility and imposing strict conditions for participation. By 2011, there were 128 GSP beneficiary nations.

Chapter 42 of the GSP program excluded travel goods, or all products with an outer shell made from textiles, since they were already covered by previously enacted trade agreements like the Multifiber Arrangement and the the WTO Agreement on Textiles and Clothing. The rationale for this exclusion was that, since these goods were already subject to trade agreements, they were not considered particularly import-sensitive items.

American Apparel & Footwear Association Vice Chairman Rick Helfenbein said, “Every time American families pack their bags and travel to visit family, commute to work, or ride the bus to school, we are reminded that Congress has a valuable opportunity to provide real cost savings for U.S. consumers.”  He continued, “Extending duty free benefits to travel goods makes essential products more affordable and creates development opportunities in the countries that need them most. Under the GSP UPDATE Act, countries like the Philippines and Cambodia will have increased opportunity to compete in the global market while providing U.S. consumers with more product choices. I applaud Senators Begich, Blunt and Wyden for their leadership on this important issue.”