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GSP Update: A Major Change for the Industry

You may not realize it, but something big has happened for our industry, something that affects all companies and brands, especially for those that deal in matters of trade. And, it’s good news.

It’s called the GSP Update.

The Generalized System of Preferences, or GSP program, allows for duty-free access to the United States for products made in qualified developing countries. Eligible products are typically items for which there is no U.S.-based manufacturing. When the program was created in 1974, it included thousands of products and was designed to help dozens of U.S. allies, like the Philippines.

Over the last 40-plus years, the GSP program has never been seriously updated or modified. As a result, it has failed to incorporate many changes in the current global economy.

Take for example travel goods—products that virtually every brand in our industry makes or sells. Travel goods in 1974 meant suitcases, and many of those items were made in the U.S. at the time.

Today, this category also includes phone cases, laptop bags, backpacks and handbags. Many of today’s travel goods didn’t even exist 40 years ago. And because this category has been excluded from the GSP program (statutorily), most travel goods today are produced in China (which is not eligible for GSP benefits).

If the true purpose and spirit of GSP is to help our friends in developing countries around the world, then GSP should be expanded to include products like travel goods. That was one of the arguments made when asking Congress to consider making travel goods eligible for GSP.

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It’s a change that the American Apparel & Footwear Association (AAFA) advocated for, and in June, Congress passed legislation which removes the exclusion of travel goods from the GSP program. This means that travel goods can now qualify for GSP duty-free benefits. It’s the first time any goods have been added to the GSP program in over 40 years, and it’s a big accomplishment.

While GSP Update doesn’t automatically provide duty-free access for travel goods, it’s one of the most important legislative changes specific to our industry in recent history and, more importantly, something we can act on now.

Last week, the Office of the United States Trade Representative (USTR) formally launched the process by which companies can petition to have goods qualify for the GSP program. The process will go through extensive review, and our hope is that dozens of travel goods categories will be deemed eligible for benefits.

AAFA is working with all of its members to make sure the products our member companies care about the most are considered and added.

The net result is not just duty-free, but an opportunity to open new markets in new countries. It will be with great pride that we will be able to watch the development and relocation of a business enterprise that will so profoundly help a key component of the industry.

Steve Lamar is executive vice president for the American Apparel & Footwear Association and a trade policy expert. AAFA is a national trade association representing apparel, footwear and other sewn products companies, and their suppliers, which compete in the global market.