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Limited Decision on Travel Goods Benefits Under GSP Has Retailers in Uproar

President Obama said last week that travel goods could get duty free benefits under the Generalized System of Preferences program (GSP)—but only if they’re imported from select GSP countries.

Now, travel goods (like luggage, backpacks, handbags and wallets) coming in from Least Developed Beneficiary Developing Countries (LDBDC) and African Growth and Opportunity Act (AGOA) countries can enter the U.S. duty free.

“Trade preference programs such as GSP and AGOA can make a powerful contribution to lifting people out of poverty and supporting growth in some of the poorest countries in the world, while also reducing costs to American consumers and businesses,” U.S. Trade Representative Michael Froman said in a statement.

While that may be all well and good, the president decided to delay the decision to extend those trade benefits to all other GSP beneficiary countries and U.S. retailers aren’t pleased at all.

“We are deeply disappointed with President Obama’s decision,” American Apparel and Footwear Association (AAFA) president Rick Helfenbein said. “If President Obama had granted benefits to travel goods from all GSP-eligible countries, we estimate the industry would have received benefits that could exceed $75 million dollars during the first year alone. These benefits translate into jobs for our U.S. workers, value for our U.S. customers, and improvements for our global supply chains. The potential for that opportunity is now delayed indefinitely.”

Helfenbein added, “Today’s decision denies benefits to countries at a critical point in development, such as the Philippines, Thailand, Pakistan, Indonesia and Sri Lanka.”

Under the U.S. GSP program, nearly 5,000 products from 122 countries are eligible for duty free treatment for exports to the U.S. Last year, the total value of imports to the U.S. under GSP totaled $17.4 billion, according to the Office of the United States Trade Representative.

As part of the Trade Preference Extension Act approved last year, President Obama had, for the first time, authority to add certain travel and luggage goods to the GSP program.

In a letter to Ambassador Froman Tuesday, AAFA, the Outdoor Industry Association (OIA), the Sports and Fitness Industry Association (SFIA) and the Travel Goods Association (TGA) jointly expressed their “deep disappointment” over how the decision went.

For one, they argued, “Deferring the decision for other GSP-eligible countries, which is not a decision, without any indication of a timeline for a final decision, further harms U.S. businesses and the development of other GSP beneficiary countries by creating confusion and uncertainty.”

What’s more, the kind of complex backpacks and sports bags made for U.S. brands like Colombia Sportswear, the North Face, Under Armour and Nike Golf, among others, aren’t going to be made in AGOA or LDBDC countries that lack the production capabilities and capacity—which makes for a large opportunity loss, the letter noted.

Last year, the U.S. imported 2.1 billion of the 28 so categorized travel goods, and of that, 85 percent came from China, 0.01% from AGOA countries and 1.3% from all least developed countries combined, AGOA included.

“The failure to make a decision regarding other GSP-eligible countries that also face significant development and political challenges, and many of whom are U.S. allies, leaves companies with few options but to source from super-competitive China,” the letter said. “If our members are to diversify in a significant way beyond China, countries such as the Philippines, Thailand, Pakistan, Indonesia and Sri Lanka must have access to the duty free benefits of GSP.”

Retailers are now calling on USTR to make all 28 travel goods items eligible for duty free benefits for all beneficiary countries and have asked Ambassador for a meeting “as soon as possible” to discuss the issue.

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