Recreation leaders gathered to discuss U.S. trade laws plaguing North American-based companies by allowing foreign countries to dominate the nation’s marketplace. According to industry members, laws regarding the Generalized System of Preferences (GSP) and U.S. tax code Section 301 de minimis exemptions are causing businesses harm by forcing them to increase costs and compete with unfair trade practices.
GSP
GSP was established by the Trade Act of 1974. The program eliminates duties on various products imported from designated beneficiary countries and territories. The RV industry primarily used the system to import luan plywood from Indonesia, duty-free.
The program expired Dec. 31, 2020, and has been pending congressional renewal.
RVIA Director of Federal Affairs Samantha Rocci said the association estimates the program’s expiration cost the industry between $1 million and $1.5 million each month.
During Outdoor Recreation Roundtable’s webinar Tuesday on U.S. trade policy, Rocci joined recreation industry members providing insight on the policy’s effect.
Trek Bicycle Corp. Vice President and General Counsel Jennifer Naeger said the expiration had monumental effects on the bicycle manufacturer. She said the trade policy changes made business unpredictable, bringing shipping delay risks and unpredictable pricing.
The program originally helped companies such as Trek expand manufacturing outside of China. With the prolonged exemptions, companies are considering moving back to China.
Regarding both GSP and de minimis exemptions, REI Divisional Vice President, Community Advocacy and Impact Marc Berejka said, “Those of us who have been playing by the rules are being punished by them now.”
Rocci also highlighted the leverage GSP provides the U.S. She cited an example of the government removing India as a beneficiary country. The U.S. later used GSP in its negotiations with India.
If GSP does not return soon, the negotiation leverage could be lost, and companies could begin moving back to China.
De Minimis
U.S. Tax Code Section 301 provides “de minimis” exemptions to products costing less than a defined threshold.
Rocci and American Sportsfishing Association President Glenn Hughes noted the threshold is significantly higher compared with other countries.
Canada’s de minimis threshold is $15, the European Union’s is 150 Euros and Mexico’s is $50.
Rocci said, “$800 is wildly out of line.”
Products entering the U.S. through the exemption are often low-quality items masquerading as high-quality products at RV dealerships. One RV industry member reported losing $10 million annually and had to lay off half of its staff because of the exemption. Another closed entirely.
Berejka said if action does not happen by year’s end, changes to the policy could be prolonged for nearly two years.
He said, “Business decisions are going to be made over the next 24 months that will adjust to a reality that Congress might not be able to address for another two years if they do not get around to it now.”
Hughes said building relationships with policymakers is essential to change.
Last week, the White House issued a Notice of Proposed Rulemaking regarding de minimis. Industry members await further action on the issue.
To view the discussion, click here.
