WASHINGTON — The Obama administration expanded duty-free benefits for imported travel goods from several countries in a decision revealed Thursday, disappointing industry groups and fashion firms like Tory Burch, Michael Kors and Coach Inc. that were seeking to have the benefits extended to a larger group of countries.
The U.S. Trade Representative’s office issued the outcome of its annual product review of the Generalized System of Preferences, touting the administration’s decision to expand the GSP program benefits to travel goods made by a large group of the poorest countries in the world.
As a result, African countries under the African Growth and Opportunity Act, as well as other countries such as Cambodia and Haiti will now be able to ship luggage, backpacks, handbags and wallets, among other travel goods, to the U.S. duty free.
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“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,” said USTR Michael Froman. “We have used these programs to give beneficiary countries a vital leg up vis-à-vis more advanced competitors.”
While the decision was good news for those countries, which are currently small or nonexistent suppliers of travel goods, it was not well received by the industry.
“We are deeply disappointed with President Obama’s decision. 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 during the first year alone,” said Rick Helfenbein, president and chief executive officer at the American Apparel & Footwear Association, which helped lead the industry effort. “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.”
He added that, “Today’s decision denies benefits to countries at a critical point in development, such as the Philippines, Thailand, Pakistan, Indonesia and Sri Lanka.”
Companies such as Coach Inc., Michael Kors, Tory Burch, VF Corp., Kate Spade, Ann Inc., REI and Columbia Sportswear petitioned the government either individually or as part of coalitions for duty-free benefits on a broad array of travel goods under GSP.
The GSP program provides duty-free benefits for more than 5,000 types of products from 122 designated countries and territories. While the entire GSP program does not cover most apparel and textile imports to the U.S., it does cover accessories, such as jewelry.
Congress passed legislation last year that removed a 41-year-old statutory prohibition on travel goods under the GSP program that then allowed companies to petition the government to include imports of certain travel goods for duty-free treatment.
USTR reviewed 20 petitions from companies, industry associations and some foreign governments in a bid to expand the GSP program to include travel goods for the first time. Hearings were also held in the matter.
The estimated amount of U.S. imports of the travel goods covered by the 20 petitions was $9.54 billion in 2014, according to four petitions filed on behalf of several brands and retailers by Sorini, Samet & Associates LLC. Of that total, China accounted for roughly $6.73 billion in travel goods imports to the U.S. China is not eligible for GSP benefits.
Many brands and industry associations were seeking duty-free benefits for countries such as the Philippines, India, Indonesia and Thailand — all existing small suppliers of travel goods to the U.S. and GSP eligible.
Those four countries did not receive the benefits from the administration in the decision announced Thursday.
In its review, the administration weighed, among other things, the impact of lifting duties on imports on U.S. travel goods manufacturers against the benefits to U.S. companies that source the majority of those products aboard and to developing countries seeking to expand their market share in the categories.
One travel goods manufacturer petitioned the government in opposition, stating it would negatively impact domestic producers. That company, Korchmar, a 99-year-old travel goods manufacturer based in Naples, Fla., said providing duty-free benefits to imported travel goods under GSP would have a negative impact on the domestic industry.
“We will continue to fight for the addition of travel goods to the GSP program for all GSP-eligible countries. Delaying this decision adds costs in the form of uncertainties and lost duty savings,” Helfenbein said.