A Wholly Predictable (and Avoidable) Situation Unfolds in Slow Motion

On Friday we wrote about these being very tough times for many GSP importers. As we compile responses from our most recent survey, it’s painful to read about how lives have been hurt by GSP expiration. And why? At the most basic level, these people are suffering for two reasons:

  1. *only* 99 percent of Senators supported GSP renewal legislation in July 2013, and
  2. “procedural hurdles” and partisan gridlock have prevented Congress from taking a vote on GSP since then.

13 months and Congress can’t even take a vote on something costing American companies nearly $2 million per day! One such company is New York-based Sophia Foods, which according to owner Candace Abitbul has paid nearly $50,000 in import taxes, laid off two employees, and halted a planned purchase of a new property that would allow the company to double in size because of congressional inaction. Candace added:

“Due to declining profitability directly related GSP the future of our entire organization and the families we employ and support is at stake. It is so sad to feel the product line and brand we have spent our entire adult lives building is hanging in limbo at risk of declining due to a policy over which we have no control.”

In a vacuum, such a response might surprise those that underestimate GSP’s importance for American companies and workers. But this was a wholly predictable and avoidable situation. Congress should have seen it coming, in no small part because companies like Sophia Foods warned them in advance.

The timeline below highlights Sophia Foods’ experience over the last several years, both in terms of the business impacts of GSP expiration and its efforts to engage Congress. This is by no means comprehensive, just what they’ve shared with us along the way, and there are many other companies with similar experiences.

In May 2011, Sophia Foods first contacted us to say that it had contacted its representatives about the impacts GSP expiration was having on its business.

By June 2011, Sophia Foods had been forced to lay off 2 workers to stay afloat in light of plummeting profits associated with its GSP imports.

In October 2011, Congress passed legislation renewing GSP through July 31, 2013.

In July 2013, Sophia Foods contacted the New York Senators’ offices multiple times urging GSP renewal. It warned of the possible impacts of GSP expiration by citing its experience from 2011. It emphasized that recovering after 2011 was difficult and asked not to be put through the stress and uncertainty again.

By early September 2013, Sophia Foods had paid $3,700 in import taxes and expected another $7,000 before the end of the month because of GSP expiration. Candace wrote: “It’s hard to compete when you don’t know the actual final cost of the goods. We’re essentially playing ‘chicken’ either with our competitors or our year end profit – destabilizing situation for the whole market! We’ve suffered enough! Cut us a break already!

By early March 2014, Sophia Foods had laid off an employee. In response to a survey, Candace wrote: “We laid off one driver due to slowing sales directly related to the raising of prices on product brought at the higher rate. To compound the problem, we’re now sitting on slower moving inventory which is strangling our cash flow.

In July 2014, Sophia Foods joined in our Tariff Tuesdays campaign (owners Danny and Candace are the people in the cover photo) and repeatedly told staff for their congressional representatives about the impacts of GSP expiration on their business and the importance of renewing it.

By August 2014, Sophia Foods had laid off another employee and delayed a major investment, as noted above. History had officially repeated itself, as the company had to lay off two employees because of GSP expiration in the span of just three years.

It remains to be seen how or when Congress will act to renew GSP and what steps companies may be forced to take in the meantime. But it’s not too late for Congress to help importers that depend on GSP. In particular, Members looking to rack up some final “accomplishments” before the November elections should make sure a retroactive GSP renewal is on the agenda for September. Better late than never.

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One Response to A Wholly Predictable (and Avoidable) Situation Unfolds in Slow Motion

  1. MAG says:

    I HAVE OBSERVED THAT SOME OF THE COMPETITORS STARTED MIS DECLARING THE CATEGORY AND NOT PAYING GST. THEY ARE SELLING THE PRODUCT AT A RATE WHICH IS ONLY POSSIBLE IF GST NOT PAID. THERE IS NO DEPARTMENT TO CHECK THE CATEGORY AND ACTUAL PRODUCT YET. THIS IS THE LACK IN THE SYSTME.

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