Jul. 23, 2024

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Company and Fruit Industry News

GSP: Sleeping Bags and Tropical Fruit

Although it may sound like the shopping list for the next season of Survivor, GSP is serious business.  The Generalized System of Preferences (GSP) provides for an exemption to import duties for almost every product iTi Tropicals imports for its customers.  This exemption lapsed on December 31, 2010 and unless it is reinstated, the resulting duties will have far reaching impacts, from reduced income for farmers in Ecuador to higher food prices for American consumers.

The GSP concept was adopted by the United Nations in 1968.  The UN resolution stated:

"... the objectives of the generalized, non-reciprocal, non-discriminatory system of preferences in favour of the developing countries, including special measures in favour of the least advanced among the developing countries, should be:

(a)  to increase their export earnings;
(b)  to promote their industrialization; and
(c)  to accelerate their rates of economic growth."

Currently, 13 nations have adopted GSP schemes to advance this purpose.  According to the Office of the US Trade Representative, the US version exempts 4,800 products from 131 countries.

Unfortunately for farmers and processors in developing countries and for American consumers, the US plan expired on December 31, 2010 and duties have therefore been reinstated on all these products.  This has significantly increased the cost of almost every product iTi Tropicals imports. 

GSP expiration not only hurts American importers and consumers, but also developing countries like Thailand and Indonesia.  The increase in duties also helps manufacturers in China by making their exports artificially more competitive by raising prices from developing countries. 

In Feburary, President Obama's US Trade Representative Ron Kirk, released a statement urging Congress to reinstate the program stating:

"I am disappointed that Congress has not acted to extend Trade Adjustment Assistant (TAA), the Andean Trade Preference Act (ATPA), and the Generalized System of Preferences (GSP). These are important programs that support workers and help U.S. businesses compete in the global marketplace. As a result of this inaction, 155,000 Americans will go without the assistance they were promised under TAA to help retrain for a new job," 

"Farmers and workers in Colombia will lose access to the U.S. market just as they are recovering from severe floods. At the same time, the continuing absence of ATPA and GSP benefits raises costs for American consumers and businesses as well as farmers in some of the world's poorer countries."


In the Fall of 2010, the US Congress failed to reinstate GSP.  The Senate bill was effectively held up by Sen. Jeff Sessions, R-Ala., to stifle competition for a sleeping bag manufacturer in his State.  According to the Cato Institute, the saving of 20 jobs will cost the American consumer $580 Million.

The good news is that as of this writing, there are bills in congress to reinstate the GSP exemptions. Except on sleeping bags.  Stay tuned.

Up to this point iTi Tropicals has not increased pricing as we fully expect that GSP will be reinstated and that it will be done so retroactively. If this is not the case, inevitably we will have to increase pricing.



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