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President Donald Trump issued a proclamation Thursday that will lower costs for backpack, duffel bag, and other travel goods manufacturers.
The “Presidential Proclamation to Modify Duty-Free Treatment Under the Generalized System of Preferences and for Other Purposes” is a “major victory” for the outdoor industry, Outdoor Industry Association says.
The move expands the Generalized System of Preferences, or GSP, which allows U.S. companies to source materials and products duty-free from certain developing countries.
Trump’s proclamation expands the types of products eligible for duty-free import under the GSP, which means manufacturers could start to see price savings if they move operations to eligible countries.
A broad list of backpacks, bags, and other travel goods are now included under the GSP, if they’re sourced from countries such as Thailand, Indonesia, Sri Lanka, and the Philippines.
As of Saturday, July 1, these products will be tax-free when they arrive in the U.S. The goal of the GSP is to help developing countries grow economically by building exports programs.
“We’re excited the GSP Act is being expanded in this way, and that it will benefit these countries in creating stronger local economies resulting in healthier, more robust job markets and opportunities,” said Karyn McKenna, VP of merchandise planning for Cotopaxi, which manufactures backpacks in the Philippines. “Hopefully, this could signal that including these developing nations is progress that’s good for their growth and good for our businesses.”
Cotopaxi works hard to vet its manufacturing partners to make sure their practices align with the brand’s mission as a B-corp, McKenna said. Making it financially viable for companies to manufacture within GSP nations could open up opportunities for other brands to find good partners for their own missions, too, she added.
It may sound like this goes against Trump’s “America first” mentality, but Rich Harper, OIA’s international trade manager, says this will primarily offer American companies the opportunity to move away from manufacturing in China. Currently, more than 90 percent of backpacks imported to the U.S. are made in there.
“For companies looking to get out of China and diversify, this is a big win for the industry,” Harper said Thursday. “We’ve already seen a movement away from China, and I think something like this will accelerate those efforts.”
It’s hard to know at such an early stage where all that money could go, but there are a few possibilities. Money saved on duties could be spent on R&D for future products, hiring more product design staffers, or savings could be passed on to customers.
“Outdoor Industry Association applauds the U.S.Trade Representative’s (USTR) decision to expand duty-free benefits to all GSP countries for certain backpacks, sports and travel bags,” said Alex Boian, OIA’s VP for government affairs, in a press release about the proclamation. “These products are often necessary gear for Americans to enjoy the outdoors and are an integral part of the business for many outdoor companies. By eliminating import taxes ranging from 4 to 20 percent, this initiative will help lower costs, fuel innovation, and create American jobs.”
How is your brand affected by this decision? Let us know by commenting below.