GSP, Import Duty, Economic Stimulus?

By Steve Getsiv, 02/07/09

Nova imports a variety of products from South America and Asia into the US. The main products are prefinished tropical hardwood flooring, unfinished tropical wood flooring and tropical hardwood decking (which is usually kiln dried and run to an S4S E4E pattern).

There is an import duty on all the prefinished flooring items of 3.2%, but not on any of the unfinished flooring or decking. The GSP (General System of Preferences) status doesn't apply to tropical hardwood prefinished flooring from Brazil (but it does apply to similar products from Paraguay). I'm guessing the idea is to encourage US importers to have their material finished in the US, right?

Well, finishing in the US has a few problems - for starters, it is horribly inefficient from a transportation and handling aspect; unloading and reloading containers and wasting money on freight. Secondly, quality is extremely difficult to control when the material is finished at a different facility than where it was manufactured; it's much better to have immediate feedback from the finishing plant to the manufacturing plant. Lastly, my experience has been that prefinishing quality is generally much higher when done at the source. From a pure cost and quality standpoint, it makes little sense to prefinish in the US, even with the 3.2% duty.

But what would happen if the 3.2% duty on prefinished flooring was dropped? Would we simply pay more to our overseas suppliers? Is this bad because it sends money out of the US? Or is it better to support our foreign trading partners?

Certainly a retroactive repeal of the 3.2% duty would go right into the hands of the importers - not a bad thing since most of us have eliminated jobs and cut salaries. Many importers are weak due to the crisis in the housing and building markets. Wouldn't this be a good idea?

Lastly, why are manufacturers and importers of prefinished tropical wood flooring penalized for supplying a higher quality product that can't easily and cost effectively be produced here in the US?

Please feel free to comment.

By Steve Getsiv, 02/07/09

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