The latest list of tariffs, the third imposed as part of the federal government's Section 301 investigation of China’s trade practices, currently does not have a process for companies to request exclusions. This is inconsistent with the U.S. Trade Representative’s previous two tariff lists under the investigation.
If applied to this third tariff list, the previously established exclusion process would provide U.S. companies opportunities to request relief if the tariffs would harm their ability to compete globally. In some cases, there are no alternative suppliers who offer the products many businesses are sourcing from China.
A group of U.S. House Representatives are circulating a letter addressed to the USTR, urging it to initiate an exclusion process applicable to the third tranche of the Section 301 tariffs. The group is asking colleagues to sign the letter. PPAI urges members to contact their House Representativesand ask them to sign on the letter currently being circulated.
As the tariffs extend into products imported and sold by companies in the promotional products industry, PPB Newslink has reached out to company leaders to ask how they are responding; how they are communicating with their vendors and customers; and for their outlook on the future.
“We’ve been preparing for tariffs on Chinese imports for a long time,” says Ben Zhang, CEO of supplier Greater China Industries in Bellevue, Washington. “I first heard about the idea in 2008, while enrolled in Harvard Business School’s Owner/President Management executive education program, and I’ve been thinking about what to do about tariffs ever since. We’ve diversified away from China some and now have sources in Cambodia and Vietnam. With the new tariffs, we will develop more manufacturing outside China. Taiwan and South Korea are more expensive than China, but with the tariffs in some categories they are competitive. So we’re exploring our options."
Despite the tariffs, China will continue to be an important source of imports. Zhang says, “We still get about 80 percent of our products from China. Six to 12 months from now, it will likely be 60 to 40 percent. Some products from China are just not replaceable, and even with tariffs, some product categories remain competitive. Not just in price, but in time and speed. China is more efficient in terms of manufacturing speed, and the infrastructure, like airports and seaports, is there."
The third round of tariffs went into effect on September 24, and they’re already having an impact on industry companies. The federal government is levying 10 percent tariffs on Chinese imports through the end of the year, going up to 25 percent on January 1, 2019. Zhang says, “For us, this will affect about 100 shipments by the end of the year. We’ve been in communication with our clients and about 90 percent understand the issue, and know it’s something none of us can do anything about.
“Our business model isn’t about selling commodities. We sell custom products, created from scratch for end-users’ campaigns. Our products come from our customers’ imaginations. There are already costs associated with tooling, molds, etcetera, so with these products, bringing them from concepts to reality, they’re not as sensitive to these price increases as others might be.”
Zhang adds, “I spoke to our congressman, Adam Smith, over the weekend and asked him what we can do as small-business owners to keep costs the same. He said to write letters and join with others to take our message to the White House.”