Outdoor gear is about to get more expensive if a proposed tariff on $200 billion in Chinese imports receives U.S. Trade Representative approval. The items on the 195-page list—including ski, bike, and camping gear shipped in from China—would be subject to a tax of anywhere from 10 to 25 percent.
The proposed tariff on these products is collateral damage from a mounting trade dispute with China over alleged intellectual property theft. In May, the USTR approved a 25 percent tariff on $34 billion in Chinese imports, followed by a 25 percent tariff on $16 billion in imports in August. (China has issued its own retaliatory tariffs in response.)
While outdoor companies were largely spared in the first round, the second round, which went into effect Thursday, August 23, hit e-bikes. The latest list, which is currently undergoing public comment before final approval, brings even more outdoor gear under threat: ski gloves, knit hats, helmets, backpacks, candle lanterns, knives, camp chairs, raw wool, bikes, and a long list of bike components including brakes, saddles, forks, frames, and pedals. “Almost every part you need to work on a bike,” says Alex Logemann of the advocacy nonprofit PeopleForBikes.
Last month, Outside reported on the impact such tariffs could have on the bike industry, which imported 99 percent of the 17.8 million bikes sold in the U.S. in 2014, according to a report by the National Bicycle Dealers Association. People For Bikes estimates that 94 percent of complete bikes sold in the U.S. come from China. Ski and camping companies have skin in the game as well, since—according to the Snowsports Industries America (SIA)—knit hats, gloves, helmets, and sports bags (duffels, backpacks, boot bags) accounted for $779 million in sales between August and March 2018.
Representatives from the Outdoor Industry Association, SIA, and PeopleForBikes cited these statistics and more in a public hearing last week, alongside executives from several major outdoor brands, including Specialized, Advanced Sports Enterprises (the company behind Fuji bikes), Bell Sports, SOG (on behalf of a coalition of seven knife companies), and Fitbit. “Raising the tariff to 25 percent could very well put some small, medium-sized companies out of business,” Rich Harper, manager of international trade for the Outdoor Industry Association, said in his statement. “Ultimately, this means outdoor companies will be unable to create new U.S. jobs and, in some cases, may be forced to eliminate existing jobs. It will force some companies to discontinue popular and profitable products and cease the development of new products.”
PeopleForBikes anticipates retail prices for bikes and bike accessories will go up by at least 25 percent. “For someone buying a $1,000 bike, what they’re able to buy today and what they will be able to buy with the tariffs imposed is going to be different,” says Bob Margevicius, executive vice president of Specialized. “You’re not going to get the same performance or quality for $1,000 anymore.” Rad Power Bikes, a leading manufacturer of e-bikes, raised its prices by several hundred dollars the same day the tariffs went into effect.
“Either you raise prices and lose business, or you eat the margin and risk running out of cash,” says Brent Merriam, COO of NEMO Equipment. NEMO, SOG, and Industrial Revolution, the company behind UCO camping gear, are all preparing to raise prices on affected products—the Stargaze Recliner chair for NEMO, titanium flatware and candle lanterns for UCO, and a significant portion of SOG’s line of knives—if the tariffs go into effect. Outside reached out to a handful of backpack makers, but none would comment.
For retailers, particularly the ones in winter resort towns that make the bulk of their money during the four-month ski season, price increases could be devastating. “With even a slight increase in price, the sustainability of our industry is in jeopardy,” says Nick Sargent, CEO of SIA, “because a price increase to consumers is fully expected to drive a decline in spending, which will ripple across local communities and tourist-dependent resort towns throughout the United States.” A loophole in customs regulations could exacerbate the problem. The de minimus ruling allows imports under $800 bought by an individual to cross through customs duty-free. In practice, this means cheap gear purchased direct-to-consumer from China via sites like Amazon or Alibaba will escape the 25 percent tariff. Effectively, this could drive customers away from pricier U.S.-made gear, American companies that manufacture their products in China, and already struggling brick-and-mortar stores.
Asked whether the tariffs would be incentive enough to bring manufacturing back to the U.S., most companies say no. “We don’t have the capacity, the technology, or the specialized skill sets to produce in mass volume here,” says Jonathan Wegner of SOG. The tariff on bike components means that the few factories that do make bikes on U.S. soil will actually face higher costs. Scaling up with a new manufacturing facility, domestic or foreign, can take years—Merriam says 2021 is the soonest NEMO would be able to shift over to a new factory—and often requires paying big bucks for new tooling (the specialized equipment used to manufacture technical gear), which Merriam says would cost around $75,000, since brands usually can’t take the machines with them when they change suppliers.
A group of outdoor-industry executives is planning to go to D.C. to plead its case before congressional representatives later this month. Consumers can voice their opinions by submitting written comments through September 5.
from Outside Magazine: All https://ift.tt/2wyIoSd
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