US – China Bearing Tariffs: What’s Your Strategy?

Author: Dave Hull, founder and president of PRECISION COMPONENTS, INC

Are you confused by the 301 tariffs the US has imposed on China? You are not alone. The majority of people I have spoken to at the Shanghai Bearing Fair have far more questions than answers, and my company, Precision Components, is happy to help.

Having worked in the bearing industry for over 40 years with 4 bearing anti-dumping cases under my belt, I have accumulated enough knowledge to offer helpful advice as a consultant. While my team and I are accustomed to getting paid for our advice, this topic is so overwhelmingly misunderstood that we feel it’s in the industry’s best interest to have this information for free.

The trade war between the US and China has left many Chinese companies feeling helpless, and most are deciding to take no action with the hopes everything will work itself out. In turn, US corporations are being forced to look to other countries in order to purchase much-needed bearings and bearing components. We don’t expect many business owners in China to understand the inner workings of the US government, however, it is important for them to know they have an outlet to better position themselves.

We suggest Chinese companies develop short-term, medium-term, and long-term strategies to reduce the impact of the 301 tariffs on their businesses. If we knew when President Trump and President Xi were going to start playing nice, we would tell you, but we don’t; so if you qualify, the first and most immediate step should be to file for an exemption. This is by far the best short-term strategy available. But get moving fast because the deadline to submit requests is Oct, 9th 2018. The process is fairly simple (2 pages at most), it’s free to file, and you do not need to hire an attorney to file for you, however, you may.

All bearings starting with a harmonized tariff schedule 8482 were on the first list of items to include an additional 25% duty. So effective July 6th, 2018, all bearings and bearing components going to the US from China were affected. The most common remark I am hearing from Chinese companies goes something like this: “We do not care because we are not paying the tariff,” to which I say: “so your customer has to pay the extra 25% and when they start buying from India instead of China, how are you going to keep your business?” By that time it will be too late.

PCI went to Washington D.C. and testified at the USTR hearings recommending bearing products be removed from list number one. Almost every company was

asked whether or not their product could be sourced from a country other than China. In the short term US companies will not change suppliers, but as the trade war continues, they will find other sources at their own expense. Most large US companies have the resources to source parts from other countries. The longer the trade war looms, the worse it is for everyone, and particularly, Chinese manufacturers.

Here are a couple of very important points that I would like to share and hope are helpful.

If you are fortunate enough to receive an exemption, it will be in effect for 1 year. A refund for all products will be retroactively granted back to the date of the tariffs inception (July 6th 2018). You are entitled to this refund if you are the importer of record and are paying the tariffs. In an effort to better keep your business, you may want to consider filing on behalf of your customers so that they don’t have to keep paying the tariff and be forced to look for your replacement in another country.

Certainly, this is all about money and detrimental affects to US business. The directions specify that you cannot request an exemption for a whole HTS category. The decision has already been made that exemptions will not be granted for whole HTS numbers. Your unique subset of parts must be accurately identifiable as a subset. Don’t ask for an exemption on all 6203’s, you will be wasting your time. However, if you are making a 6203 with the Gothic arch ball path, special agricultural seals with a nonstandard bore, a non-standard OD for service parts in an obsolete application, made nowhere else in the world (and that can be verified) you have a much better chance.

While answering the questions on the exemption application form, you can give a complete description of the product you feel should be exempt. This must be a part or group of parts smaller than a 10 digit harmonized tariff schedule. You can ask for an exemption on a single part number. Most importantly, whatever part or group of parts you identify, you must give a detailed description of how US customs can tell the difference between the parts you are requesting and other similar parts. For example, perhaps there is a special bore size or keyway slot.

Keep in mind that China uses an 8-digit HTS code and the US uses a 10-digit HTS code. Be sure you are using the US standard HTS numbering system, not the Chinese numbering system. The major difference is the US uses 2 extra digits in order to collect data in more detail.

There are questions that you must give ‘yes’ or ‘no’ answers, such as the ability of the products to be manufactured in the US or a country other than China. If you answered no, you must give verifiable information in the following question.

There is a question that has been added since my company filed our first requests for exemption in July. This question is helping those who will review the requests

for exemptions determine the impact on the US economy. Is the product being processed further in the US or being installed into a piece of machinery? Is it being sold as a bearing to a distributor who will then resell the product? This is one of those legal conundrums I suspect would be debated in law school. A bearing by itself isn’t good for much and needs to be incorporated in other machinery to be useful.

Precision Components Inc. supplies bearings and bearing components to the US market and we are currently being affected by the tariffs. It is our hope that the two countries can come to an agreement in the near future, nonetheless; while uncertainty looms, we are preparing short, medium, and long-term strategies to minimize the effects of the tariffs. We welcome the opportunity to discuss longer-term strategies with the hopes of assisting the industry as a whole.

Dave Hull is the founder and President of PRECISION COMPONENTS, INC, which for the last 28 years has provided engineered metal products and services to major manufacturers. For information on Mr. Hull, you can read his BIO on www.pcomponents.com

Any Facts and Figures are based on research performed by Precision Components Inc. and Precision Components Asia Division