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Chinese Tariffs and their Effect on the Tile Industry
Many people have asked us about how the newly implemented Chinese tariffs will affect the tile and flooring industry. They wanted us to go into detail about the actual tariffs and their impact. Here it is.
Retailers and product-based companies in many consumer categories are affected by the new tariffs and countervailing charges implemented on goods from China. The threat of anti-dumping charges is imminent. Keep reading to see what these changes mean and how each has increased. Keep in mind most importers, like Architectural Ceramics, imported excess stock to get through this transition.
A tariff is a duty or tax for a specific class of imports from a government. Tariffs or duties are different rates based on the type of material and their country of origin.
Before 2019, the duty for tile imported from China was:
8.5% for unglazed ceramic
10% for unglazed porcelain
8.5% for glazed ceramic and porcelain
2.7% for glass
4.9% for stone
At the end of 2018, duties went up by +10% for all the categories. For example, if a duty was 8.5%, it went to 18.5%.
Then in the summer of 2019, duties went up by 25%. For example, if a duty was 8.5%, it went to 33.5%.
An additional increase of 8.5% + 30% was expected in October but has been postponed. Keep in mind; we are not alone as other countries have had these tariffs before us.
Countervailing duties are when a foreign government subsidizes, provides credit insurance or loans, or gives tax incentives to their factories to overproduce material meant for export. The Chinese government does subsidize their factories in different ways; they aren’t the only country doing this. They sell it at a lesser price than their domestic market for export, which protects their domestic manufacturers.
The U.S. government now charges countervailing duties to protect our domestic factories (therein the dilemma for many products affected). We didn’t have countervailing before September 10, 2019. It only impacted glazed and unglazed ceramic and porcelain.
Now with the two duties above 8.5% + 25% and countervailing + 103.77% = 137.27% total duties for glazed. Unglazed is 138.77% total duties.
Example: Take a tile that’s $3 per sf.
For glazed, the total import taxes are $4.12 in addition to the price of the tile.
For unglazed, the total import taxes are $4.16 in addition to the price of the tile.
A $3 per sf tile is now $7.12 (glazed) and $7.16 (unglazed).
None of this includes the freight charges from the factory to the U.S. port, which varies based on weight but can add 30-60 cents per square foot for a container load and over a dollar for LTL (less than container load).
Anti-dumping is a duty or penalty that’s purpose is to defray dumping. Dumping is a term that refers to when materials imported from a foreign manufacturer, are sold into the U.S. and underpriced as compared to our domestic fair market value. The penalty for violating anti-dumping rules may vary from 0% to 550% of the cost of the tile on the bill of lading. Sources say a decision on the final fines will come out in December.
Now you know why China isn’t an ideal source of supply anymore for ceramic and porcelain tiles. Here is the good and the bad of it. Our first considerations for buying from a factory are quality, price, style, and social responsibility. The Chinese factories we work with employ educated adults, provide decent living quarters (think garden apartments in SoCal), have chefs, organic gardens, and attractive vacation and pay packages. They are the lower middle class in China with a decent life.
An influx of porcelain tile factories in the U.S. has opened over the last decade. Most of them are owned by foreign companies, meaning a lot of those profits leave the country. A porcelain tile factory doesn’t employ many people because they’re robotic in nature. The plus is while the pricing is similar to European factories, they are closer, more convenient, and are getting better at making attractive tiles. One of the things missing is double-loaded porcelain tiles used for monochromatic styles. The unglazed porcelain has a colored porcelain patterned layer on top and an uncolored porcelain body on the bottom, which remains unseen when installed, which is great for commercial use. You see these in malls and airports.
In summary, the whole situation isn’t apples to apples on how U.S. manufacturing is affected by Chinese tariffs. Unglazed and glazed ceramic and porcelain tiles from China now cost more than twice as much. We will still have to source outside of the United States for at least in the short term because of lacking supply domestically.