How concerned should the custom integration channel be about the flurry of tariff activity by the President Trump administration? That was a question addressed by CEDIA in the well-attended webinar, “Trump Administration Tariff Proposals Information for the CEDIA Community,” held Monday. The presentation included CEDIA’s Daryl Friedman, CEO and global president, and Alex Capecelatro, chairperson, and legal insights from panelists Laura Siegel Rabinowitz and Rob Mangas of the firm GreenbergTraurig.
Among the big takeaways, dealers will need to pay attention to more than just from where a product is being imported. As described by Rabinowitz, they also have to look at the classification of a product, where certain individual parts come from, where the main manufacturing takes place… otherwise there may be several tariffs on top of the general duty for the imported goods.
“It’s very country specific and it’s very product specific,” she says. Every product has a 10-digit classification code that will factor into the tariff amount. “Customs is going to be very aggressive.”
Rabinowitz cited an example of a client that imports steel stepstools, something which naturally integrators might need on a job, in the warehouse, etc.
“There’s general duty, and then their product comes from China so they already have the Section 301 duty, in their case it’s 25% — about two-thirds of the products from China have the Section 301 duty which is either 25% or 7.5%. Because it comes from China now there’s an additional 10%, and now because it’s steel there’s an additional 25%,” she explains.
Lightapalooza took place in late February, and the growth of the event has mirrored the rapid ascension lighting fixtures and controls.
“So, we calculated that the steel stepstool would now come into the U.S. with a 65% duty rate, which is crazy to think about.”
While the tariffs on Chinese imports impacted the channel during Trump’s first term, the newly instituted and proposed tariffs this time around are going to be much more widespread and implemented more swiftly, Mangas adds.
Plus, it could get complicated, because one of the important criteria for determining a product’s country of origin is where the “essential character” was manufactured.
For instance, Rabinowitz says, if a compressor is made in Germany and then the rest of the finished manufacturing takes place in China, its essential character comes from the compressor and would not be subject to the 25% China tariffs.
“If you’re a company using a product manufactured overseas and imported to the U.S., you need visibility into the supply chain. Where are your products coming from — purchase agreements, what country they’re coming from, what’s the source and finish of those products,” Rabinowitz says.
One tariff for the CEDIA channel to follow closely is that 25% tariff on steel and aluminum with no exceptions, which is supposed to go into effect March 12.
“There are a host of derivative products that I think will hit this industry and it includes nails, screws, bolts, brackets, fittings, cables, cable wire, chain… so it’s really important to look at those [classification] lists,” –Laura Siegel Rabinowitz
“It matters a lot what that 10-digit classification code is. The steel and aluminum products are specific; it’s not for all steel and aluminum, it has to be one with a 10-digit code on the list and those are 25%,” Rabinowitz says.
She forecasts that the biggest impact on those imports will come from the “derivative products” that are basically must-haves for an integration company. Even if a classified product is not from China, it will still have the general duty plus the 25%.
“There are a host of derivative products that I think will hit this industry and it includes nails, screws, bolts, brackets, fittings, cables, cable wire, chain… so it’s really important to look at those lists,” she adds.
Duty is based on classification and value of good, and importers can lower the value with legal deductions on things such as international freight, foreign inland freight, foreign terminal charges, buying agent fees, quality control payments, and royalty payments, she notes.
Regarding all the tariff activity, Mangas says that typically the news starts with a bang before settling down.
“You’re all going to be affected by this in some way or another,” he says. “For the moment it’s very chaotic.”
In addition to the March 12 implementation of the 25% aluminum and steel tariffs, Mangas points to April 1 and 2 as the next key dates for dealers to follow. April 1 is multiple reports are due under the America First Trade Memo that will include recommendations for additional tariffs, and they could go into effect as early as the next day.
For its part, CEDIA leadership will be heading back to Washington, D.C., again this spring to continue its legislative meetings and advocacy for the custom integrator channel.
Like with the huge supply chain crisis a few years back, the webinar panel agreed that custom integrators will need to edit their purchase agreement contracts with very specific language pertaining to the tariffs and why a project may cost more than what the customer was originally quoted.
Maintaining transparency and open lines of communication will be vital, Capecelatro asserts.
“For our industry, while I do agree that there’s generally flexibility on what price is, we need to be careful about a project going for X but then becomes more,” he says.
“Communication needs to be very transparent and very early. We don’t want to raise prices, but sometimes it may be forced upon us.”
Toward that end, Friedman says CEDIA will be drafting language to help dealers protect themselves in their purchase agreements. Additionally, businesses can go to someone like Rabinowitz to do so.
“Going forward, you’re going to have to be very careful with the tariff language,” she says.
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