Tariff on Quartz Vanity tops from China
The Action-
On May 14, 2018, the Department of Commerce (DOC) announced the initiation of AD (Antidumping Duty) and CVD (Countervailing Duty) investigations of imports of certain Quartz surface products from the People’s Republic of China. This includes Quartz slabs and other surfaces such as countertops, backsplashes, vanity tops, bar tops, shower surrounds, etc., or all Quartz products used in Hospitality remodeling projects.
The action was initiated by a complaint filed by US Quartz manufacturer, Cambria Company LLC, Eden Prairie, MN. Cambria alleges that Chinese companies are producing Quartz surface products that materially injure, or threaten material injury to, their company in the United States.
The determination of the DOC investigation is scheduled to be announced on September 24 2018
The Consequences-
Quartz is currently taxed with a 3.9% Duty when imported from China. This rate will increase to circa 35% – 40% if passed by US Department of Commerce International Trade administration.
Cut-to-size Quartz products imported from China will increase in cost due to the higher tariff. The price increase will be passed on to the end user of the Quartz products- i.e. The Property Owners.
The Facts
- Cambria Quartz, the petitioner of the investigation, is privately owned by the Davis family of Minnesota. In 2014 the Davis clan landed on Forbes magazine’s list of richest American families, with an estimated net worth of $1.7 billion.
- From Cambria quartz countertops to Davis Family Dairies to Sun Country Airlines, the Davis family owns and manages some of the state’s landmark homegrown businesses. They employ 2,600 workers and take in about $710 million a year in revenue, a figure that would rank the privately held business 38th among Minnesota’s 100 largest publicly traded companies. *
- Cambria Quartz currently sells their products in the form of Slabs. They do not even sell cut-to-size vanity tops, yet they petitioned cut-to-size fabricated quarts tops to be included in their petition.
Our Opinion
- Chinese Quartz manufacturers generally produce a product that is competitive on the world market. They produce with lower overhead, lower labor costs, lower Cost of Goods Sold (quartz natural stone, epoxy binders, and color pigments cost less with a reduced carbon footprint), lower upper management costs, and operate at a much lower profit margin than Cambria Company LLC. Chinese quartz manufacturers compete with many factories nearby their location and, sometimes, 20 other manufacturing plants are operating within a 50 mile radius. Cambria is one of only a couple of domestic manufacturers in the entire USA. The fact that Chinese Quartz factories are able to produce Quartz products at a lower price than a US manufacturer like Cambria Company LLC, should not come as a surprise. This is efficiency, not dumping.
- The Families that have invested in Chinese quartz companies are not worth $1.7 billion like the Davis Family. Most Chinese quartz companies are not dumping products at below their cost of production, but rather are producing a finished product at a competitive priced fueled by domestic competition and world market prices.
Why does a tariff increase matter? Because an increase in tariffs on Chinese quartz products will not impact Cambria’s Cut-to-size sales (they do not even produce cut-to-size tops!) nor increase their Slab sales. Higher tariffs will be paid in higher US construction costs, and allow Cambria Company LLC to increase their prices even more, making their products more profitable but not any more competitive than before the tariff increase. The DOC is not punishing Chinese quartz manufacturers. They will sell the same as before and the tariffs will be passed on to the US consumers who will then have to pay more. Cambria Company LLC will not sell more product as they will remain ineffective in competing with Chinese Cut-to-size and Slab producers. But Cambria will make more money as they take advantage and raise their prices as their Chinese competitors prices rise due to the tariffs.
For example, Cambria Company LLC wholesale pricing for their Slabs ranges starts at $25/sq ft. per their distributors. Cut-to-size Quartz vanity tops when sold through a US Fabrication company using Cambria quartz price out at about $50 to $85/ sq ft
Chinese Quartz factories sell Slabs at $8/sq ft. to us importers and cut-to-size vanity tops from a Chinese Factory price out at about $14/sq ft, They do this AND make a profit. They are not dumping at below their cost.
Cambria Company LLC prices will probably increase to $31/sq ft after the new tariffs are implemented. With an added 33% tariff, Chinese quartz products will arrive in the US at around $12/sq ft. Cambria Company LLC wants the US Department of Commerce to believe the all Chinese are dumping their products in the US Market at below their cost, thus injuring their company’s ability to sell their product. The fact is that Chinese Factories can produce at a much lower price and make a profit, and a 33% tariff increase does not make Cambria competitive in the world market, but only give them an excuse to raise their prices so they can increase their profit margins even more.
Also note that due to the increase in shipping costs, it currently costs about $6800 to truck a 53’ boxed van with 20 tons from the West Coast to New York. It costs about $5500 to ship from China to New York door to door. Should we impose a 33% tariff on all containers heading to the US so the Trucking companies can raise their rates?
I always encourage people to buy US products whenever possible. But some products are best purchased from China as the US manufacturers are not set up to be competitive in certain areas. Quartz countertops is an example of this. The tariff proposed for Quartz cut-to-size tops and slabs is a political response, not an economic response, and the consumer will pay for the petition to punish Chinese Quartz exporters. And who wins? Cambria. Who loses? Who do you think?
* http://www.startribune.com/no-14-under-the-radar-st-peter-family-among-richest-americans/284917381/
Background articles:
https://www.jdsupra.com/legalnews/stone-industry-rocked-by-new-trade-case-49929/