The U.S. Hide, Skin and Leather Association and the American Apparel and Footwear Association are preparing an opinion piece to "address the benefits associated with updating the 9802 program," the USHSLA said in an email. Heading 9802 allows for "companies to deduct any U.S. components from their imported merchandise before assessing duty," the group said. The USHSLA didn't give any more specifics on the piece, which will run in The Hill. The Office of the U.S. Trade Representative recently ended the special tariff provisions in Chapter 98 for U.S. goods returned after assembly, repair, alterations and processing that are subject to Section 301 tariffs (see 1808160049).

Master Electronics will absorb costs of Section 301 tariffs on Chinese imports that took effect over the summer by establishing itself as a “tariff free zone,” the electronics components distributor said in a news release. It’s vowing no tariff-related price increases or surcharges “for the foreseeable future.” The first two rounds of 25 percent tariffs took effect July 6 and Aug. 23. The third round took effect Sept. 24 at 10 percent, but is scheduled to rise to 25 percent after Jan. 1. “Our prices do change regularly based on supplier prices and market elements,” the company’s website says. “There will be no price change, surcharges, or fees due to tariff policy.”

Costco sees “many moving parts” in an “extremely fluid” environment now that Section 301 tariffs are in effect on $250 billion worth of Chinese imports, Chief Financial Officer Richard Galanti said on an Oct. 4 earnings call. Working with suppliers “to see what can be done to reduce and/or absorb some of the costs” is one of the strategies Costco is “exploring,” Galanti said. “Reducing our commitments on certain impacted items” is another possible remedy, he said. There’s “limited ability” to find “alternative country sourcing,” even where that’s “possible and feasible,” and that “takes time,” he said. “We’ll have to see how customers and competitors react to tariffs, and what impacts it will have.” It’s in Costco’s “DNA” to be the last to raise prices on consumers, and “we want to work with any supplier to figure out how to not do that,” Galanti said. That Costco owns more than $138 billion of purchasing power “affords us, I think, some opportunities that perhaps make it a little easier for us,” he said. People “smarter than me” don’t like tariffs, he said. “Whatever negative” they bring, “we can weather it better than others,” he said. Costco, through membership in the Retail Industry Leaders Association representing big-box retailers, lobbied unsuccessfully against the three rounds of tariffs.

The U.S.-Mexico-Canada Agreement could lead to further escalation of the trade dispute with China, said Ethan Harris, global economist at Bank of America Merrill Lynch, in a research report. "The completion of the NAFTA deal does not alter our view that the US-China trade 'war' will get worse before it gets better," he said. "We see the NAFTA deal as part of an attempt by the US to marshal its forces with China," he said. There are political considerations at play too, and the Trump administration could "dial back its demands" for China in order to show a "win" that might help Republicans in the midterm elections, he said. At the same time, China is aware of this dynamic and "would like to see if President Trump’s negotiating position is weakened by the midterms," he said.

Alcatel-Lucent Enterprise (ALE) through year-end will “absorb” the “significant” cost increases of the 10 percent Section 301 tariffs on Chinese imports of networking equipment and components that took effect Sept. 24, it said in a Oct. 3 news release. The Trump administration removed imports of Bluetooth headphones, smartwatches and fitness trackers under the 8517.62.00 line item from the final tariffs list, but let 10 percent duties stand on networking equipment imported under the same classification. The tariffs are scheduled to rise to 25 percent after Jan. 1. “Many vendors have chosen to pass the cost through to channel partners and customers by immediately increasing prices,” but ALE “will absorb the current 10 percent increase and give partners the opportunity to place orders before a potential need to adjust pricing in the new year,” it said. Most U.S. customers “locked in 2018 budgets long ago and are already in planning cycles for next year,” ALE said. “We recognize an unexpected price increase could aggravate a budgeting process that is often already complex for business leaders.” It vowed to give three months’ notice of any 2019 price increases.

Already supply chain shifts are underway as multinational corporations see the possibility of a prolonged trade dispute with China as too risky, Nicole Bivens Collinson, president of government relations at Sandler Travis, said during a conference call with Merrill Lynch. "Collinson believes it will take two to three years for most companies to fully shift capacity out of China," Merrill Lynch analyst Rafe Jadrosich said in a Sept. 27 research report. "However, she also noted several risks that could slow the process and result in near-term production inefficiency."

A change in approach that goes beyond the tariffs that have inspired Chinese tariffs in return is coming, said Jeremie Waterman, president of the China Center at the U.S. Chamber of Commerce. "We're now entering into the next phase on export controls; that will be a major issue for the business community, in terms of being able to bring your IP and create value in China." With regard to rolling back the tariffs, he said there's no process for negotiations now, and CEOs are starting to try to figure out if this is going to last long enough that they need to make changes to where they manufacture, including leaving the U.S. because of Chinese retaliatory tariffs. "The supply chain conversations at the C suite level are very hot and heavy right now," he said.

A Canadian customs broker told a group of her colleagues from the U.S. that the last year "has been probably the most challenging year of my life." Kim Campbell, who is president of MKMarin Trade Services, fears it could get worse. If the Trump administration decides to levy tariffs on Canadian cars, car parts or uranium under Section 232, the amount of goods that now cross the border tariff-free would drop dramatically, she believes, because Canada would have to put in place counter-tariffs.

Coping with the U.S.-China trade war “continues to be a moving target,” said Mark Mondello, CEO of manufacturer Jabil, on a Sept. 24 earnings call. “You wake up one day, there’s a tweet, you wake up 48 hours later, something else is going on,” Mondello said. “It’s a very complicated issue in terms of what’s going to be, how bad will it get.” There’s some “conversation” in supply chains that the trade war is “just going to be kind of a little bit of a tit for tat, and then there’s people that have the opinion that it could extrapolate to something much bigger,” he said. If U.S. tensions with China escalate "it absolutely is going to affect our business, as it will everybody’s,” he said. Mondello personally and in dealing with customers tries “not to get too obsessive about how bad things can get,” he said. “We do planning scenarios internally on what we would do, but assuming this thing doesn’t blow up in a big way, I think Jabil’s really well-positioned.”

Micron Technology expects its gross margins to take a “near-term” hit “to the tune of 50 to 100 basis points” from the 10 percent tariffs on $200 billion worth of Chinese imports that take effect Sept. 24 and are due to rise to 25 percent Jan. 1 (see 1809170051 and 1809180020), Chief Financial Officer Dave Zinsner said on a Sept. 20 earnings call. “We are working to gradually mitigate most of the impact from these tariffs over the next three to four quarters,” Zinsner said. “Clearly, tariffs are impacting us,” and reducing Micron’s exposure to the damage “obviously takes some time,” he said. “We have to do some things operationally to get ourselves in a place where it isn’t as impactful, and so, it’ll be a quarter or two probably before we start to see some benefit from the improvement there.” Micron argued unsuccessfully for removal from the Trump administration’s “retaliation list” the tariffs on 8473.30.11 printed circuit assemblies imported to the U.S., which include the “memory modules” it makes in Xi’an, China.