The additional tariffs on optical products imported from China—threatened on and off by The White House throughout the spring and summer—went into effect Sept 1. Frames, spectacle lenses, plano sunglasses, OTC readers, all goggles, and some low vision devices (these are on List 4A) are now assessed an additional 15% tariff.
EB asked Rick Van Arnam, The Vision Council’s Regulatory Affairs counsel, for an update on the situation and how optical is preparing to deal with the additional tariff. He provided the following information:
Originally, the additional tariff had been announced as a 10% tariff, but the president increased it to 15% in response to China imposing retaliatory duties. As a result, optical products are now subject to a 15% additional tariff in addition to the tariff that was already being assessed against these products, typically in the 2 to 2.5%range.
Another list (list 4B) which includes optical telescopes used for low vision, is scheduled to be assessed for an additional 15% duty on Chinese-origin products as of Dec. 15. (The products on list 4B, which include many consumer electronics, were given a later December date to avoid price increases that would be borne by holiday shoppers.)
Lists 1, 2, and 3 (which generally do not include any optical products) are already subject to an additional 25% duty. Steps are being taken to increase this to 30% on or around Oct. 1, 2019. Again, the increase results from the U.S. response to China imposing its own duties on goods of U.S. origin in response to the finalization of Lists 4A and 4B (the ones on which optical products are located).
According to Van Arnam’s analysis: President Trump has shown a predilection to increase these tariffs when he feels that China is disrespecting him. For example, when President Trump felt that China had backed away from concessions allegedly made during earlier negotiations, he moved immediately to implement List 3. Likewise, when China retaliated with duties of its own in response to List 4, President Trump raised the rates from 10% to 15% and began steps to raise the 25% tariff to 30%. Looking toward the future, President Trump could raise the 15% rates to 25%, 30%, or where ever he sees as beneficial.
In commerce, taxes, fees, and tariffs tend to be passed along to the next buyer, all the way down the distribution line to the end consumer. Will that happen in optical?
To gauge the plans of optical wholesalers, distributors, and ECPs, The Vision Council did a “flash survey” this summer (when tariffs were threatened but not yet enacted) of various members across The Vision Council’s divisions. Responses were collected from various members across The Vision Council’s Eyewear & Accessories (E&A), Lab, Lens, Lens Processing & Technology (LPT), Low Vision (LVD), Optical Retail (ORD) and Sunglass & Readers (SRD) Divisions. Click here to see the full survey results.
Here is how the Optical Retail Division members answered the survey:
When a 10% tariff was anticipated, 44% of optical retail division respondents said they should share the increased costs with customers, 33% would absorb the costs, and 22% would pass along the costs to customers.
When a 25% tariff was anticipated, those numbers were 56%, 0%, and 44%, respectively.
When looking at the total responses for all members for both the 10% tariff and 25% tariff possible outcomes, a majority (52% and 56%, respectively for each situation) responded they would “pass along all cost increases to my customers.”