Friday, August 10, 2018 UNIONTOWN, OH—ChemSpec, Ltd. feels it has a responsibility to its customers to help them stay abreast of issues that may have a large impact on their respective businesses. To this end, ChemSpec believes the pending TEN PERCENT (10%), or now possibly TWENTY-FIVE PERCENT (25%), tariff increase on Chinese goods, could have a major effect on chemicals, polymers, and other compounding ingredients that ChemSpec (and also many other chemical distribution firms) sells to elastomer and plastics compounders.

BACKGROUND:

Over the course of past 12 months, the current U.S. Presidential Administration has made it known that it would like to better level the competitive playing field when it comes to imports and exports with China. Due to this, beginning in the spring of 2018, it commenced assessing additional duty on imported goods coming from China. Between March and June 2018, on 2 separate occasions, it located and assigned an additional duty rate of 25% on many specific commercial goods being imported from China to the United States (approximately $50 billion worth of product). A portion of those duty increases (also known as tariffs) commenced being assessed on products hitting U.S. Ports in early July, while hearings recently wrapped-up in relation to another portion of those products and those tariffs will go into effect on August 23rd. Very few of the above-described increased tariff assessments however really impacted the chemicals and additives ChemSpec distributes to its various polymer compounding customers.

JULY 10TH & AUGUST 1ST PRESS RELEASES:

All this changed with a press release issued by the United States Trade Representative on July 10, 2018 (see press release here: https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/july/statement-us-trade-representative). In that release, the Administration explained that it was going to assess a new round of tariffs concerning an additional $200 Billion in Chinese imported goods. The duty rate for these goods is to be 10%, plus whatever the existing duty rate already in place is. In this list of goods that are to be assessed at an additional 10% duty rate, many are products used in elastomer and plastics compounding, and consequently, some of those products ChemSpec distributes across North America. (See the original list and remarks summary here, pp. 11-205: https://ustr.gov/sites/default/files/301/2018-0026%20China%20FRN%207-10-2018_0.pdf). Moreover, less than 30 days after this July 10 press release, the Trade Representative notified the industry that it may change this 10% tariff hike to 25%, because of the decreased value of Chinese currency, but that change has not yet officially been determined as of the time of this release. (See this August 1 Press Release here: https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/august/statement-us-trade-representative).

Please note though that ChemSpec sources its products from across the globe and China is but one source of our materials; many of our products come from Europe and other parts of Asia. You will need to ask your respective sales team member to see if your product(s) is impacted. In addition, just because you “think” you are purchasing a product from a chemical distributor that is sourcing product made locally in North America (or some other non-Chinese source), ChemSpec urges its customers to double-check, as many products are private labeled from China to the U.S. If you do not do your own research into this issue, you may find that you get a big price hike on many raw materials without anticipating it.

WHAT NEXT?

The comments period for these proposed tariff increases is just opening and hearings are in the middle of August. The hearings and comments period close on September 5th, so it will likely be sometime between September 6th and the end of September before we see any of these newer tariffs actually enacted and hitting product at U.S. Ports.

Moreover, this is a political maneuver by a Presidential Administration that does not seem to fear pushing the envelope when it comes to tough negotiations with other countries, and so maybe some of these goods get assessed, maybe all of them, or maybe none of them. Only time will tell. It is certainly not an exact science and none of us will know until we are told by the Federal Government officially.

We invite you to reach-out at any time for a discussion on this topic; we appreciate your patience and proactivity as we progress through these increased tariffs.

Sincerely,

Christopher J. Wagner

ChemSpec's Marketing & Law Director