The New Tariff Policy Is About To Come Into Effect, Which Helps Businesses Overcome Their Difficulties.

When President Trump first announced tariffs on Chinese imports last year, the production of Randa for men's accessories for famous brands such as Dickies and Levi's doubled the capacity of their belt plant in Guatemala.

Randa is fortunate enough to complete the expansion plan of the Guatemala leather goods factory before the new round of trade wars.

President Trump recently announced tariffs on new product categories, including belts, and proposed tariffs on another 325 billion US dollars imported from China, including most clothing and footwear. The tax policy is likely to take effect as early as June 24th.

A large part of Randa is produced in China, which means that its import cost will increase by 25%, but at least those belts made in Guatemala can be avoided.

Richard Carroll, vice president of Randa, said: "the expansion of Guatemala factories has both advantages and disadvantages. We regard this crisis as an opportunity to move the garment business out of China."

Many garment manufacturers are not so lucky.

According to the data provided by the trade organization, about 40% of imported clothing and 73% of imported footwear from the United States are produced in China.

From H&M, Forever 21 and other fast fashion chain stores to high-end brands such as Ralph Lauren and Calvin Klein, tariffs will have a far-reaching impact on the fashion industry.

We will do our best to reduce the impact of tax policy on company revenue.

Clothing enterprises are faced with difficult choices, whether they should readjust the supply chain or raise the selling price.

The longer the tariff policy is maintained, the more likely it is to change the fashion industry's operation mode in essence.

"We will do our best to reduce the impact of tax policy on company revenues."

Samsonite chief financial officer, Reza Taleghani, said at a conference call earlier this month, "we will ensure that the company's earnings are less affected by the three aspects of commodity pricing, consultation with suppliers and product restructuring. In fact, we are too diverse in product categories and are not conducive to centralized production."

Before the new tariff policy comes into effect, brands and retailers can make preparations ahead of time, adjust the supply chain, or do a good job of customer communication in advance.

Set up a new production line in other countries

John Kernan, an analyst at Cowen, said that with the new round of tax policy, the major fashion companies will lose more than 20% of their net income.

He also said that Skechers, G-III clothing group, Carter 's, PVH and Ralph Lauren and other garment enterprises were particularly hard hit.

It is impossible for the major garment brands to move their production business away from China in the short term, thus avoiding tariffs completely.

Because it will take at least a couple of months to build new production lines in India, Vietnam or Bangladesh, and there is no guarantee that new partners can deliver products at the same quality, cost and speed.

Clothing companies also need to realize that the US government may reach some sort of agreement with the Chinese government and then abolish tariffs. If rashly resumes the supply chain, it may suffer a great deal.

Over the years, many garment brands have moved some of their production business out of China, because the manufacturing costs in China are slowly rising.

J.C. Penney CEO Jill Soltau said at a conference call last week that they have been providing contingency plans for the production of commodities for many years and have been looking for new production bases worldwide in the first round of trade wars.

Large enterprises like J.C. Penney usually have full-time staff dedicated to finding the lowest cost and highest quality factory in the world.

Smaller businesses can find new suppliers in trade shows and industry exchanges.

Kernan points out that most brands choose to build new factories in other Asian countries, but even fast-growing manufacturing centers like Bangladesh and Vietnam are unable to cope with large-scale orders from China.

The biggest advantage of manufacturing in the United States is that, regardless of tariffs, we can produce goods quickly and reduce the backlog of goods.

Some companies are trying to move the production line back to the United States. Although the cost is higher, the goods can be delivered to the customers faster.

In view of the rising cost of manufacturing in China, and the brands are exploring ways to deliver products quickly, McKinsey analyzed the advantages and disadvantages of us made in a report last year.

Gary Wassner, founder of investment company Interluxe and factoring company Hilldun, recently opened a knitting factory in Saint Louis.

He said in an interview with BoF: "this knitting factory can survive today, relying on high-tech and sophisticated equipment.

In this way, we can get rid of all the troubles from China's air cargo to the United States, and then create jobs in the United States. "

Suuchi is a start-up company that has cooperated with 230 brands of clothing, footwear and accessories. They own their own garment factories in New Jersey.

The company updates its progress on all aspects of its technology platform, including design, procurement, production and pportation, so that partners can track the whole process.

Suuchi Ramesh, the founder of the company, said: "the biggest advantage of the United States is that we can produce goods quickly and reduce the backlog of goods, regardless of the tariff."

She added that Suuchi's own factory and 140 other cooperative factories using this technology have a total capacity of about 12 million per year.

However, American manufacturing is not realistic for most brands: data from Institute for Global Labour and Human Rights show that the cost of producing a denim shirt in Bangladesh is only $3.72, while the same dress costs US $13.22 in the US.

Search for new country of origin for commodities

If some of the steps in the production process are pferred to other factories, the brands that rely on China's manufacture may avoid taxation.

The United States Customs defines the country of origin as the "country or key component producing country that has completed the most important part of assembly".

In some cases, this means that those countries that have completed the final assembly are commodity origin countries.

If the yarn used for a sweater comes from Peru, its weaving part is completed in China, but it is knitted in Vietnam, then Vietnam may be regarded as the country of origin of this sweater.

If you own an underwear company and finish weaving, tailoring and sewing in China, we can help you pfer the work of tailoring and sewing to another country.

"If you own an underwear company and finish weaving, tailoring and sewing in China, we can help you pfer the work of tailoring and sewing to another country, so you can argue that the product origin is not China."

Richard Mojica, a Miller & Chevalier law firm, said that he had been providing legal advice to retailers and clothing companies on tariff issues. "These so-called ending work can be completed in Vietnam and India."

Mojica also suggests that enterprises should first submit a well conceived supply chain to the US Customs and decide whether or not to pay customs duties.

Different brands may get different responses, and the verdict is usually released within 30 days.

Hoarding goods before the tariff policy takes effect

The major brands can also ask suppliers to rush to deliver goods to the United States by June 24th, thereby avoiding taxes in the short term.

According to Adam Winters, chief executive of Merchant Financial Group, fashion brands will normally receive a month's work before the shelves are available, thereby reducing inventories.

However, in view of the current situation, some businesses are considering completing all the orders this year, hoarding goods to tide over the difficulties ahead, and businesses need large sums of money.

They can seek help from companies that offer short-term credit services such as commercial financial groups to raise funds to cover costs.

In the next few weeks, the air, sea and air cargo routes will be very busy.

Winters said, "some customers have recently called us, hoping that we can provide financial support to help them deliver all autumn products to the United States by June 24th.

In the next few weeks, the air, sea and air cargo routes will be very busy.

He added that some companies relied solely on this way to tide over the difficulties and hoped that President Trump would eventually reduce tariffs during the second election period.

Sharing tariff costs

Another short-term solution is that brand businesses agree with suppliers and retailers to share tariff costs.

For example, if a brand usually buys a sweater from a Chinese supplier at a cost of 100 US dollars, but now it has to pay more than 25 dollars in tariffs, they can ask the manufacturer to cut down the price of 5 dollars, and persuade the retailer to add another 5 dollars to bear the cost of taxes.

I don't think any link in the supply chain can bear the cost rise caused by tariffs.

Randa Meredith Travers, vice president of advanced sales, said: "I do not think any link in the supply chain can bear the cost rise caused by tariffs.

All parties are working hard to get rid of the problem of rising costs and pass them on to consumers.

All parties are clearly aware of the urgency of the problem, and we all lend a helping hand, hoping to bridge the difficulties ahead. "

Western apparel brand Boot Barn has 234 stores in the United States. Its chief executive, James Conroy, said at a recent conference call that they were discussing with suppliers and factories about how to reduce tariff effects, and analyzed various initiatives such as finding low-cost sources of goods and improving supply chain efficiency.

He added: "no matter what impact the tariff will bring on us, we are confident that we will eventually pass it on to consumers."

Explore the "first sale" plan

In the "first sale" plan, clothing manufacturers sell products to intermediaries (cost price, which is the first sale), and intermediaries sell the same products to American brands of imported products (the cost plus the handling charge, which is the second sale).

The brand pays the tariff at the cost of the first sale, so that the cost of handling can be excluded from the tariff.

Mojica says many clothing and footwear brands have already used "first sale" to reduce costs.

But he also warned that this is a high-risk strategy.

"The first sale" has been subject to strict scrutiny by customs, plus the tariff changes, the US Customs will definitely tighten up such activities.

The prerequisite for obtaining the first sale qualification is that the paction between producers and intermediaries must be genuine sales.

The brand should seek help from lawyers and consulting firms to meet customs requirements.

Advice to the US government

From now until 10 June, enterprises can also submit their views to the office of the United States trade representative.

They will hold hearings in June 17th.

Written reviews are a way for companies to oppose universal tariffs. Businesses can ask the Trump administration to revise policies and impose tariffs on small products, thereby ensuring that many goods on the list are not affected.

Enterprises have to take more stringent regulatory measures to resist tariff storms.

A successful precedent in this respect is that hundreds of us Steel Corp have applied for exemption from tariffs after Trump announced tariffs on imported steel.

According to The Associated Press, the US Department of Commerce approved the application of tariff exemption for 370 companies.

A public expression of objections will also make the government aware of the seriousness of the incident and exert political pressure on it.

Last week, more than 170 footwear companies including Nike and Adidas wrote to the Trump administration, calling the proposed tariff policy a "disastrous" result.

"I hope that all parties' pactions can continue, because this will be beneficial to both sides."

"At the same time, companies may have to take more stringent regulatory measures to fight the tariff storm," Winters said.