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Reality of New Government Imposed Tariffs

The new government-imposed tariffs on almost all goods imported from China are now a stark reality and in full effect.

As of Oct. 1st, goods have an additional tariff of 10% or 25%, and most ALL goods from China will be taxed at the additional 25% rate
as of Jan. 1st of 2019.

We have received numerous notifications from companies either raising their prices by 25% effective on Oct. 1st or adding a separate “tariff” line item of an additional 25% to all invoices. We have taken a completely different approach to the issue which is a two-part approach.

Number one is that prices had already begun to rise even before the tariffs were introduced. Labor and raw material prices in China were both under pressure and we did see this coming before the end of 2017. Because of this, we placed a large number of advance inventory orders that kept our pricing stable through 2018, and we still do have some levels of inventory left at the old pricing levels. While we have already been hit by the tariffs as most everyone has, because of our inventory mix, we felt it fair and prudent to hold off on raising prices until it became absolutely necessary.

The second part of our approach is to try and mitigate the increases by working with our raw material and manufacturing partners to try and lower costs anywhere possible. We do have alternate sources and are using that as leverage to try and get some pricing relief. While we absolutely do not want to change our manufacturing process since we control it ourselves, we are trying to use other possible avenues in various other regions worldwide as a negotiating tool.

We have done a tremendous amount of internal work figuring out how much inventory is at the original pricing level compared to how much has been received at the 10% and 25% higher price levels, trying to quantify a truly fair and equitable price increase policy for our customers. We also felt that absorbing a portion of the increase could help us from a customer loyalty and retention aspect, as we are all in this situation together. While we will lose quite a bit on some of these transactions, we felt the best way to do this is with an incremental price increase policy that you see detailed below.

Please note that this increase will NOT affect LED MR16 & Bi-Pin Pricing at this time, but these items will most likely have a moderate increase at some point in 2019:
All orders placed by 11/15 Current Price
All orders placed by 12/31 5% Price Increase
All orders placed by 1/31 10% Price Increase
All orders placed by 2/28 15% Price Increase

We also felt the incremental increase was better so as not to have everyone place huge orders to beat the increases which could adversely affect our stock levels, delivery times, and timing of price increases. And because of these issues, we do reserve the right to delay all or some part of orders placed to make sure we keep adequate inventory levels for our entire customer base, and we feel the best way to do that is to communicate any of these situations with you on a case-by-case basis.

— Craig A. Klomparens
Dauer Manufacturing & FUSA CORP

October 29, 2018

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