(Bloomberg) -- Paul Shekoski thinks he presented a good case why the weather stations and other products his company makes in China should be spared from President Donald Trump’s tariffs. As a small-scale employer, he’s not optimistic he will win.
Shekoski, chief executive of the Primex Family of Companies in Lake Geneva, Wisconsin, is among the hundreds of U.S. companies filing requests by Tuesday’s deadline for exclusions from the initial round of tariffs imposed on Chinese imports. While Shekoski has testified against the duties, asked elected representatives for help and filed for exclusions on almost 80 products, he puts the odds of getting them approved at less than 10 percent.
“It’s swimming upstream,” said Shekoski, whose business employs about 200 people. “At the end of the day, we’re fairly small and not very visible, so we’re kind of caught in the process.”
Companies including Apple Inc (NASDAQ:AAPL). successfully avoided having tariffs imposed on products, and General Motors Co (NYSE:GM). and HP Inc. are among those seeking duty exclusions for goods such as the China-built Buick Envision and toner cartridges. But some smaller businesses such as Primex say they fear they lack the clout and resources to prevail, and they can’t afford to quickly switch suppliers.
Threaten Business
Shekoski said his supply chain was built over three decades and the duties are enough to wipe out his annual profit, which would threaten the 75-year-old business.
Meanwhile Ohio-based Weastec Inc. has filed more than 60 requests for exclusions from tariffs on switches and other automotive parts it imports from a sister company in China for warehousing and just-in-time delivery to Honda and other automakers in the U.S., said Doug Ernst, senior manager of operations at the firm, which employs about 190.
The parts are made with unique tooling and manufacturing processes that only exist in China and can’t be produced in a cost-effective manner in the U.S. or any other country, Ernst said. The initial round of duties would add $635,000 in costs in the coming year, and the total with the third tranche of duties would be $4.1 million, he said.
“I hope I’m wrong, but I would think that the bigger players would get more consideration than folks like us would,’’ Ernst said. “Money talks and the big businesses get more press and economically they’re more, I guess, critical to the overall country.’’
Each request for exclusion is judged by career trade experts on the same criteria, regardless of the requester, the Office of the U.S. Office of Trade Representative said in a statement. Decisions are based on whether a product is available only from China, whether duties “would cause severe economic harm” to the company or U.S. interests, and whether the item is strategically important.
More Duties
The Trump administration has imposed three rounds of tariffs, starting with 25 percent on $34 billion in goods July 6 and on $16 billion worth of products Aug. 23. A 10 percent duty on $200 billion took effect last month and is set to increase to 25 percent on Jan. 1, while Trump has threatened even more duties on top of that.
Before each tranche of tariffs, hundreds of U.S. companies and trade groups testified at public hearings seeking to avoid the duties, most unsuccessfully. The White House spared some categories of products, including those that cover the Apple Watch and AirPods as well as fitness trackers from Fitbit Inc.
Filing Deadline
Exclusions are the final chance for companies to avoid the duties. Besides Tuesday’s filing deadline for the initial tranche of tariffs, companies must file requests for exclusions from the $16 billion list by Dec. 18. While the Trump administration hasn’t put an exclusion process in place for the $200 billion list, the National Retail Federation and 120 other organizations in the Americans for Free Trade coalition have asked USTR to include one.
The USTR has begun to issue decisions, and of the more than 2,000 requests posted as of Oct. 4, 108 have been denied and 25 are being reviewed with U.S. Customs and Border Protection to determine whether an exclusion can be administered, according to data published by the government.
Chicago-based Hallmark Industries Inc., which has 10 employees and supplies water pumps and motors, had four exclusion requests denied and expected that, President Henry Huang said. Trump has threatened to slap tariffs on virtually all Chinese imports, and granting exclusions undermines that effort, he said.
“If you exclude everything made in China, pretty much this whole tariff thing is a waste,’’ Huang said.
Trade War
Mike Bergmeier, president and principle owner of Shield Industries Inc. in South Hutchinson, Kansas, said he supports what the administration is trying to do but can’t afford a protracted trade war. Bergmeier said he only filed exclusion requests on his agricultural equipment parts that have never been made in the U.S. While they technically could be manufactured outside of China, the time and cost it would take isn’t practical for the company with 42 employees.
“It’s not going to hurt anybody except me and my company and my employment,’’ he said.
Robert Piazza, chief executive officer of California-based Price Pump Co. with 36 employees, said he doesn’t have the political pull or ability to lobby as an Apple or other large company. But he’s filed for exclusions on metal castings he imports from China because they would cost about three times as much made elsewhere, and he’s obligated to try.
“I would hope that government would be objective, but I think that’s just wishful thinking,’’ Piazza said.