U.S. domestic companies have submitted more than 16,000 applications requesting exemptions from the Trump administration’s tariff on $200 billion in Chinese goods a year ago. More than 10,000 of them are from the same company: Arrowhead Engineered Products Inc.
The Wall Street Journal reported on September 23 that Arrowhead imported thousands of after-sales repair parts from China for cars, lawnmowers, ATVs and other products, all of which are now subject to a 25% tariff. And by October 15 the tax rate will rise to 30%. According to the company’s executives, these import tariffs have ruined Arrowhead’s business model of selling manufacturers’ parts and components at lower prices. As it turns out, filing an exemption application for these tariffs is a challenge in itself, which shows that the losses caused by trade wars to US companies are sometimes difficult to observe. Arrowhead’s chief operating officer, John Mosunic, said that because it had to file an exemption for tariff issues, the company basically put everything else in a secondary position. Given that there are no reliable alternatives to many of the parts imported from China. Arrowhead contacted the local MP, the office of Republican Congressman Tom Emmer of Minnesota, and looked forward to ways to simplify the grievance procedure.
According to Mosunic, Arrowhead received guidance that is as specific as possible when seeking an exemption. As a result, the company eventually filed an exemption for each imported gasket, air filter, spark plug and other components, and hired a group of temporary workers to submit applications manually. The company has approximately 1,000 employees.
US companies have adopted different strategies for tariff exemption procedures. Some companies only apply for exemptions for several key products. Some companies submit a single application covering many products. The Office of The U.S. Trade Representative has said that applications will be waived one by one, considering whether the product can only be imported from China and whether the tariff will cause significant damage to the company. According to Mosunic, as a repair part, Arrowhead imports products of a specific specification, which makes it difficult for the company to change suppliers, although it has been looking for alternative suppliers as much as possible. The overall concept of the parts market is to find low-cost sources of supply. He said: “Many of these components have no American source at all. That’s the way it is. There is no way to do it. There is no source of supply. The United States has not produced alternators and starters for 20 years.”