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Post by marknycfan on May 27, 2019 11:46:26 GMT -8
Cut and pasted so all can read it-
Dear Model Railroaders,
I would like to address the issue of the possibility of trade tariffs in regard to the model railroad industry. There have been some erroneous reports about tariffs that have allegedly been applied to model railroad products being imported from China, and other misinformation that unfortunately leads to misleading and increased confusion in this, at times, complex subject.
First and foremost, as of Wednesday, May 22nd, 2019, no decision has been made regarding implementation of tariffs by the US government on the balance of approximate $300 billion dollars in export trade with China, the large part being consumer goods that include model railroad products. According to US Treasury Secretary, Steve Mnuchin, “no decision will be made for the next 30-45 days”.
During this time President Trump and China President Xie are scheduled to meet in Japan at the end of June, where trade negotiations may or may not be decided to continue. In the meantime, an exclusionary process is being set up which allows a procedure for deciding if any product will be granted an exclusion from the tariff increase which could be up to 25%.
Atlas will do its best to keep all our customers informed of any news and possible company policy changes in accordance with confirmed facts as they occur.
Thank you for your understanding and continued support of the great hobby of model railroading.
Sincerely,
Tom Haedrich,
Executive Chairman,
Atlas Model Railroad Co Inc
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Post by valenciajim on May 27, 2019 14:10:24 GMT -8
This is a very informative, factually based message. Thanks for posting.
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Post by marknycfan on May 29, 2019 16:45:13 GMT -8
Yes, no speculation about who is or isn't going out of business, who's bankrupt, etc.
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Post by valenciajim on Aug 3, 2019 15:17:35 GMT -8
I don't want to get into a political discussion about tariffs, but based on what I saw on CNN and CNBC, it appears that the President is considering imposing a 10% tariff on Chinese merchandise, including toys,, on September 1. A link to the CNBC article is here: CNBC report on tariffsThe bullet point summaries of the CNBC article include the following points: "In the toy industry, Trump’s new tariffs on China come at a particularly bad time: September is a peak holiday shipping month for toy companies like Hasbro and Mattel." "While a number of these toymakers have come up with contingency plans, like lowering their reliance on manufacturing in China, many have made it clear that price increases will come if tariffs hit on Sept. 1, as Trump has threatened." The article states that the demand for toys is fairly elastic ( i.e., price sensitive), but I am not sure about the elasticity of demand for model railroad products made in China. The business press has spent a considerable amount of time discussing the impact on Hasbro and Mattel, but I was wondering whether model trains would be included, and if so, how much (if any) of the tariffs would be absorbed by the importers. I suspect that the importers' margins are pretty thin already and that most of the tariffs would be passed on to the consumer. Again, I do not want to get into a political discussion or engage in speculation. I was wondering whether anyone has heard whether the September 1st tariffs, if imposed, will apply to model trains. If, so how will he model train importers respond. |
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Post by ncrc5315 on Aug 3, 2019 16:47:48 GMT -8
I wonder what the price point is that the 10% is based on? Is it based on the MSRP, the manufactures cost, does anybody know?
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Post by Deleted on Aug 4, 2019 7:45:17 GMT -8
But I thought that model trains weren't toys  |
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Post by valenciajim on Aug 4, 2019 12:09:01 GMT -8
I wonder what the price point is that the 10% is based on? Is it based on the MSRP, the manufactures cost, does anybody know? That is a good question. Based on what I have read it appears that most tariffs are based a percentage of the price a US importer pays to a foreign seller. I am not sure how it works if the goods are shipped through an intermediate country (such as Rapido, where the goods are first shipped to Canada before being resold to a US customer). Also, it is not clear how much of the tariff is absorbed in the supply chain. Due to decreased demand, the manufacturer sometimes reduces the price or the importer does not raise the price by the full amount of the tariff. My guess is that, for goods that we have already ordered, those goods have been or will be manufactured under an existing contract, so the manufacturer will not absorb much of the tariff. For future contracts, that may change. With respect to the question of whether model trains are toys, from what I read the Administration intends to apply the September 1st tariff broadly to $300 billion of Chinese exports that are not already subject to tariffs-including (but not limited) to toys. If the idea is to apply the tariffs to all Chinese imports, it won’t matter whether model trains are toys. If the tariffs will apply selectively to certain goods, and toys are one category of those goods, as a practical matter, I wonder how easy it will be to distinguish a Matchbox die cast vehicle from a Bachmann toy train to a highly detailed scale model that is not intended for use by children. The reason why I am asking is because I am semi-retired and my income is relatively fixed. In the past few years, my wallet was safe because I concluded that I have enough stuff. Thus, I refrained from purchasing new offerings of model railroad equipment. However, in the past several months Rapido and Scale Trains have changed that and I have about $2,500 of stuff on back order. I am trying to get a feel for how much my modeling costs will increase because our family’s taxes and medical expenses have increased sharply this year. Consequently, I will be spending less on vacations and model railroading. I am trying to budget my purchases accordingly. |
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Post by valenciajim on Aug 5, 2019 20:07:36 GMT -8
This may not end up being a problem. If the Chinese let their currency, the Yuan, float and it drops 10% in value relative to the US dollar, and the contracts to manufacture the merchandise are expressed in Yuan, rather than in US dollars, then the price paid by importer, when expressed in US dollars, is only 90% of the price at the pre-tariff exchange rate. When the tariff is imposed, it merely returns the cost to the importer to the approximate pre-tariff amount. I realize this might be a bit confusing so here is an example:
Pre-tariff cost = $100 or 770 Yuan
Cost after tariff, but before China lets currency float
Pre tariff cost = $100 or 770 Yuan
10% tariff is 10% of amount paid to manufacturer measured in US $ = $100 x 10% = $10
Total cost to importer = $100 + $10 = $110
Cost after tariff and after China lets currency float
Pre tariff cost = $90.91 or 770 Yuan (The Yuan is worth 10% fewer US $)
10% tariff is 10% of amount paid to manufacturer measured in US $ = $90.90 X 10% = $9.09
Total cost to importer = $90.91 + $9.09 = $100
The Chinese manufacturer is happy because he has not had to reduce the price. The only time he feels the pain is if he purchases goods that were imported from outside of China.
The importer is happy because his costs remain the same.
The US customer, hopefully is happy because the price remains the same (unless the importer increases the price using tariffs as an excuse to increase the profit margin).
The key is that the manufacturing contract has to be expressed in Yuan rather than in US dollars.
I hope this makes sense.
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Post by dti406 on Aug 8, 2019 7:31:55 GMT -8
I have just seen reports where both Bachmann and Broadway limited are increasing prices to cover the tariff increase.
Rick Jesionowski
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Post by edwardsutorik on Aug 8, 2019 8:40:28 GMT -8
I am sure they will cancel those increases when they discover their Chinese costs dropping and THEIR effective costs remain the same.
Ed
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Post by jonklein611 on Aug 8, 2019 8:43:14 GMT -8
From BLI:
On September 1, 2019, the US will impose a 10% tariff on Chinese imports which will affect Broadway Limited Imports products arriving on or after September 1, 2019. Please see the table below for the price increases for five projects that have already been announced, but arriving after September 1—HO PRR T1, HO Baldwin Sharknose, HO GG1, HO EMD F3, HO Streamlined PRR K4. This price increase of 7% is effective retroactively, regardless of whether a preorder has already been placed. Broadway Limited Imports reserves the right to make additional tariff-based price increases depending upon delays (manufacturing or otherwise) that push additional previously announced products into the window of the September 1 tariff. Future announcements will have the tariff already factored into the price.
If you have placed preorders for any of the projects below, please expect to hear from your dealer regarding the price increase on your reservation. We apologize for the inconvenience.
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Post by ambluco on Aug 8, 2019 17:10:52 GMT -8
Same message now from ScaleTrains in email just hours ago. Price increases on the next engines due in.
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Post by canrailfan on Aug 8, 2019 17:47:25 GMT -8
This may not end up being a problem. If the Chinese let their currency, the Yuan, float and it drops 10% in value relative to the US dollar, and the contracts to manufacture the merchandise are expressed in Yuan, rather than in US dollars, then the price paid by importer, when expressed in US dollars, is only 90% of the price at the pre-tariff exchange rate. When the tariff is imposed, it merely returns the cost to the importer to the approximate pre-tariff amount. ... It's my understanding that contracts between model railroad importers and the Chinese manufacturers are negotiated and paid in U.S. dollars. (A lower value for the yuan is to the Chinese companies advantage.) I think that is why we are seeing the importers raise their prices and unless the tariff is not implemented or is later removed, prices won't go back down. The whole trade war situation has a 'boomerang' effect on domestic consumers that the politicians just don't seem to want to admit or consider. Importers may have to reduce the value of their models (less detail, fewer unit-specific paint schemes, etc.) to keep sales moving. Prices for freight cars and locos are already high enough to make many modellers reduce their purchases. With the number of models in the pipeline for all the major importers, the tariff is certainly going to cause some problems. |
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Post by ambluco on Aug 9, 2019 2:51:40 GMT -8
Per the ScaleTrains email, the tariff is paid at customs, before your container is released. And they estimate 10s of thousands per container. ScaleTrains raised their prices $5-10 depending on Operator or Rivet.
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Post by riogrande on Aug 9, 2019 3:06:24 GMT -8
Other than the bulkheads due before Sept 1, there is nothing coming from ST that is on my want list. Tons and tons of wide cabs, but ST appears to be mainly a manufacturer of "modern" train models (my definition, past ~25 years). I do have engines on my buy list due next years from Athearn and Rapdio so am bracing myself for increases there.
There has been some comments about the devaluation of the Yuan would offset the tariffs but some feedback I have gotten from one model train company seems to not believe that is going to be the case. He sent me this link that is on Youtube - appears to be BLI by the logo:
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Post by valenciajim on Aug 10, 2019 8:41:34 GMT -8
Other than the bulkheads due before Sept 1, there is nothing coming from ST that is on my want list. Tons and tons of wide cabs, but ST appears to be mainly a manufacturer of "modern" train models (my definition, past ~25 years). I do have engines on my buy list due next years from Athearn and Rapdio so am bracing myself for increases there. There has been some comments about the devaluation of the Yuan would offset the tariffs but some feedback I have gotten from one model train company seems to not believe that is going to be the case. He sent me this link that is on Youtube - appears to be BLI by the logo: I saw this video when it first came out. I understand that, apparently the video was produced by the Chinese government, so it has to be taken with a grain of salt. Having said that, I am not sure that the importers of model trains have the economic clout individually to force changes in the contractual terms of manufacturing requirements (i.e., changing the contracts to be denominated in dollars). Also remember that many of them are still recovering from the closure of factories. Wal-Mart may have the clout to change the terms of their contracts, but model railroad importers are not Walmart. In the big scheme of economic relations with China, model trains are a pimple on the butt of an elephant. Given that the Chinese government is letting their currency fall, I think they expect that some portion of the goods they manufacture will be sold in Yuan rather than dollars. Also, let's remember that the September 1st tariffs are only 10%, not the full 25% that has been threatened. If the Chinese stand their ground, the extra 15% could be imposed at a later time. |
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Post by valenciajim on Aug 10, 2019 8:44:35 GMT -8
From BLI: On September 1, 2019, the US will impose a 10% tariff on Chinese imports which will affect Broadway Limited Imports products arriving on or after September 1, 2019. Please see the table below for the price increases for five projects that have already been announced, but arriving after September 1—HO PRR T1, HO Baldwin Sharknose, HO GG1, HO EMD F3, HO Streamlined PRR K4. This price increase of 7% is effective retroactively, regardless of whether a preorder has already been placed. Broadway Limited Imports reserves the right to make additional tariff-based price increases depending upon delays (manufacturing or otherwise) that push additional previously announced products into the window of the September 1 tariff. Future announcements will have the tariff already factored into the price. If you have placed preorders for any of the projects below, please expect to hear from your dealer regarding the price increase on your reservation. We apologize for the inconvenience. Interesting point to read between the lines is that the tariff is 10%, but the price increase is only 7%. I suspect that means that the cost paid to the Chinese is 70% of MSRP. Remember the tariff is based upon what the importer paid for the product. |
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Post by thunderhawk on Aug 12, 2019 2:19:33 GMT -8
From BLI: On September 1, 2019, the US will impose a 10% tariff on Chinese imports which will affect Broadway Limited Imports products arriving on or after September 1, 2019. Please see the table below for the price increases for five projects that have already been announced, but arriving after September 1—HO PRR T1, HO Baldwin Sharknose, HO GG1, HO EMD F3, HO Streamlined PRR K4. This price increase of 7% is effective retroactively, regardless of whether a preorder has already been placed. Broadway Limited Imports reserves the right to make additional tariff-based price increases depending upon delays (manufacturing or otherwise) that push additional previously announced products into the window of the September 1 tariff. Future announcements will have the tariff already factored into the price. If you have placed preorders for any of the projects below, please expect to hear from your dealer regarding the price increase on your reservation. We apologize for the inconvenience. Interesting point to read between the lines is that the tariff is 10%, but the price increase is only 7%. I suspect that means that the cost paid to the Chinese is 70% of MSRP. Remember the tariff is based upon what the importer paid for the product. Assuming BLI uses distributors, I haven't picked up a Walthers catalog in years so really don't know or care, they pay far less than 70% of MSRP to their supplier. I won't say what the numbers are but Rapido has said in the past what they sell to distributors for. Just think about the fact the importer has to make money, the distributor has to make money, and the retailer has to make money while often discounting below retail. And all the shipping in there has to be paid by someone as well. As someone pointed out above, if the Chinese suppliers are not lowering their prices (in US dollars) to match the exchange rate with the devalued RMB this is a windfall for them. Product currently in transit is already paid for so it is what it is. Product going forward should reflect the exchange rate unless the suppliers figure they have the importers over the barrel. Which they very well may with stuff already cutting molds and such. Marklin and other Euro manufacturers are looking wise having plants in Eastern Europe and Vietnam. |
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Post by santafe49 on Aug 13, 2019 6:14:55 GMT -8
Just watching Bloomberg News and it was announced by the US Administration that the tariff's have been postponed until Dec 15. They will be having discussions over the next few weeks to try to forestall the implementation of these tariff's.
So, if the tariff's are not imposed, do the manufacturer's refund the extra charges they put on item's in advance of the actual tariff's cost's or just keep them as an increase in extra profit. Kind of unethical i would think. Saying the price is going up because of one thing and the cost then doesn't go up, but we are keeping the money anyway. Almost seems like double taxation.
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Post by kentuckysouthernrwy on Aug 13, 2019 17:40:54 GMT -8
8-13-19
I had an email this afternoon just before 4 pm from BLI that basically said....never mind
“IMPORTANT TARIFF IMPACT UPDATE
Prices reverting to original MSRPs
Today, August 13, 2019, the USTR (Office of the United States Trade Representative) announced that toys, including model trains, are on List 4B. This means that Broadway Limited Imports' products will not be tariffed on September 1, as originally announced. Since we will not be incurring immediate additional costs of import, products will revert to their original pricing.
Items on list 4B are to be tariffed effective December 15, 2019, according to USTR. As this date draws closer, we will be in contact regarding any products that may incur the tariff at that time.
We at Broadway Limited Imports apologize for the confusion and inconvenience caused by these evolving measures. We know it is frustrating. Thank you for your continued support!
Sincerely,
--The BLI Team”
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Post by Deleted on Aug 16, 2019 14:16:51 GMT -8
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Post by riogrande on Aug 16, 2019 15:00:13 GMT -8
That article is from June and is there a reason BLI couldn't move to another country rather than go out of business?
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Post by ambluco on Aug 24, 2019 4:30:39 GMT -8
So it appears the tariffs are back on....
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Post by riogrande on Aug 24, 2019 7:59:56 GMT -8
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Post by nebrzephyr on Aug 25, 2019 6:43:06 GMT -8
Now that the president has ordered all US companies to leave China, maybe the US train companies should open an "import" operation in Canada.  Bob |
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Post by jonklein611 on Aug 27, 2019 14:11:04 GMT -8
Now that the president has ordered all US companies to leave China, maybe the US train companies should open an "import" operation in Canada. Bob Rapido's one step ahead again! |
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Post by valenciajim on Sept 6, 2019 17:19:22 GMT -8
Now that the president has ordered all US companies to leave China, maybe the US train companies should open an "import" operation in Canada. Bob I would be surprised if this works because I believe that tariffs are based on the product's country of origin (i.e., where it was manufactured) rather than the country from where the crossed the US border. This would be too big of a loophole to get around the tariffs. |
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Post by riogrande on Sept 6, 2019 17:52:20 GMT -8
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Post by thunderhawk on Sept 6, 2019 20:20:32 GMT -8
Now that the president has ordered all US companies to leave China, maybe the US train companies should open an "import" operation in Canada. Bob I would be surprised if this works because I believe that tariffs are based on the product's country of origin (i.e., where it was manufactured) rather than the country from where the crossed the US border. This would be too big of a loophole to get around the tariffs. Yeah, if it was that easy CP and CN would be clogged up with stack trains parked everywhere. Also, decoupling has been a big point of this from the beginning. One cannot go on naively strengthening it's enemies forever. China is no one's friend but it's own. See their antics in the South China sea for evidence. Diversifying where our imports come from avoids problems as seen on a small scale with the train importers recently. |
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Post by valenciajim on Sept 6, 2019 22:12:30 GMT -8
I would be surprised if this works because I believe that tariffs are based on the product's country of origin (i.e., where it was manufactured) rather than the country from where the crossed the US border. This would be too big of a loophole to get around the tariffs. Yeah, if it was that easy CP and CN would be clogged up with stack trains parked everywhere. Also, decoupling has been a big point of this from the beginning. One cannot go on naively strengthening it's enemies forever. China is no one's friend but it's own. See their antics in the South China sea for evidence. Diversifying where our imports come from avoids problems as seen on a small scale with the train importers recently. You raise some outstanding points. We did not get into this overnight and the solution will take a long time. Model train importers have born the brunt of the dysfunction of doing business in China. They also are too small to have any economic clout when dealing with the Chinese companies. The day before President Trump issued his order for American companies to move operations from China, I attended an economic conference where two of the presentations dealt with tariff mechanics and the economic situation in China. One of the points made was that US companies who import manufactured goods from China cannot easily turn off the switch and relocate manufacturing to other jurisdictions. Many larger enterprises (probably not including model train importers) are contractually committed to long term agreements with Chinese manufacturers that are prohibitively expensive to get out of. Second, alternative foreign manufacturing venues do not have the manufacturing and logistical infrastructure to compete with China. The speaker thought that it would take at least a decade for US companies to extricate themselves from China. The leaders of this change are likely to be larger companies with substantial economic clout. That probably means that model trains will continue to be produced in China for some time. One of the other points made by the speakers is that China cannot clamp down on Hong Kong, because Hong Kong is where China gets its hard currency. If the Asian financial center moves from Hong Kong to Singapore (the most likely alternative), it will be more expensive for the Chinese to exchange their currency into US dollars or other currencies like the Euro, Yen, etc. Model trains are a small part of the overall picture, but they certainly will be a harbinger of the economic consequences of dealing with China. |
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