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Decision to come on imported brake parts

Wednesday, February 22, 2012 - 01:00
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The dependence of aftermarket retailers on imported parts means that the industry ought to be at least as interested, if not more so, in the "pro U.S. manufacturing" focus of President Obama's State of the Union address. The President's proposals and remarks were clearly implied criticism of U.S. companies who manufacture abroad and import those products back to the U.S.


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That "anti-U.S. imports" tact — if we can call it that — will certainly have reverberations in the aftermarket sector. Aftermarket retailers are exclusively dependent on imported brake parts, for example, and those parts are often manufactured by U.S. companies abroad. Brake Parts, Inc. (BPI), a subsidiary of the Affinia Group, manufactures brake parts in India. According to Scott Howat, director, Global Communications, Affinia Group, there are no aftermarket brake rotors manufactured in the U.S. Affinia, in fact, has factories around the world. Aftermarket products from those factories are often imported back to the U.S.

BPI is currently trying to prevent having to pay a 2.5 percent tariff on those Indian brake imports. India is one of 140 countries that are part of the Generalized System of Preferences (GSP). Once imports in any product category from a GSP country exceed $150 million, tariffs are imposed, unless the President grants a competitive need limit (CNL) exemption.

 

Indian brake imports totaled $143 million through November 2011 and are about 4 percent of the $4 billion total of brake parts imported into the U.S. each year. With imports likely to exceed $150 million in 2011, BPI filed a "pre-emptive" CNL petition late last year with the office of the U.S. Trade Representative. The USTR will make a recommendation to President Obama on whether BPI and other companies should be able to keep importing brake parts from India duty free.

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Of course aftermarket retailers are less interested in where parts are manufactured and more interested in what they cost. Affinia's Howat declines to get into a discussion about whether imposition of the 2.5 percent tariff would result in higher costs for some brake parts for aftermarket retailers. He says, "When the cost of shipping, energy, and other inputs increases, do we directly get that into our pricing? We try to run our business in the most competitive way and provide a quality product, which is what we have done in India."

There will be some politics involved in Obama's decision, because he has some wiggle room. Imports of single product categories from GSP countries are assessed a tariff when they exceed $150 million or when those country imports account for more than 50 percent of imports from all countries. Indian brake parts will be a tad over $150 million in 2011, but they are only 4 percent of the total.

If the President takes a strict reading of the law, he has to impose a 2.5 percent tariff. Moreover, he might not apologize for that, since he believes, based on his State of the Union address, that BPI should bring those brake manufacturing jobs back to the U.S. from India. BPI, however, in its petition, says continued freedom from the 2.5 percent tariff would actually help "to secure the employment of thousands of Americans employed by the Affinia companies in the United States."

So domestic job creation may play a role in the White House decision. And so may consumer prices. Will aftermarket retailers have to pay more for brake parts from India if a 2.5 percent tariff is imposed? BPI hints at the answer to that in its petition, where it says: "The benefit of not paying the 2.5 percent Customs duty when the product is imported helps ensure that this product is sold as economically as possible in the United States."

 

The dependence of aftermarket retailers on imported parts means that the industry ought to be at least as interested, if not more so, in the "pro U.S. manufacturing" focus of President Obama's State of the Union address. The President's proposals and remarks were clearly implied criticism of U.S. companies who manufacture abroad and import those products back to the U.S.


Like this article? Sign up to receive our weekly news blasts here.

That "anti-U.S. imports" tact — if we can call it that — will certainly have reverberations in the aftermarket sector. Aftermarket retailers are exclusively dependent on imported brake parts, for example, and those parts are often manufactured by U.S. companies abroad. Brake Parts, Inc. (BPI), a subsidiary of the Affinia Group, manufactures brake parts in India. According to Scott Howat, director, Global Communications, Affinia Group, there are no aftermarket brake rotors manufactured in the U.S. Affinia, in fact, has factories around the world. Aftermarket products from those factories are often imported back to the U.S.

BPI is currently trying to prevent having to pay a 2.5 percent tariff on those Indian brake imports. India is one of 140 countries that are part of the Generalized System of Preferences (GSP). Once imports in any product category from a GSP country exceed $150 million, tariffs are imposed, unless the President grants a competitive need limit (CNL) exemption.

 

Indian brake imports totaled $143 million through November 2011 and are about 4 percent of the $4 billion total of brake parts imported into the U.S. each year. With imports likely to exceed $150 million in 2011, BPI filed a "pre-emptive" CNL petition late last year with the office of the U.S. Trade Representative. The USTR will make a recommendation to President Obama on whether BPI and other companies should be able to keep importing brake parts from India duty free.

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