Last updated on September 30th, 2019 at 10:46 am
Companies across the United States have been scrambling for more than a year now to confront new tariffs in the escalating trade war between the U.S. and China.
Racine-based Johnson Outdoors Inc. is no different.
The maker of outdoor recreation equipment was recently granted exemptions from the Section 301 tariffs that the Trump administration levied against Chinese imports. As a result, the company said it now expects tariffs to cut its profit by about $3 million this year, down from the previous estimate of $5 million to $7 million.
Granted, Johnson Outdoors reported operating profits of $63 million last year and $61.9 million through the first three quarters this year.
The company has reported a loss or small operating profit in its fourth quarter in recent years, so $2 million to $4 million stands to be a 3% to 6% boost from previous expectations.
“We appreciate that USTR (United State Trade Representative) and CBP (U.S. Customs and Border Protection) have granted these exclusions, and we continue to pursue a range of tariff mitigation efforts to strengthen U.S. manufacturing,” David W. Johnson, chief financial officer, said in a release “We remain hopeful that trade negotiations successfully and fairly resolve disputes and eliminate tariffs for the benefit of American manufacturers and workers.”
Johnson Outdoors is not alone in seeking exemptions. Each round of increased tariffs have drawn hundreds of requests for exemptions from around the country.
The exemptions Johnson Outdoors received included two types of LCD screens and two types of injection-molded plastic casing assemblies used in Humminbird fish finders. The actual volume and value of the parts the company sought an exemption on was redacted from public versions of the requests.
In its exemption request for the LCD screens, Johnson Outdoors noted the screens it uses help contract manufacturers fill out their capacity in China.
“The volumes required by Johnson Outdoors … are simply not large enough to justify any LCD panel manufacturer in relocating production outside of China or investing in new production elsewhere,” the request said.
For the casing assemblies, the company argued that U.S. injection molding companies have said they are unable to produce the required tooling for the parts. The casings also incorporate other components such as wiring harnesses and keypads that the company sources from China.
“Johnson Outdoors’ ability to source casing assemblies from China, inclusive of both Chinese-origin moldings and Chinese-assembled basic electronic components, is central to the company’s ability to maintain market share against competitors that manufacture wholly abroad, and therefore to the company’s ability to maintain its U.S. fish finder assembly operations and the U.S. jobs that they support,” the request said.
The company said its fish finder operation relies on more than 200 assembly workers in Eufaula, Alabama and another 55 workers in software development, engineering and marketing across locations in Georgia, Minnesota and Racine.
Johnson Outdoors said in its request a potential 25% tariff would have forced the company to consider relocating its assembly operations abroad.