How Tariffs Affect the Phone Repair Industry
UPDATE 9/23/2019: Several tariffs were lifted last week which include Chromebooks and AC Adapters (but excludes batteries).
Over the past few months, we’ve been hearing The Trump Administration’s on-going negotiations with China about a solidified trade deal. Last month, The Administration declared that tariffs will be imposed until China and the United States come to an agreement.
How are phone parts declared?
When all items (assembled or raw goods), are ready to be exported, they are categorized with an HTS code. Each code has its own amount of tax that must be paid by the importing business. When importing goods, information regarding your cost on the item needs to be provided to U.S. Customs so the company can be taxed accordingly.
Current and upcoming tariffs
In May 2019, Section 301: List 3 Goods were subject to a 25 percent tariff. These goods include lithium-ion batteries, Chromebook parts, laptop parts, and game console parts. On October 15, 2019, these List 3 Goods are set to increase to 30 percent. EDIT: Chromebook parts were lifted from tariffs on 9/23/2019.
On September 1st, The Trump Administration imposed a 15 percent tariff on Section 301: List 4A Goods. This tariff affects all phone parts but excludes Samsung Service Packs*. On December 12th, 2019, there will be a 15 percent imposed tariff on Section 301: List 4B which includes various consumer electronics such as phones, laptops, watches, and more.
How does this affect the repair industry?
According to JPMorgan Chase, households are projected to face around $1,000 in additional costs each year due to tariffs. Since tariffs are paid by businesses, some of the added cost of importing goods is transferred to the consumer. This means consumers might see an increase in prices across the board for Chinese goods. This isn’t only affecting the repair industry, but it is affecting all industries and goods across the United States.
What does this mean for Mobile Defenders?
Prior to the tariff announcement, we stocked our warehouse with all of our main SKUs to prevent our customers from seeing the effects of tariffs right away. Any products received after September 1st, 2019 are susceptible to tariff increases.
Recommendations for your business
Since consumers are going to experience these price increases nationwide, you might see a decrease in customers looking to get their devices repaired until a trade agreement has been settled. If customers begin asking why prices have increased, we recommend explaining to them how tariffs have impacted not only the device repair industry but many other industries as well. To ensure that you’re protecting your margins, we recommend looking into raising product and service prices, but note that most stores have a low 25-35% Cost of Goods Sold (COGS) percentage, so you do not need to raise your prices by the full value of the tariffs. Tariffs aren’t set in stone just yet - they can always be rolled back if the Trump Administration and China come to an agreement. The next round of in-person trade talks between the United States and China are scheduled for “early October” - check back for updates!
*It’s important to note that OEM Samsung Service Packs from Mobile Defenders are currently not being impacted by tariffs because they are not manufactured in China. That may change in the future, but we will do everything we can to find alternatively sourced products to avoid or minimize tariffs.