Luggage Store Owners Say Section 301 Exclusions Won't Help

Backpacks imported from China that faced a 10% tariff, then a 15% tariff, then a 7.5% tariff -- in addition to the standard 17.6% tariff -- can now be excluded from the additional tariff, as long as they are a certain size. Luggage stores that fretted over tariffs that first went up in October 2018 (see 1905090012) say the break won't make a difference now.

Third-generation retailer Tiffany Zarfas Williams, who runs a luggage shop in Lubbock, Texas, said a year ago that sales were down 8 percent from the same period in 2018. Recently, she told International Trade Today that when she first read about the exclusion, which she believed would cover messenger bags and backpacks, she thought: “This is a win for us.” But she said now she thinks it's not, really.

“There were a few items on the list that applied to us but not very many,” she said. “With having our store closed, tariffs are the last thing on my mind.” She said she didn't expect manufacturers to decrease prices to retailers because they can get the tariffs refunded on a subset of duffel bags and backpacks.

And suitcases, which make up 75% of The Luggage Shop of Lubbock's sales, are not excluded. Even though Texas is one of the states opening up, and her store has opened since the exclusion was granted last week, she doesn't think people will be taking more than regional car trips for quite a while.

“What we’ve got right now is what we’re going to be selling the rest of the year,” she said. “When are people ever going to travel?” She said she expects even business travel to be limited. “I think we’re probably going to have to have sales on luggage. That’s going to help me with my inventory I have on hand.” But she added, “If I’m discounting, I’m just losing margin.”

Maine, which is also beginning the process of opening, has not included retail shops such as Tripquipment, in Falmouth, Maine. Owner Sam Hirsh said, “We sell everything related to travel -- wallets and handbags, backpacks, briefcases, luggage, travel clothing, socks, travel underwear, water purification and filtration....”

Hirsh said one line of Briggs and Riley suitcases he sells was going for $499, and within a year, that price went up by $100.

“Does it impact the sale? In some cases yes. But I will say this, when you’re talking about someone already talking about selling $499 on a product, at that point, price isn’t as much of an issue,” he said. Fortunately, Eagle Creek, his mid-tier brand, was already manufacturing in Vietnam, so that $199 carry-on price stayed steady.

He complained about how the administration kept changing the tariff levels as negotiations dragged on in 2018 and 2019. “Because of the ways the administration has handled this, we saw things go up two and three times in the course of a year,” he said. “I was having an online discussion with a friend of mine who’s a major Trump supporter. He was talking about [how] Trump is pushing for the U.S. to be less dependent on China,” Hirsh said in a phone interview. “OK, I agree with the sentiment of not being so reliant on China,” he said, but asked if customers are going to buy a made-in-USA bag if it's two to three times the price of an import? Also, he said, when brands move production to Vietnam or Cambodia, most of the time, it's the same Chinese vendor running the new plant.

Hirsh said he doesn't know if any of the backpacks he stocks are covered by the exclusion, and even if they are, he's not sure the manufacturer will share the savings. “My biggest worry with the tariffs is: How long is this going to go on?” Hirsh said that with the administration attacking China over the spread of the novel coronavirus, he's worried Trump will enact even more tariffs.

Right now, the state of Maine is saying his store can open June 1, as long as there's not too much of an uptick in COVID-19 cases. “Through the end of the year and probably the first three to six months of next year I think it’s going to be tough,” he said. Hirsh said he opened his store in 2007, but said, “This year is like shot, right now. It’s like nothing I’ve ever seen in my 61 years of life. I cannot believe this. And there’s just nothing you can do.” Hirsh said the majority of his customers are 45 and older, with many retirees. “People are going to be very, very cautious at first.”

California has not set a specific date to reopen non-essential retail, but it could happen sometime in May. In Palm Desert, California, Chuck Weisbart is owner of a shop called It’s… in the bag! He said that about half of his stock was covered by Section 301 tariffs, but any products that receive exclusions, he thinks the brands won't even see the savings to pass along to him, because Chinese factories will raise their prices to absorb it.

That said, he doesn't believe that the tariff hikes affected his sales, and they didn't cause him to buy more product from vendors manufacturing outside China. “What I’m going to carry is what my customers want. Where’s it sourced, where it comes from, what happens with the tariffs, that’s immaterial to me,” he said.

“The tariffs did not impact the demand significantly, not to be noticeable,” he said. “If they’re not going on vacation, they’re not buying the category, the whole category's gone,” he said. “This is going to be a financial disaster. There’s going to be no recovering until the end of 2021.”

He said his landlord didn't offer any concession on the rent, which he's had to pay for two months “without a nickel coming in. ... With COVID 19, the tariffs are a non-issue at this time. That is like a pimple on the elephant’s ass!”