What’s the Impact from the Reinstatement of the Tariffs on Chinese-Built Molds?
Who is going to build the mold? That’s an important decision that every plastics injection molding company makes on every new job. Cost, quality, and timeliness are factors which weigh heavily in their decisions. And, sometimes politics becomes a factor.
In late December 2019, the Office of the U.S. Trade Representative (USTR) published a formal notice that it would not extend the exclusion of the 25% tariff from Chinese plastic injection molds. In essence, it now costs 25% more to purchase a mold built in China than it did a month ago.
This decision was considered a win for the United States mold builders. In its press release on December 26, 2019, Kym Conis, Managing Director of the American Mold Builders Association (AMBA), said, “This is an important victory for AMBA, its members and all small downstream manufacturers who have felt the pressure from China for years.” She continued, “The Trump administration is doing what others have not – standing up to China.”
There is no doubt that U.S. mold builders have struggled to compete with the cost of molds from low-cost countries (LCC). In the article, “AMBA formally calls for reinstatement of 25% tariff on Chinese molds” by Clare Goldsberry from December 4, 2019, on Plastics Today’s website, Goldsberry cites “a recent survey by Harbour Results Inc., manufacturing consultants with expertise in downstream industries, which ‘showed that 60% of mold builders reported losing more business in 2019 to low-cost countries compared to previous years.’”
But is the reinstatement of the tariff good for all U.S. companies? The answer is No according to the article “As tool makers press to bring back tariffs, other manufacturers push back,” by Steve Toloken and Bill Bregar, which was republished by Rubber & Plastics News. “Domestic manufacturers … say tariff-free Chinese molds are equally important to their own competitiveness.”
It’s not only molds from China that has the AMBA concerned. The article by Toloken and Bregar cited statistics that more than twice as many molds were imported from Canada in 2019 into the U.S. than from China. “While the tariff fight focuses on China, industry data shows that Canada is a much larger source of imported injection molds.”
It was to Canada that Dave Seedorf, Engineering Manager for Team 1 Plastics, a plastic injection molding company for the mobility industry, went in April 2019. He visited a mold maker in Mississauga, Ontario, specifically to determine if this mold maker should be added to Team 1’s list of mold suppliers.
Seedorf explained that he had connected with the U.S. based salesman for the company and had asked the company to quote some jobs. He said that he was surprised at the quoted cost to build molds. “The pricing was unreal! It was a fraction of the cost. It was crazy! Literally, it was less than half – a third of the cost.”
The cost was very favorable, but that was not the only consideration. As he does with all potential new mold makers, Seedorf spent considerable time in communicating Team 1’s terms, building requirements, and standards. Then, the decision was made for Seedorf to visit the facility.
“I went to Canada to see if their facility actually existed. They have a good facility. They have all the equipment. They have about 25 toolmakers. They were making a lot of molds. We talked again about timing, standards, processes, systems, and requirements. It seemed like everyone was on the same page.” Seedorf and Team 1 Plastics made the decision to begin using this mold maker. “Right after that visit, we started sourcing simpler jobs to them.”
Unfortunately, this particular toolmaker has not proven to be reliable in communication and timeliness for Team 1 Plastics said Seedorf. So even though the cost factor is extremely low and quality was satisfactorily, Team 1 will probably need to re-evaluate them before future sourcing decisions to them are made.
Seedorf said that he’s always looking for new mold makers – both domestic and international. “I talk to toolmakers all the time and try to investigate them and find the right fit.” He added that with Team 1’s recent addition of a second Sales Development Manager, the company is anticipating additional job orders which means that more molds will need to be outsourced.
Seedorf said that it seemed to him at a trade show he attended in Fall 2019, that India is the “hot topic” right now for a lot of companies when considering LCC because of the 25% import tariffs on Chinese-built molds.
It was to New Delhi, India, for Seedorf in March 2019, to investigate the toolmaker, JBJ Technologies. Team 1 started working with this LCC toolmaker in 2015, asking them to provide quotations for molds. They now build some rather complex molds for Team 1. Although molds imported into the U.S. from India have a 3.5% tariff on them, Seedorf said that his experience is that “the simpler tools from India are still cheaper than those built by U.S. toolmakers, but the real savings is in complex mold builds.”
Seedorf said that he was impressed with the number of certifications that JBJ has achieved. “Their requirements are as stringent — or even more stringent — than what U.S. organizations require. They have to qualify more frequently, and there are unannounced visits during which they must allow people to come in and do inspections. That was pretty impressive.” Seedorf also said that they have a very nice facility and are well organized. “JBJ is superior in utilizing lessons learned, recommendations, incorporating improvements recommended to them – not just for molds, but in communication, timing, mold sampling, etc.”
Team 1 Plastics continues to be impressed with everything about JBJ. Seedorf said that there are other Indian mold builders that Team 1 is beginning to investigate because “I don’t think that the Chinese tariffs are going to go away anytime soon. I just don’t really see where China’s going to be a viable solution for us at any point in the near future.”