b'INDUSTRIAL TARIFFS (continued) cost to our customers, who ultimately had to pass themTile, wall tile and tile deco are all subject to proposed on to consumers. new duties, and accounted for about 34% of our sales this year, of which approximately 39% was sourced from Seeking other sources China. We believe we can lower our China-sourced tile Going forward, like Floor & Decor, other distributors areexposure to the low single-digit range as a percentage of looking to find alternative sources for imported ceramictotal sales by the end of 2019 due to the early actions we tile. The need to switch to other countries is even morehave taken in moving sourcing to other countries.intense as duties of up to 222% due to CVD and ADD deci- The tariffs were one thing, but CVD and ADD decisions sions loom over the industry.make importing tile from China a whole new ball game. Hays said conversations hes had with suppliers who doThe tariff has affected us and our customers as the price source from China indicate a shift away from that coun- points for everyday items that they purchased jumped by try, especially since the countervailing and anti-dumping25% and then will go up another 5% in October, Arleys penaltieshavebeenannounced.WithCersaiecomingLevysaid.Therealstrategychangeisfromtheanti-up (at this writing), Hays said Virginia Tile will be on thedumping and countervailing. The countervailing has gone hunt there for alternate supply of decorative wall tile andthrough and U.S. Customs will be taking cash deposits of backsplash material. Italy will continue to be a strong sup- a minimum of 103.77% from all importers of any Chinese plier of floor tile to Virginia Tile.goods that come into the country. We are working hand Arleys Levy said, Our manufacturers made the ulti- in hand with our suppliers to minimize the disruption to matedecisionastheanti-dumpingandcountervailingour customers as we evaluate the situation. We will not legal proceedings made it necessary for them to movebe importing any new items from China.production. Hes confident that other countries can meetFor Hays at Virginia Tile, the concern is with wall tile and the demands of Arleys customers, as the distributor hasbacksplash products. The good majority of budget-orient-enjoyed established relationships with Italy, Spain, Israel,ed decorative products are from suppliers who source this Brazilas well as China, and the USAfor decades. Wematerial from China, he said. We still have to determine have and are always looking at all parts of the world forif our customers will pay the potential dollar increases on product. We import from countries that have a strongthese products. Hays wondered if this situation will limit infrastructureintile.Weneedtomakesurethatwethe offering of these types of decorative items. Products can buy enough from a factory or group of factories tolike this are rarely produced in the U.S., so we will see if we easily move containers and keep our inventory currentcan source these products from other countries. and turning for our customers. There is no one perfectLevy said, I do not expect Chinese tile to be a major sourceforproductforourcompany.Itdoesntmatterforce in the USA moving forward. Manufacturers and dis-where it comes from as long as it is a quality product thattributors have moved production to other countries, and has the look that people want. we do not see it coming back. There will be some produc-tion that stays in China that comes to the USA for now TheswingawayfromChinese(primarily glass mosaics), but that will eventually move as productswillintensifyduetowell. The lower cost of production in other countries (if you take the tariff, anti-dumping and countervailing into theproposedanti-dumpingaccount) will lead manufacturing to open new facilities in and countervailing duties. a place that will not have the restrictions.But Conestogas Vogel thought this is not likely the end of the story. As I am told, large Chinese tile producers Looking to the future are setting up in other countries and the buyers are fol-Going forward into 2020, the swing away from Chineselowing them, he said. Well see where this goes. Its products will intensify due to the proposed anti-dumpingconceivable to believe that the same problems that exist-and countervailing duties expected from Commerce anded with Chinese tile will be launched from some other the ITC. Floor & Decors Taylor said, We see and havecountry. But, now that there is a precedent developed planned for a significant reduction in ceramic tiles thatand momentum moving for the Coalition for Fair Trade aresourcedfromChinabytheendof2019fromourin Ceramic Tile, they can take this fight to wherever they accelerated actions to diversify our countries of origin.feel they need to. And they will.322019|TECH'