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Home » Blog » EU Hits US made Boats with 25% Tariff

Blog: EU Hits US made Boats with 25% Tariff

By Admin | June 16, 2019

Boat Export USA

In June 2018 the European Union announced the immediate imposition of a 25% tariff on many categories of American-built boats. The EU said this was in retaliation for the 10% and 25% American tariff on European aluminum and steel. The previous week Canada announced a 10% tariff on American-built boats starting July 1, in retaliation for America’s recently imposed tariffs on its metal exports to the U.S. Canada is the #1 importer of U.S.-made boats.

Boating-industry sources say that American boat sales to Canada, Mexico and the EU account for 70% of all U.S. boat exports. The retaliatory tariffs are expected to have a dramatic effect on the U.S. boating industry, causing the layoffs of thousands of American workers.

In the overall scheme of international trade, American boat exports rank pretty low, amounting to about $1.7 billion – 70% of which is to Canada, Mexico and the EU. Total U.S. exports in 2017 for all products were, reported by Statista, slightly over $1.5 trillion, which means U.S. boat exports accounted for about one-tenth of one percent. That’s less than a rounding error for these kinds of trade statistics.

EU. According to U.S. boating industry statistics, the U.S. boat exports to EU countries amounts to $338.5 million, or 22% of U.S. boat exports. “A 25-percent import tax makes our products unmarketable,” said an NMMA (National Marine Manufacturers Association) spokesman.

Canada. All U.S.-built boats sold in Canada will face a 10% tariff. 100,000 new and used boats were sold in Canada last year, and 65% of them came from the U.S., according to Soundings Trade Only, a U.S. boating trade publication. Canada is the largest importer of U.S.-made boats, accounting for about $700 million in annual sales.

Mexico, which represents $147.4 million or nearly 10 percent of U.S. boat exports, has announced a 15-percent tariff on all U.S. boats effective immediately.

The Targeted Boats

The new EU import duties effectively stop all U.S. boat exports from canoes and kayaks to PWCs to sterndrives and inboard cruisers to megayachts. The only boats that seem to be excluded are outboard-powered boats and inflatables to the EU nations.

Currently, about 111,000 aluminum boats are made in the U.S., including aluminum fishing boats and pontoon boats. Aluminum boats account for about 43% of all boat sales in the U.S. According to an NMMA spokesman, the price of domestic aluminum has already jumped 20%.

The $39 billion U.S. boating industry supports 650,000 American jobs, said NMMA president Thom Dammrich in a statement.

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This is an NMMA graphic showing how the current worldwide trade war is beginning to affect the marine industry in the U.S. To this drawing can be added last week’s 10% and 25% tariffs.

It’s a World Economy

We live in a truly global economy and U.S.-built boats are highly regarded overseas. U.S. exports to Europe and Canada can range from 10% to 35% of a boatbuilder’s overall sales. For example, Rob Parmentier, the President of the Larson Boat Group, made up of Larson, Striper, LarsonFX, Escape, and Triumph brands, 20% of its sales are in Canada.

Exports Have Saved U.S. Boat Builders in the Past

During the dark days of the 10% luxury tax on boats over $100,000 in the early 1990s, European sales kept more than a few U.S. boat builders in business. In the late ’70s and early ’80s, when U.S. interest rates were 20%, sales to Europe and Canada saved the industry. And when the financial crisis of 2008-10 hit the boating industry harder than any other, sales to the robust Canadian economy, and other pockets of resilience in the world, enabled many builders to stay on life support.

Echos of Past Disasters

These high tariffs by America’s major trading partners echo the 10% luxury tax imposed on all new boat sales in the U.S. in 1991 by the U.S. Congress. This law was designed to have the political optics that Congress was the friend of the working man, and it was “soaking the rich.” But the rich, the near rich, and those working on becoming rich, simply stopped buying boats – and spent their money on other things or invested in securities. It was the workers at boat companies, both white and blue collar, who lost their jobs – in the tens of thousands.

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Many U.S. Boat builders have their own sophisticated upholstery shops that employ hundreds of people industry-wide.

Tariffs Target Workers. These new tariffs will hit shop floor personnel at boatbuilding plants all over the U.S. Blue-collar workers will be the hardest hit by layoffs, because white-collar staffs in the boating industry were taken down to bare bones in 2009 and have remained extremely lean ever since. Fewer unit sales mean less work and fewer workers will be needed.

The Ultimate Discretionary Item

Because boats are at the very pinnacle of discretionary purchases, every ripple in the U.S. or world economy drastically affects sales to a degree far worse than those felt in non-discretionary products or services. For example, the oil embargos of the early 1970s slowed American powerboat sales at a far higher percent than truck or luxury car sales.

20% interest rates of the late ’70s and early ’80s virtually stopped all boat sales, sail and power, even though general commerce (except housing) still continued at only a small decreased rate.

The 10% luxury tax in 1991 devastated the industry precisely because no one needsa boat except a drowning man. General business was doing fine, but builders of boats costing more than $100,000, were shut down, and virtually all of their workers put on the street. Boat builders were forced to make fiberglass hot tubs, windmill blades and the like to keep a small workforce together and have a trickle of income. In this category, the boating industry largely never recovered.

The financial crisis of 2008 brought the boating business to its knees once again, and it has only recently recovered to about 70% of its pre-crisis sales.

The lesson learned here is that the 25% European tariff will result in virtually no sales of American boats in Europe — and that will have significant consequences for the builders involved and their work force.

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All boats, even most small ones, are essentially “hand-built,” requiring the work of hundreds of employees from low-skilled labor to highly trained techs, who install the complicated systems, and the skilled carpenters who have years of experience.

Consolidation Is Not Good for Consumers

Over the years, as boatbuilders have gone out of business, their brand names and tooling have been bought for pennies on the dollar, and have been consolidated under one owner. In the outboard and sterndrive categories, boatbuilders today build boats of several brands that they purchased, and build them all in the single factory that used to build just one brand. Unfortunately, these companies produce fewer total units now than they did when they started out with just one brand.

RIP for Big Boat Brands. For the most part, in the inboard cruiser category, once-successful brands just became extinct, and only a handful of American builders remain. Gone are such names as Trojan, Uniflite, Ocean Yachts, Jersey Yachts, Pacemaker, Tollycraft, Luhrs, and many others. Gone are such sailboat builders and brands such as Pearson, Bristol, Morgan, Irwin, Gulfstar, Ranger, Cal, and Erickson, just to name a few.

Higher Prices Come Next. The result of all of this for the American boating consumer is fewer choices, more similar choices, and higher prices. In this latest imbroglio, the tariffs will impact the component costs of boats because of the steel and aluminum used in them, as well as the fact that fixed infrastructure costs – already at rock bottom for the most part – will have to be spread over fewer units. It cannot be any other way.

Outboard Boats

The one bright spot in all of this tariff gloom, as we read the EU tariffs published below, seems to be that outboard-powered boats are exempt from the EU’s 25% tariff. Shipping costs overseas, however, have always inflected these boats with an export “tariff” all its own, because the cost of shipping is a relatively high percent of the boat’s overall price.

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It all started with the American tariff on aluminum and steel from Canada, Mexico, and the EU, but who knows where it will all end?

Canada is Different

Unfortunately, outboard boats are not exempt from Canada’s 10% tariff on boats, which hits America’s aluminum boatbuilders particularly hard. Ironically, aluminum boats led the boating industry’s recovery from the 2009 economic nadir.

The difference between Canada’s tariff imposed on boats versus that of the EU, is that America’s 10% tariff on aluminum produced in Canada is matched by 10% tariff on all American boat exports to Canada, which are mostly aluminum boats. This means that American-made aluminum boats sold in Canada will be directly affect by two tariffs – America’s 10% tariff on aluminum imports, and Canada’s 10% tariff on aluminum boats exported there.

For American consumers of aluminum boats, prices will be affected by the impact of Canadian sales declines as well as increased costs of aluminum.

European Union Tariff List of Boats by “CN” Code – All at 25%

“CN” stands for Combined Nomenclature. It is the common nomenclature of the European Community and is an 8-digit product classification system used in export declarations and in statistical declarations for trade in the European Community.

89039110 Sea-going sailboats and yachts, with or without auxiliary motor, for pleasure or sports – 25%

89039190 Sailboats and yachts, with or without auxiliary motor, for pleasure or sports (excl. seagoing vessels) – 25%

89039210 Sea-going motor boats and motor yachts, for pleasure or sports (other than outboard motor boats) – 25%

89039291 Motor boats for pleasure or sports, of a length <= 7.5 m (other than outboard motor boats) – 25%

89039299 Motor boats for pleasure or sports, of a length > 7.5 m (other than outboard motor boats and excl. seagoing motor boats) – 25%

89039910 Vessels for pleasure or sports, rowing boats and canoes, of a weight <= 100 kg each (excl. motor boats powered other than by outboard motors, sailboats with or without auxiliary motor and inflatable boats) – 25%

89039991 Vessels for pleasure or sports, rowing boats and canoes, of a weight > 100 kg, of a length <= 7.5 m (excl. motor boats powered other than by outboard motors, sailboats with or without auxiliary motor and inflatable boats) – 25%

89039999 Vessels for pleasure or sports , rowing boats and canoes, of a weight > 100 kg, of a length > 7.5 m (excl. motor boats and motor yachts powered other than by outboard motors, sailboats and yachts with or without auxiliary motor and inflatable boats) – 25%

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