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July 10th, 2019

Dear US customer:

We trust your business in the first half of the year has been good, even though several parts of the country were slowed down a bit by the weather, which we hope will pick up in the second half.

As for the second half, we had announced an increase in prices of our fittings, accessories and restraint products, May 10th, 2019 — to reflect the 2nd round of tariffs announced by US government on a wide group of products from China for all shipments from China after May 10th. So, our price increases were effective for all orders to be shipped from July 1st.

We have received a few calls from some customers if these announced price increases are effective on account of the recent high-level discussions between the US and Chinese governments and what our response would be, should the tariffs be dropped at some point.

So, we would like to share this update to provide some clarity during these uncertain times:

  • We have already started receiving shipments from China sailed after the effective date of May 10th and have been paying the additional tariffs of 15% as required. In addition to increasing our effective product costs.
  • Even before the new tariffs became effective, we had faced significant increases in the ocean freight costs from both India and China of more than for 20% over our contract rates of last year. We did not adjust our pricing to recover these higher costs due to the announcement of tariffs by the US government also at the same time. These costs will be in effect for the full year till April 30th, 2020.
  • During the recent discussion between US and Chinese governments, only decisions announced was the deferment of decision to extend the tariffs on Group 4 of almost all the remaining products from China not currently affected by tariffs and to continue discussions towards a mutually acceptable trade agreement. No change on the two rounds of tariffs already implemented — the 10% imposed from September 2018 and 15% from May, were intimated nor confirmed.
  • From all indications we have received from China, it is likely that the current tariffs will remain in place for a considerable span of time expected from 6 to 12 months, due to the serious discord between the two sides on major issues of importance to both sides.
  • As is common when we face cost increases, this time too we are not able to reflect the full cost of tariff increases in our price increases, due to accommodation of previously quoted price commitments and other competitive factors. In addition, if and when the tariffs are terminated, we would still have inventories at the higher costs from the tariffs already paid, which will not be refunded retroactively.

So, we request you to treat the new pricing we have published through our letter of May 10th, as the currently applicable pricing and reflect them in your quotes and orders.

We thank you for your continued support and business.

With best wishes for a better half!

Sincerely,

Greg Fox
Vice President of Sales
SIGMA Corporation
256.496.3388