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MEMA Mourns Passing Of Aftermarket Veteran Steve Handschuh
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By Esacivic
Hey y’all I have a 1989 Honda civic hatch and I’m looking to build up a strong suspension but I’m unsure of some quality brands for them. I’m looking for anti roll bars that are beefier then stock, full control arms all around, camber kits front and rear, sway bar.
any and all help is appreciated thank you
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By Counterman
This article, contributed by Tom Cook, is courtesy of link hidden, please login to view
All companies engaged in the global supply chain seek to lower the “landed costs” on their goods in imports and exports sales, purchasing and operations.
While there are numerous components that make up “landed costs,” duties, taxes and tariffs are a huge factor and can often be a detriment to global trade.
Duties, taxes and tariffs are costs borne by the importer as the goods enter a country. These fees are assessed by the country’s local customs authority. In the USA, this is the U.S. Bureau of Customs Border and Protection (CBP).
These fees are determined by what the product is and where it is from. The “what” is known as the HTS (Harmonized Tariff Schedule) and the “where” is the actual origin country of the product.
While some of the guidelines are standardized from one country to another, we must understand that the customs rules and their interoperation often vary differently from one country to another. Sometimes the differences are slight and in other countries the differences are huge.
The importer of record (IOR) has the primary responsibility to determine the correct HTS and origin upon entry of the goods for customs clearance in the country of import.
Most importers utilize the services of freight forwarders, customhouse brokers and/or 3PL’s to provide these clearance services, as well as rely on their expertise to accomplish the clearance process in a successful and compliant manner.
Importers may also obtain the assistance of these service providers in determining the correct HTS classification and
the origin.
Importers are legally responsible to exercise:
• Due Diligence
• Reasonable Care
• Supervision & Control
These standards are the responsibility of the importer of record (IOR). If the IOR outsources the responsibility to a customs broker, under the “supervision & control” standard, the IOR is still responsible for supervising and controlling for the statements and information provided by this third-party on their behalf.
This standard requires the importer to have a working knowledge of the import regulations and be able to properly supervise their outsourced provider.
Customs recognizes that an importer may need guidance in the clearance process. This may be received from CBP, a qualified consultant, a customs attorney or a practitioner that has expertise in customs regulations.
It is critical to understand the steps in managing duties, taxes and tariffs. The first is to understand how the import regulations apply, followed by learning what measures can be taken to mitigate the risk and cost associated with duties, taxes and tariffs. If the origin and the classification are the controlling factors, it is important to understand that this is where the answers lie to mitigation.
For example, Section 301 tariffs on certain goods exported from China into the U.S. may add as much as a 25% surcharge to the import landed cost. This resulted in many companies seeking out alternative sourcing options to avoid this surcharge.
In addressing alternative sourcing options, nearshoring, reshoring and friend shoring – countries such as but not limited to Vietnam, S. Korea, Taiwan, Malaysia – all presented viable options.
In some situations, the acquisition cost may have been higher, but when calculating the landed cost, with the 25% duty eliminated, the comparison demonstrated a viable alternative to the importer.
Companies involved in aftermarket sales, where margins are tight, can benefit from this type of analysis and mitigation strategy.
Another strategy involves the Harmonized Tariff Schedule, or what the product is, from CBP’s perspective.
First, we want to make sure we are utilizing the proper HTS number. It can be possible that the correct HTS number, when changed, will offer a lower duty rate.
Secondly, what we refer to as “Tariff Engineering” is a legitimate manipulation of a product’s design or materials that impacts its classification and potentially lowers the duty rate.
The choice of materials, the functionality of the product, product specifications or qualities all impact how a product is classified.
For example, changing the make-up of the materials utilized in fabrics, such as the mix of cotton, rayon, nylon, etc. will change the classification of a product. Features such as changing the product to be waterproof and adding other qualities may also change the tariff classification and impact the duty rate.
Another example may be how the product is designed; for example, for personal utilization or for commercial application, may have an impact.
How parts and equipment are assembled and utilized can also have an impact on the classification as well as the origin.
The amount of “value-add” in the manufacturing or assembly process can also impact how CBP will view the origin and/or the HTS, therefore directly impacting the duty rates.
Tariff Engineering requires R&D, engineering, and technical support, as well as guidance from trade professionals that can assist in interpreting the import regulations and research prior CBP rulings.
CBP has a great resource called CROSS which is a searchable database of CBP rulings that can be retrieved based on simple or complex search characteristics using keywords and Boolean operators. CROSS has the added functionality of cross-referencing rulings from the initial search result set with their modified, revoked or referenced counterparts.
Rulings collections are separated into Headquarters and New York and span the years 1989 to present. Collections can be searched individually or collectively.
CROSS can be an excellent resource in managing the impact of duties and tariffs on
landed costs.
Duties, taxes and tariffs often emanate from political and economic positions from government offices and agencies. We witnessed this when President Trump put forward the 232 and 301 Tariffs in his first year in office.
China then secured retaliatory duties. We have seen these similar actions in the EU, Australia, Mexico and Canada.
Personnel in the aftermarket engaged in global supply chain purchasing, sales and operations need to pay attention to the political and economic situations in the countries they do business in, as regulations impacting duties and tariffs change frequently with both positive and negative consequences.
Additionally, trade organizations’ lobbying efforts should be followed with the Executive Branch and Congress. These efforts seek to keep open free trade concepts and minimize the utilization of duties and tariffs as political and economic weapons in global affairs.
Studies have been accomplished that clearly demonstrate the negative impact of tariffs on manufacturing, distribution, and trade costs in the global supply chain.
While many tariffs are designed to protect industries or certain markets, they generally wreak havoc in global trade and have negative impacts.
The automobile industry, its suppliers and ancillary industries such as the aftermarket are significantly impacted by duties, taxes and tariffs.
In controlling “landed costs,” duty and tariff mitigation as outlined above are all good strategies, but there are other options that also should be considered:
• Utilization of Foreign Trade Zones
• Consolidating Transportation Providers and Carriers
• Running annual Freight RFP’s
• Choice of INCO Terms
• Alternative Sourcing
• Free Trade Agreements
• Location and methodology in warehousing, fulfillment, and distribution
• Utilization of Technology
• Demand Planning Systems
In summary, developing strategies in tariff mitigation is a viable solution to duty and tariff management and ultimately lowering landed costs and enhancing your company’s competitiveness in both import and export purchasing
and sales.
Thomas Cook is Managing Director of Blue Tiger International, a global consultancy advising on supply chain management, trade compliance, purchasing, trade and disruption management, global business and logistics. For more information, go to www.bluetigerintl.com. Tom can be reached directly at [email protected].
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By Counterman
Over the past couple of months, MEMA has been building on momentum to try and get the REPAIR Act passed the organization said. Now, it’s announcing the next step in a campaign called the “At Home REPAIR Campaign,” asking aftermarket suppliers to get involved.
“Members of Congress will be back at home frequently in April, May, June, and July. These recesses provide the perfect opportunities to meet with legislators and urge them, face-to-face, to pass the REPAIR Act in 2024,” MEMA said.
MEMA’s goal: Suppliers schedule in-person legislator meetings and facility visits during these recesses to advance the REPAIR Act.
This is after MEMA Aftermarket Suppliers completed their Washington D.C. fly-in to try and build momentum behind the REPAIR Act, also known as H.R. 906.
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By Counterman
MEMA announced Collin Shaw has officially assumed the role of president of MEMA’s Original Equipment Suppliers group, succeeding Julie Fream who served for 10 years in the position. Shaw’s commencement provides a continuation of leadership that ensures MEMA’s support of the supplier community’s evolution toward embracing emerging trends and strategies that will redefine the automotive supply chain’s future, the organization says.
“Our strength lies in our collective voice and actions of all diverse members across both light- and commercial-vehicle sectors. As we welcome new supply chains, evolving technologies, and changing geographics, MEMA is committed to creating an environment where the supplier’s voice is heard and we, together, enable a profitable ecosystem,” said Bill Long, president and CEO of MEMA, The Vehicle Suppliers Association. “We are fortunate to have Collin’s passion, energy, and vision in further advancing the business interests of the original supplier community.”
“For the past 120 years, MEMA’s vision has been to foster a profitable, innovative and influential ecosystem for its supplier members. As I look forward to the future, the vision remains consistent,” said Shaw. “Myself and the MEMA OE team will remain focused on; helping suppliers navigate the significant paradigm shift in vehicle architecture due to electrification and software defined vehicles, adopting and leveraging technology such as AI, and embracing the fresh perspectives brought by new leadership demographics to drive our industry forward.”
As Shaw embarks on this journey, his message to members and employees is clear, the association says: “We are on the brink of transformative change. Your insights and feedback are invaluable as we navigate this journey together. We will continue striving to represent the automotive and transportation supply base with the dedication and excellence it deserves.”
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By Counterman
link hidden, please login to view, we took an in-depth look at the Consumer Price Index (CPI) and the average vehicle age, highlighting their significant roles in shaping the automotive aftermarket. At the time of publication, we hinted at further exploration into other critical factors that influence our industry, and today, I’ll fulfill that promise by examining gas prices and vehicle miles traveled (VMT), two indicators that give a snapshot of the economy and provide professionals a means to predict the future of the aftermarket landscape.
First, let’s look at everyone’s favorite expense: gas prices.
The fluctuations in gasoline prices in the United States are more than mere figures at the fuel pump; they serve as barometers for a variety of factors, including economic health, geopolitical tensions, consumer confidence and the vitality of the automotive aftermarket sector. Gasoline stands as a relatively inelastic commodity, with demand showing little sensitivity to price changes. This is largely because a significant portion of vehicle use, estimated at about 30% for commuting purposes alone, is essential and non-negotiable for many individuals, according to a University of Michigan study. When considering additional driving for school-related activities, errands and other purposes, visits to the gas station are an inevitable aspect of daily life.
This inelastic nature of gasoline consumption implies that rising fuel prices compress consumer spending power and escalate operational costs for businesses reliant on transportation. Consequently, there’s a logical link between fuel costs and mileage traveled, especially for discretionary travel. Recent studies, including research by AAA, reinforce this connection, suggesting that as gas prices climb, individuals adjust their travel and lifestyle accordingly.
AAA released an article in July 2022 summarizing the aforementioned research that they conducted. The article showed that 64% of U.S. adults made changes to their driving habits and/or lifestyle since March 2022, at a time when gas prices were hovering around $4.30 and peaking at $5.03 in June 2022, with 23% of consumers making major changes. As illustrated in the article, of the 64% who reported they were making changes in their driving and lifestyle, 88% said they would drive less, 74% said they would try to combine errands, 56% said they would reduce shopping or dining out, and 30% reported they will delay major purchases.
Putting these sentiments into the context of the automotive aftermarket, less driving will put fewer miles on vehicles, leading to extended periods in between the 3,000-5,000 mile oil changes, roughly 6,000-mile alignments and factory scheduled maintenance around the 30,0000-, 50,000-, and 90,000-mile marks. Additionally, if people have less disposable income, they may put off repairs or standard maintenance like an oil change, further increasing the interval of vehicle maintenance.
However, while less driving may lead to extended periods between routine maintenance tasks such as oil changes, alignments and factory scheduled services initially, this shift in consumer behavior presents a silver lining for the automotive aftermarket. With people potentially delaying maintenance due to reduced disposable income, it stands to reason, vehicles are likely to be held onto for longer periods. This not only increases the likelihood of maintenance and repairs in the long term, but also signals a decrease in the purchase of new vehicles. As a result, the market could see an uptick in older, used vehicles that require more frequent servicing and do not receive warranty services (in other words, an increase in the use of vehicles within the aftermarket sweet spot). This scenario underscores the importance of the automotive aftermarket in supporting vehicle longevity and reliability, highlighting a potentially robust market for service shops and parts suppliers alike.
However, despite the intuitive connections and survey research, some reports, such as one from TIME, paint a different picture. Research analyzing fuel prices and American driving habits from 2000 to 2022 indicates that by June 24, 2022, U.S. gasoline consumption was nearly 8.93 million barrels per day, slightly below the 9 million daily average since 2000, showing a minor 1% drop. Conversely, gas prices soared to 90% above their average for that period.
The results of the TIME analysis will be partially corroborated by some of the charts presented in this article, but it is important to understand that the data presented for miles driven is in millions, so even small spikes on a chart will represent rather larger scaled changes.
To begin our deep dive, we start with Chart 1, which sources data from the U.S. Energy Information Administration and reveals the trajectory of retail gasoline prices across several years, displaying a pattern of highs and lows that correspond with a multitude of external factors.
link hidden, please login to viewChart 1 As we observe the trend line from January 2014 to January 2024, we see a gradual increase with significant peaks and troughs. The trendline suggests a weak upward trend with considerable volatility, which can be attributed to a range of influences, from geopolitical events, supply disruptions, technological advancements and shifts in consumer behavior. While Chart 1 showing a decade of gas price fluctuations may not explicitly outline the impact on the automotive aftermarket as far as time is concerned (meaning that we can’t accurately predict the price of gas in a few years with time alone), the implications are significant. Higher gas prices can lead to increased demand for fuel-efficient aftermarket products or vehicles, as consumers look to optimize their vehicle’s performance.
Conversely, lower gas prices can result in more disposable income to pursue vehicle repairs or perhaps drive more in general, which will inevitably lead to a greater need for repairs and vehicle upkeep (more on that to come). Ultimately, whether gas prices rise or fall, the aftermarket can benefit from the resulting changes in consumer behavior, as vehicle owners seek to manage their operating costs or take advantage of economic conditions to use their vehicles more.
VMT: A Reflection of Changing Times
As previously stated, VMT can have a significant impact on the health of the automotive industry and the aftermarket. So, let’s jump into Chart 2, which showcases VMT data over the last 10 years, according to the Federal Reserve Economic Data (FRED).
This chart traces the VMT from January 2014 to October 2023, offering a graphical story of the nation’s driving habits.
link hidden, please login to viewChart 2 The data shows that simply counting on an increase in driving over time won’t work for predicting aftermarket service demand. Instead, aftermarket businesses should focus on the specific factors that influence driving habits, like economic trends such as inflation and cultural/societal trends such as remote work policies. This understanding is crucial for aftermarket businesses to effectively manage inventory, plan marketing and schedule services. Recognizing that vehicle use can vary widely, rather than following a steady climb, allows aftermarket companies to be more agile and meet their customers’ needs in real time.
Is There a Correlation Between Gas Prices and Vehicle Miles Driven?
Various reports and studies have highlighted a discernible link between gasoline prices and the distance traveled by drivers. However, a broader analysis of economic data reveals a more complex scenario. Despite the intuitive connection between fuel costs and driving behavior, the practical demands of daily life in America—such as commuting to work, school and other essential activities—often render the inclination to reduce driving due to higher gas prices moot. (See Chart 3 which integrates information from the preceding two charts.)
link hidden, please login to viewChart 3 While there’s a connection between gas prices and VMT, it’s relatively weak as indicated by the low correlation coefficient and the even smaller predictive regression score not presented, indicating the presence of other influential factors. For accurate market predictions, we must consider additional variables like geopolitical issues affecting oil supply, policy changes and shifts in oil demand, which can abruptly alter gas prices.
Similarly, VMT is influenced by factors such as public transportation availability, urban versus rural living patterns and societal shifts toward remote work or “walkable” cities. Changes in consumer preferences, such as a growing interest in environmentally friendly transportation options or online shopping, can also play a crucial role.
Therefore, automotive aftermarket professionals should consider integrating advanced analytics and diverse data sources into their decision-making processes. This could involve investing in resources that help analyze social, economic and political trends, alongside traditional market data. Engaging with experts in related fields, from energy economics to urban planning, can also enrich their strategic outlook. In summary, a proactive understanding of the diverse drivers behind market changes is essential to navigate the industry’s complexities, capitalize on opportunities and ensure lasting success in a constantly evolving market.
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