US retailers bet on Congress over Bolivia to thwart Trump border tax issue

US retailers bet on Congress over Bolivia to thwart Trump  border tax issue

CHICAGO: Target Corp , Wal-Mart Stores Inc and other retailers are shelving considerations to move supply bases closer to the United States in the face of a possible border tax, banking instead on killing support for the tax idea in Congress.President Donald Trump’s push to impose a tax on imports, such as the 20 percent levy initiated by House Republicans, could raise U.S. consumer prices by as much as 25 percent, industry officials said. Last week, the President said he favored an ‘import tax’ that could be adjusted to reflect the country of origin’s tax rate for U.S. products.The decision by retailers to forestall supply chain investment in countries such as Bolivia and Romania to focus on lobbying Congress shows how Trump’s ambitious agenda has instilled a new level of risk operating outside U.S. borders. But the vagueness around the tax proposals and whether they may ever be implemented means retail industry executives are still not willing to change their operating infrastructure.The Retail Industry Leaders Association, which is leading the industry lobbying effort, has conducted 140 meetings with lawmakers since December, focusing on the costs of a new tax and encouraging lawmakers who oppose the tax.Prospects for a quick passage of a tax bill took a hit last month when the Republican attempt to overhaul the national healthcare law failed to get a vote in the U.S. House of Representatives. Trump and Republican leaders have said they still intend to pass a healthcare reform law first, casting further doubt on when Congress may consider tax reform.The border tax proposal likely will be “as messy as the healthcare bill,” according to Brian Dodge, senior executive vice-president of public affairs for the retail lobby group.Target, for one, thinks the industry’s lobbying efforts are succeeding.”We are working on educating lawmakers and President Trump hasn’t embraced it yet, so we definitely think we are making progress,” a senior company official at Target said on condition of anonymity.There is good reason for retailers to fight the tax idea. RBC Capital Markets forecast such a levy could reduce profits of six large U.S. retailers by as much as US$13 billion in its first year, with Wal-Mart alone seeing its federal tax bill jump to US$16.6 billion from US$6.6 billion. For a graphic please click http://tmsnrt.rs/2oVlOPBBest Buy Co Inc , which relies heavily on electronics imports, could see its earnings completely wiped out, RBC warned. Best Buy declined to comment.Firms with less exposure to overseas suppliers – ranging from off-price chains like TJX Cos and Ross Stores to cosmetics seller Ulta Beauty – would feel less impact than heavy importers like Wal-Mart, Target and Costco Wholesale Corp , analysts and consultants said.TJX Companies and Ulta Beauty declined comment. Ross Stores and Costco did not respond to requests seeking comment.Steve Osburn, director of supply chain for retail consultancy Kurt Salmon, said it is more cost effective to spend on lobbying than on supply chain relocation at this point. Retailers also have other investment needs, especially around winning consumers who want to shop from home.”They are putting a lot of money in e-commerce initiatives to compete online so there are not a lot of funds to spare,” he said.One outlier is luxury handbag maker Rebecca Minkoff, which sells its own products and supplies other retailers, like Nordstrom Inc and Amazon.com Inc .The prospect of a U.S. border tax factored into its recent decision to supply U.S. customers from Europe as it mitigates logistics costs to supply to the United States, according to Uri Minkoff, the firm’s founder and CEO. “The process has intensified in the past six months,” said Minkoff.WHERE THE SUPPLY CHAINS AREThe decision to bank more on the lobby effort to kill support for the tax idea comes after retailers spent the last few months considering whether to move some of their production to supply bases like Bolivia, Brazil and other South American countries with low wage rates, as well as European countries like Hungary, Bulgaria and the Czech…