TOANO, Va. - Flooring and retail giant Lumber Liquidators announced late last week that the U.S. Trade Representative ruled to retroactively exclude certain flooring products imported from China from the current 25 percent tariff.
The favorable decision, along with recent talks of reaching a trade deal with China soon, led the company to update its full-year guidance. Investors rushed in, and Lumber Liquidators shares were up almost 18 percent as of last Thursday.
"We are pleased with the USTR's decision to retroactively exclude certain vinyl and engineered flooring products from Section 301 tariffs," CEO Dennis Knowles said in a statement. "Luxury vinyl tile is one of the fastest growing segments of the hard-surface flooring market, and we look forward to continuing to serve consumers with a broad selection of floors that can satisfy nearly any style."
The retailer expects to save around $11 million in light of the exclusions in the fourth quarter alone, and expects savings of upward of $25 million by the end of second quarter 2020. Full-year 2019 operating margin has been updated from 2.1 to 2.4 percent, up from the previously predicted 1 to 1.4 percent.
As of last month, more than 2,500 American companies had filed requests to be excluded from tariffs on Chinese imports. The majority of companies wrote that they have been unable to find replacement goods – it either being impossible or doing so would hurt their businesses financially. Others wrote that they've fully transitioned to China and they're in too deep to suddenly move manufacturing back to the U.S.
As of October, the U.S. Trade Representative has ruled on 439 requests - approving 61 and rejecting 378. Among requests on earlier rounds of tariffs, the USTR denied 61 percent of the more than 13,000 requests.
Companies hoping to get an exclusion must explain to the U.S. Trade Representative's office why they think they deserve one. There's also a spot for comments from the public and organizations, who can choose to support or oppose the application. The deadline for exclusion is January 31, 2020. To submit, fill out an application here.
Lumber Liquidators saw another eventful year in 2019. In March, the company claimed Cabinets To Go, a specialty retailer of kitchen cabinets founded by Lumber Liquidators founder Tom Sullivan in 2008, reneged on a 2010 agreeement that forbid competition between the two companies for at least 10 years. That meant not selling wood floors for that period. But in 2019 - just nine years after the agreement - Liquidators claimed Cabinets To Go had begun selling wood flooring.