Shayne Kemp learned last week that his family’s craft wood company must pay $300,000 in import tariffs by Monday. The small company does not have that kind of money.
Kemp, who is vice president of Farmington-based Kemp Enterprises, is concerned for his family and the broader implications for Maine’s wood industry, which has seen products it used to make in abundance move to cheaper overseas production.
“My father is trying to look at different ways to pull this out of a hat, but realistically, he may have no choice but to sell his home,” Kemp said. “It is really not right.”
It is an example of the collateral damage to American companies from a trade war with China that began under former President Donald Trump but is still being enforced by President Joe Biden. While tariffs are imposed on goods that the U.S. government deems a threat to domestic industry, Kemp Enterprises is an example of a company that relies on imports.
The stiff duties come from a federal rule that went into effect in February 2021. On top of a 25 percent duty levied on certain goods from China, it adds tariffs of 220 percent of the value of certain millwork imports, including wooden dowels that Kemp Enterprises buys from a Chinese company.
But it is difficult to source enough of the white birch dowels in the U.S., Kemp said. The wholesaler sells dowels and wooden components to toymakers, builders and other companies, with the dowel segment making up 25 percent of Kemp’s business.
He and his father were unaware of the new tariff. Had they known about it, they would have figured out a way to handle it, even if that meant getting dowels locally out of more expensive wood. They found out they had not been paying the extra duty on their imports last Monday, after they heard from a competitor that it had been asked to pay the duty.
Kemp contacted his local freight forwarder and customs broker, Ocean Air, which confirmed he needed to prove his products did not fall under the law or pay the additional duties to the federal Customs and Border Protection by Monday. An Ocean Air spokesperson was not immediately available for comment.
He said four containers of dowels worth about $60,000 per container were flagged by customs as not having the extra duty paid, and another three or four could potentially require payments.
“It could cost us hundreds of thousands of dollars in tariffs,” he said.
Kemp said he and his father have reached out to members of Maine’s congressional delegation, which said it is talking to the relevant federal authorities about the situation and is working to set up a meeting with the Commerce Department as soon as possible.
The company also hired a lawyer, Richard Furman, who said it will have to pay or potentially suffer additional financial losses. Although the government typically does not grant payment extensions, he said, it might be possible to work out a payment plan.
The federal government could potentially seize the dowels and sell them at auction. Another possible outcome is that the surety agency that provided an import bond for the products might pay the duties and then come after Kemp Enterprises for the amount owed.
Furman said the government does not notify individual companies of law changes. That is done by publishing them in the Federal Register. While larger companies may have staff dedicated to searching for those changes, it is challenging for smaller companies. Kemp has 10 employees.
Twenty years ago, Kemp’s company could have bought dowels from nearly 100 different U.S. mills, but he said only four or five are left, forcing him to buy offshore. He may turn to some to buy more expensive poplar dowels if he doesn’t get relief for the current payments due, whether that is through financial help or an import exemption for white birch.
“We don’t necessarily completely disagree with the law itself,” he said. “Twenty-five years ago it probably would have saved the wood industry, but it’s about 25 years too late, unfortunately.”