Moog generated a lot of interest, concern and sympathy with its recent newsletter stating that the impact of President Trumps 25% tariff on certain electronic components could mean that they would have to move manufacturing out of the US. Discussion has raged over on the Moog Facebook page and now some other manufacturers have entered into the debate, including Paul T Schreiber from SynthTech Inc, who suggests that Moog may have got it wrong. Is it time to Keep Calm and Carry On?
The 301 list
First of all, it’s a long and detailed list of things to go through to find the components relevant to synthesizer construction. The document (301FRN list Docket No. USTR-2018-0005) is 58 pages long and the bits we’re interested in are on page 46. These refer to resistors, capacitors, trimmers and panel pots. Other items such as circuit boards, switches and encoders and not included.
Paul points out in a Facebook post what this means for his manufacturing:
for resistors…..nothing. I mean, $14 for a reel of 5000? Meh. for capacitors? Hell’s Bells, they already raised the pricing 300-350% 6 weeks ago, after everyone panic-bought the shelves to zero inventory. So Meh yet again. for pots? Now this is the big one, especially for me. But still, if a Euro module has 8 pots, and you bought them from Mouser for $0.60ea, the impact is ($0.60 * 0.25) * 8 = $1.20 So, a manufacturer can just eyeroll and suck up the entire BOM impact (call it $1.45) or raise wholesale pricing $5 which then raises retail $9.
So Paul’s intention, when he has to reorder, is to absorb the price on resistors and capacitors and raise his prices a small amount to cover the cost of the pots. Nothing like the 25% increase in total price that Moog was alluding to.
The detail about what is and is not included in the 301 list can get a bit messy, not to mention formal ITC schedules and dealing with import/export. If you’ve ever exported electrical equipment as I have then you’ll know what a paperwork headache it can be. There’s no way that I’m going to attempt to unravel it here.
But Paul mentions that “musical instruments” are in Chapter 92 of the formal ITC listing and Chapter 92 is not included in the 301 document. The part that he imagines Moog are concerned about is a reference to printed circuit assemblies “NESOI” which means “not elsewhere specified or included”. He says that this doesn’t mean every PCB ever made, that it’s specifically talking about oscilloscopes. All of these tariffs are designed to protect US manufacturing from “screw shops” where a company imports a lot of components and screws them together with a sticker that says “made in the USA”. Sound recorders, televisions, medical equipment and so on all come under this sort of protection. Both Moog and SynthTech are a kind of “screw shop” but musical instruments are not in the same chapter as the affected items.
Paul references another synth maker, Brad Holland of ISLA Instruments who made a comment about “freight forwarders” being the source of the tariff problem. Many people use freight forwarders (FF) to reduce shipping by sharing containers. Stuff a container full of components that don’t get shared out until they reach the US. In these circumstances, the FF have to pay any tariffs or taxes on the whole shipment and in turn bills the individual companies. So it’s possible that Moog received a notification from their FF that the prices are about to go up by 25% because of the new tariff. What Moog needs to do is ensure that all their imports have the absolutely correct codes and descriptions so that they can say to the FF that the charges do not apply. If general codes are being used then they will be bundled in with everyone else.
So what does all this mean?
Potentially, it means that Moog has got themselves and the synthesizer community into a bit of a tizz over very little. There may be some small increases in the price of knobs and other components but nothing like the 25% overall price hike that was being bandied around. The biggest factor seems to be printed circuits boards but it’s becoming clear that these are not, or should not be included in the tariff. Moog is much larger than SynthTech and so that’s a factor. So then is Moog’s newsletter politically motivated? Possibly, but then in that regard you can’t trust either side of the argument. But I’m sure that all parties are acting in what they see as the best interests of their company, customers and the industry.
But all of it is speculation and the debate will no doubt continue and it will be interesting to see if Moog Music come back with further comments or what will actually happen post-July 6th when the tariffs come into force. Hopefully, we can all go back to making and playing with electronic noises.