U.S. Imposes More Tariffs, Contract Glaziers Feel the Impact

Chinese materials used in the glass, glazing and metal industries are subject to a 10 percent tariff, which took effect September 24, 2018. The Trump Administration announced a finalized list of $200 billion worth of tariffs on Chinese goods. Starting January 1, 2019, the new tariffs will increase to 25 percent. Some con-tract glazing companies are experiencing negative impacts from the tariffs implemented this year.

The latest tariff list includes:

  • Various float glass products;
  • Glass mirrors;
  • Glass frit;
  • Laminated safety glass;
  • Glass in the mass of fused quartz or other fused silica; and
  • Enamels, glazing, pigments, colors and lusters for the glass industries.

Base metal door closers suitable for buildings, base metal automatic door closers and base metal parts are also affected. Base metal, other than iron, steel, aluminum or zinc, mountings and fittings suitable for buildings are also included in the tariffs.

China retaliated to the latest trade escalation with $60 billion in tariffs on U.S. goods including small aircraft, computers and textiles at a 5-percent rate and chemicals, meat, wheat and wine at a 10-percent rate. These tariffs also went into effect September 24, 2018.

Bob Linford, vice president of California operations for contract glazing company Giroux Glass, says the tariffs are affecting pricing, procurement and schedules.

“At this point almost everything is being negatively affected in some way,” he says.

Due to fluctuating prices, lead times are impacted and unpredictable, according to Linford. He says suppliers can’t make commitments about when they will receive their own materials, and, as a result, can’t say when they will be able to make and ship glazing contractors what they need.

“Usually what we buy is a compilation of materials from several suppliers, so it’s a trickle–down effect that’s impacting all of us,” says Linford. “On a short-term project, it’s not as much of an impact, other than we may start to use vendors we never have used before if they happen to have what we need. It becomes a case of who can even procure what we need, not whether the price is acceptable or not.”

Linford explains that for long-term project estimates, suppliers can hold their pricing for around 30 days, but not for the duration of the project or even until they are due to ship it months later.

“No one will hold pricing until the time that it needs to ship, and that makes it really tough for us to bid both an accurate cost and schedule,” he says.

Linford describes the market as volatile and less predictable. Often sup-pliers build in a small percentage to account for possible cost increases for materials, but the cost increases can surpass that small allowance. He says that most contracts for big projects don’t allow an increase for escalations in pricing and scheduling due to tariffs.

“If we have to resort to using products from other sources, based solely on who has what we need when we need it, companies not previously considered, we may not get the usual level of quality or reliability,” says Linford. “These tariffs put us smack in the middle of schedule delays and price increases—we’re stuck between having to commit to timing and pricing, but rely on suppliers who can’t do it either. How do we bid on a project now, when we don’t know what prices or new tariffs will hit us in a year? We simply can’t hold onto our pricing throughout the project’s duration. This is a whole new situation, one fraught with all of these issues.”

Report Highlights Severity of the Labor Shortage

The labor shortage is impacting the glass and glazing industry nationally, but the problem isn’t unique to these industries. Eighty percent of firms in the U.S. are having trouble finding craft workers according to new data from the Associated General Contractors (AGC) of America and Autodesk.

According to the 2018 Workforce Survey of more than 2,500 respondents, 65 percent of firms reported finding it more difficult to fill installer positions compared to one year ago. Sixty-two percent of firms found it more difficult to fill ironworker positions compared to one year ago.

Many contractors reported losing hourly craft personnel to other employers. Fifty-one percent said they lost employees to other construction firms and a quarter of contractors reported losing workers to other industries. Thirty-six percent of contractors reported that they were not losing hourly craft workers to other employers.

In an effort to increase hiring of hourly craft positions, 62 percent of contractors increased their base pay rates, while 25 percent provided incentives and bonuses. Around a quarter of contractors reported increasing their portion of benefit contributions and/or improved employee benefits.

Methods to reduce onsite worktime such as lean construction and building information modeling (BIM); labor-saving equipment such as drones, robots or 3-D printers; and specialists such as architects or BIM personnel are some ways contractors are handling the continued labor shortage.

“Technology can help bridge this gap, and more firms are bringing training in-house to implement digital strategies such as building information modeling, or BIM, to ease staffing challenges and train the next generation of industry professionals,” said Sarah Hodges, senior director, construction business line at Autodesk.

Commercial Surety Grows Outside Construction Industry

Commercial surety is growing beyond the construction industry. According to the Surety & Fidelity Association of America, the surety industry’s direct premium written increased from $5.9 billion to $6.2 billion in 2017. It was  the fifth straight year of steady growth.

Surety is an agreement among three parties in which a third party guarantees an obligation from the one party to another.

According to Risk & Insurance, the oil and gas business along the Gulf Coast are using surety bonds increasingly, especially in Houston. Traditionally, construction, including glazing, makes up approximately 80 percent of the U.S. surety market. The other 20 percent is referred to as general commercial surety.

Risk & Insurance credits ease of access and rising interest rates for the growing number of surety bonds within the oil and gas industry. Many parties are using surety bonds to guarantee the purchase price of the commodities, as well.

According to Viking Bond Service, surety bonds in the oil and gas industry will compensate the state up to the bond amount if a business does not follow regulations or pay the necessary taxes.

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