Suppliers, buyers gauge impact of U.S. tariff on Brazilian paper goods

Drug Store News, Feb 6, 1989

Suppliers, buyers gauge impact of U.S. tariff on Brazilian paper goods

NEW YORK -- A 100-percent tariff recently imposed on raw paper and finished paper products imported from Brazil will tighten the availability of paper in the United States this year, sources in the paper industry say. As a result, the price of paper, which has been rising steadily for the past year and a half, will go up more this year, some sources predict.

The tariff "effectively shuts the door to Brazilian paper," said Dan Hoover, vp and general manager of Roaring Spring Blank Book Co. Brazilian raw paper (called roll stock in the industry) and finished paper products accounted for about 5 percent of the U.S.'s paper supply.

Paper prices increased several times last year as a result of such factors as the devaluation of the dollar. Manufacturers are paying about 19 percent more for raw paper for this back-to-school season than at this time last year, Hoover estimated. That may mean an increase of as much as 15 percent in selling prices to retailers this back-to-school season compared with last year's some sources said.

Back-to-school will be affected more than home office supplies, one vendor said, because the home office demand is more evenly spread throughout the year, whereas "machine capacity and the paper supply come into play in a concentrated period" such as the back-to-school season.

For drug store retailers, the tariff, which went into effect Oct. 29, may translate into increased price points for such items as filler paper. Also, "Counts may go down some, but there are traditional counts [such as 200-count filler paper] that are hard to bounce off of," said one source.

At least one manufacturer is suggesting retailers limit the number of packages per customer as a way to finesse the situation.

"The lack of Brazilian competition is not going to encourage paper and paper product companies to come in with lower prices, and paper will be in shorter supply," said Mark Blandford, school and stationery buyer at K&B. "Pricing will be at an all-time high this year as a result of both factors." Pricing changes may show up more in low-priced goods, Blandford suggested, "because retailers work closer to cost on those. There's more room for absorption on higher-priced goods."

The tighter paper market has sent paper manufacturers, as well as retailers who imported paper products from Brazil, scurrying to find other sources to replace their Brazilian connections.

Although at least one large paper product vendor is known to have lobbied for the tariff, it is mainly seen as a retaliatory tariff, stemming from Brazil's unwillingness to conform to the U.S. Trade Representative's demands concerning pharmaceuticals.