Ipe Wood Could End Up Double in Price


Exotic Wood Import Taxes

Many small businesses from all over the U.S. rely on imports from countries in different parts of the world for sustaining their business. Now, these businesses are faced with a problem in President Trump’s proposed import tax. One of the industries that will be hit by the proposed new tax scheme is the importing of Ipe wood.

Ipe, an exotic wood priced for its characteristics that cannot be found on any other domestic wood, is imported mainly from South American countries where it is indigenous. Ipe, when turned into a deck, is next to perfect. This beautiful exotic wood is an ideal decking structure for the woods out of it are hard, strong and naturally resistant to weather, rot and abrasion.

Additionally, Ipe woods are denser than most domestic woods and are five times as harder as well. This makes Ipe a priced exotic wood in the country and is highly imported. Recently, however, with President Trump’s proposed import tax, the industry of importing Ipe woods and other exotic woods is one of the businesses that can have a huge effect in the Ipe wood business as well as other businesses that rely on importing.

Ipe woods industry is only one of the many businesses that heavily rely on imports that will be affected by the Trump administration’s proposed 20% tax on imports. The new import tax was proposed as one of the possible ways to pay the US-Mexico border that President Trump is planning to build.

The planned US-Mexico border is estimated to cost about $12 to $15 billion and the administration is thinking of getting the money to pay for the border through the 20% tax.  At first, the 20% tax as proposed by Trump administration was only related to Mexican imports.

However, the Republican leadership indicated that the 20% tax is aligned with the leadership’s broader tax-reform plans. It specifically aligns with the border adjustment tax implementation. The proposed 20% import tax in the US would apply to goods imported and sold in the country. What this means is that companies would be able to deduct only their local costs from their tax.

In addition to funding the planned US-Mexico border, the revenue that would be generated from this new tax scheme would also be used to fund the reduction to the corporate tax rate, which would be reduced from 35% to 20%.

With the Ipe woods industry being one of the industries that would be hit by this new tax scheme, Ipe Wood USA, one of the country’s leading ipe woods supplier has voiced their concern about the effects of the new tax scheme to local businesses that rely on importing particularly local ipe woods decking businesses.

Last April, the Trump administration has excluded the import of the House Republican in their new tax reform principles. This has given retailers from all over the country a breath of relief. After waging a high-profile campaign against the new tax scheme, they earned a victory.

President Trump chose to decline endorsing the border-adjusted tax but its advocates have hinted that this victory is not permanent. Even so, the anti-border tax group will not relent in their efforts in ensuring the border adjustment tax will not have a place in the country’s tax policies. The fact is that retailers all over the country, including suppliers of ipe wood decks, would face great risks if the border adjustment plan is passed.

If the President decided to endorse the new tax scheme and it was passed, that would mean companies’ tax will be based on their sales’ destination. The new import tax would also mean that exports would be excluded from taxable income but then companies will be prevented from deducting export sales.  In effect, tax would be placed on import.  Many small businesses, wholesale and retailers, would stand to lose in this setup.

In the case of Ipe wood decking, the proposed import tax would cause the cost of imported exotic woods including Ipe to skyrocket. It could mean Ipe would cost as much as double its current price in the near future. If Ipe is currently sold for $2.23 for a linear foot, in the future it could cost in as much as $4.55 if the new tax scheme happens. If this ever happened in the future, many small businesses would be affected negatively in many aspects of their business.

“There are no domestic woods that have the same characteristics of exotic woods like Ipe. Any cost increase in the import tax on exotic woods would be negative not just for the sale of Ipe but for the quality of work in the U.S. Everybody would lose,” said Jerry Brown, the 79-year old of California.

Too many small businesses rely on imports that this new tax scheme would be a really huge burden. Many small businesses simply cannot run their own manufacturing operation, which is a very unrealistic option. In the case of Ipe woods, this would be an impossible feat. After all, you cannot find this rare wood in the country.

Ipe woods would need to be absolutely imported and heavy tax on imports would put higher price for Ipe wood decks. Many people enjoy Ipe wood decks because of its incredible characteristics. Strong, durable, highly resistant, it has all the ideal characteristics of wood. If price ends up increasing, buyers would feel the burden, they will feel compelled to find other alternatives to the wood or simply endure using low-grade wood decks.

On the other hand, the pressure and demand for Ipe wood decks would increase that companies’ quality of work will also suffer. In the end, even though the new tax argues the new tax scheme would benefit exporters, the result is that everybody would lose. It is great that the border-adjustment tax was excluded in the tax reform outline in April, the White House does not completely rule out the tax reform.

Apparently, there were many aspects of the border adjustment the administration like. According to the Treasury Secretary, the current form of the law does not seem to work but there will be more discussion about revisions that can be considered. As it looks like, retailers’ problems regarding the border adjustment tax is not finished yet.

However, even if that maybe so, the anti-border adjustment tax will continue their work to fight against this new tax scheme. With so many people and entities that will be affected if the border-adjustment tax is passed including that of the Ipe wood deck industry, they must band together to fight the shortfall that it would be.



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