LONDON — Fortnum & Mason, the 318-year-old luxury retailer, has reported that recent U.S. tariff measures are significantly affecting its tea exports, resulting in higher costs for American customers and reduced demand.
Chief Executive Tom Athron said the combination of stricter country-of-origin rules and the removal of the “de minimis” exemption for parcels valued under $800 has created new hurdles for international buyers.
“The American authorities have told us — this applies to the tea industry as a whole — that if a blend contains tea from multiple countries such as China or India, then tariffs are applied as though the entire product originated there,” Athron told the Financial Times.
Tariff Measures Affecting Prices
Earlier this year, U.S. authorities imposed higher tariffs on goods from key trading partners, including duties of up to 50% on certain imports. While these measures are intended to strengthen domestic industry, they have added significant costs to retailers exporting specialty products to the U.S.
For example, a 250g canister of Fortnum & Mason’s Royal Blend tea, which retails for $27.85 in the U.S., now faces delivery fees starting at $25.41 because of additional customs duties. Previously, most of these products entered the U.S. market without tariffs under the de minimis threshold.
Country-of-Origin Rules Creating Uncertainty
U.S. customs agents determine tariffs based on whether a product undergoes a “substantive transformation” that changes its origin classification. For blended teas, this can create uncertainty for exporters, as origin is often assigned to the source countries of the raw leaves rather than the location of blending or packaging.
Athron noted that these rules, combined with the elimination of duty exemptions, have made some American consumers hesitant to purchase premium goods. “A lot of our products are sent as gifts,” he said, adding that buyers want reassurance they won’t face unexpected customs bills upon delivery.
Overseas Sales and Inflationary Pressures
Fortnum & Mason’s overseas sales — including teas, hampers, and other specialty goods — reached £12.5 million in the year to July 2024, representing about 5.5% of its total revenues. The company has also faced broader inflationary pressures, with the U.K. price of its 250g Breakfast Blend canister rising nearly 40% over the past five years.
Despite logistical efficiencies, Athron acknowledged that U.S. consumers should expect higher prices as tariffs and duties continue to shape international trade conditions.
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