Pier 1 2008 Annual Report Download - page 13

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Risks Associated with International Trade
As a retailer of imported merchandise, the Company is subject to certain risks that typically do not affect
retailers of domestically produced merchandise.
The Company may order merchandise well in advance of delivery and generally takes title to the
merchandise at the time it is loaded for transport to designated U.S. destinations. Global political unrest, war,
threats of war, terrorist acts or threats, especially threats to foreign and U.S. ports, could affect the Company’s
ability to import merchandise from certain countries. Fluctuations in foreign currency exchange rates and the
relative value of the U.S. dollar, restrictions on the convertibility of the dollar and other currencies, duties,
taxes and other charges on imports, dock strikes, import quota systems and other restrictions sometimes placed
on foreign trade can affect the price, delivery and availability of imported merchandise as well as exports to
the Company’s stores in other countries. The inability to import products from certain countries, unavailability
of adequate shipping capacity at reasonable rates, or the imposition of significant tariffs could have a material
adverse effect on the results of operations of the Company. Freight costs contribute a substantial amount to the
cost of imported merchandise. Monitoring of foreign vendors’ compliance with U.S. laws and Company
standards, including quality and safety standards, is more difficult than monitoring of domestic vendors.
The United States government has the authority to enforce trade agreements, resolve trade disputes, and
open foreign markets to U.S. goods and services. The United States government may also impose trade
sanctions on foreign countries that are deemed to violate trade agreements or maintain laws or practices that
are unjustifiable and restrict U.S. commerce. In these situations, the United States government may increase
duties on imports into the United States from one or more foreign countries. In this event, the Company could
be adversely affected by the imposition of trade sanctions.
In addition, the United States maintains in effect a variety of additional international trade laws under
which the Company’s ability to import may be affected from time to time, including, but not limited to, the
antidumping law, the countervailing duty law, the safeguards law, and laws designed to protect intellectual
property rights. Although the Company may not be directly involved in a particular trade dispute under any of
these laws, its ability to import, or the terms and conditions under which it can continue to import, may be
affected by the outcome of such disputes.
In particular, because the Company imports merchandise from countries around the world, the Company
may be affected from time to time by antidumping petitions filed with the United States Commerce
Department and International Trade Commission by U.S. producers of competing products alleging that
foreign manufacturers are selling their own products at prices in the United States that are less than the prices
that they charge in their home country market or in third country markets or at less than their cost of
production. Such petitions, if successful, could significantly increase the United States import duties on those
products. In that event, the Company might possibly decide to pay the increased duties, thereby possibly
increasing the Company’s price to consumers. Alternatively, the Company might decide to source the product
or a similar product from a different country not subject to increased duties or else discontinue the importation
and sale of the product.
In recent years, dispute resolution processes have been utilized to resolve disputes regarding market
access between the European Union, China, the United States and other countries. In some instances, these
trade disputes can lead to threats by countries of sanctions against each other, which can include import
prohibitions and increased duty rates on imported items. The Company considers any agreement that reduces
tariff and non-tariff barriers in international trade to be beneficial to its business. Any type of sanction on
imports is likely to increase the Company’s import costs or limit the availability of products purchased from
sanctioned countries. In that case, the Company may be required to seek similar products from other countries.
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