Industrial Supply Distributors NAICS 423840

Feb 8, 2026 - Anti-Circumvention Provisions Protect Distributors

• Distributors that work hard and invest heavily in growing their manufacturing customer's business can be blindsided if that customer bypasses them to deal directly with customers or sub-distributors within the distributor’s territory or network, a recent article in Industrial Distribution (ID) warns. To protect against this, many distribution agreements include anti-circumvention (aka non-circumvention or direct dealing) clauses to prohibit manufacturers or suppliers from bypassing the distributor to sell to customers the distributor developed. Such provisions protect the distributor’s investment in lead generation, technical support, and customer relationships critical in markets where deals are high‑value and trust‑based. Depending on the structure and nature of the relationship, anti-circumvention provisions can take several forms, including: territory‑based, customer‑based, non‑solicitation, and post‑termination clauses. ID warns that poorly drafted versions can be unenforceable or anti‑competitive and stresses the need for clear scope, reasonable duration, audit rights, and strong remedies.
• US factory activity, which drives demand for industrial supplies, shrank in October for an eighth consecutive month, driven by a pullback in production and tepid demand, The Wall Street Journal reported in November citing the latest data from the Institute for Supply Management (ISM). In October, ISM’s Purchasing Managers’ Index (PMI) fell to 48.7 from 49.1 in September (a reading under 50 indicated contraction), with production, new orders, and employment all contracting, reversing short-lived gains seen in previous months. Six manufacturing industries reported growth in October with Primary Metals, Food, Beverage & Tobacco Products, and Transportation Equipment topping the list. Twelve industries reported contraction for the month including Textile Mills, Apparel, Leather & Allied Products, Furniture & Related Products, and Machinery. WSJ noted that tariffs and their impact on prices and demand featured highly in respondents’ answers to the ISM survey.

• The Trump administration’s on-again, off-again tariff strategy is sending ripples through the industrial sector, significantly impacting production costs, supply chains, and overall competitiveness in the machinery and industrial equipment sector, Manufacturing.Net reports. The implementation of an additional 10% tariff on Chinese imports, suspension of de minimis exemptions for Chinese shipments, and newly announced (and since delayed) 25% tariffs on goods from Mexico and Canada, are causing confusion and requiring manufacturers to quickly adapt to mitigate potential cost spikes and avoid supply disruptions. Manufacturers looking to reshore operations to avoid tariffs and shorten their supply chains are an opportunity for domestic industrial supply distributors. However, rising recessionary fears could cause existing and potential customers to delay or cancel new orders. In March, Goldman Sachs raised the probability of a US recession to 35% from 20%, amid tariff turmoil and economic uncertainty.
• Producer prices for machinery and supply wholesalers, a measure of input costs including supplies and labor, rose 7.8% in November compared to a year ago, after rising 2.6% in the previous November-versus-November annual comparison, according to the latest US Bureau of Labor Statistics data. Employment by industrial supplies merchant wholesalers shrank 2.1% year over year in November, while the average industry wage rose 7.6% over the same period to $32.37 per hour, a sharp retreat from its high in September, BLS data show.