Avoiding the Trade War Squeeze
As trade volatility between the United States and China escalates, shippers find few options for avoiding a painful squeeze. While some are shifting production to other nations in the region, others find those countries are less than ready to handle the spike.
In the thick of peak season preparations, here are some ways to ensure product gets to its destination on time without stifling added costs.
Front-loading. Many shippers are pulling forward (also known as front- loading) goods in an effort to beat deadlines for tariffs on Chinese goods. This means shipping goods scheduled for later in the year, in addition to typical shipments. One large electronics retailer pulled forward more goods in a two-week period in February 2019 than it did during the entire 2018 peak season, for example. The pull-forward effect has been evident for months now at ports.
Tariff remedy programs. In May 2019, the U.S. Trade Representative published Federal Register Notice 84 FR 21389 outlining the decision to grant exclusion requests from the 25% duty assessed under the Section 301 investigation related to goods from China. Though they often go underutilized, there is such a thing as tariff remedy programs.
By taking advantage of processes like Section 301 exclusion, shippers can ensure their goods enter the country duty-free. It's worth reviewing these exclusions and seeing if they apply to your business.
Switching warehouses. Another tactic shippers deploy is shipping product into bonded warehouses. In this scenario, duties are levied only when the goods are removed. The warehouses can be used to manage cash flows by spreading the duties over time. Alternatively, they can be used to pay lower rates if tariffs are reduced at a later date.
Planning for the long term, but being able to quickly adjust, is critical with tensions rising and an unpredictable tariff war ahead. An interconnected, technology-infused supply chain is not just a nice-to-have but is essential in today's volatile trade environment.