International Trade & The Pandemic
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The COVID-19 pandemic has greatly affected international trade. If you are an importer or an exporter you have seen the impact first-hand. But we understand that there are so many changes that it can be hard to stay updated. Because of that, we are here today to highlight some of the most important changes in the industry. The Office of the U.S. Trade Representative is accepting comments through June 25 on the possible removal of the Section 301 25% tariff on medical products from China. This includes the products that have previously been rejected for an exclusion. In order to submit a comment, you must identify the product as precisely as possible, including the ten-digit HTSUS subheading and its functionality and physical characteristics. Then you must explain precisely how it relates to the COVID-19 response, according to Sandler, Travis & Rosenberg, P.A. International Trade, Customs & Export Law. There have also been changes coming from the Department of Homeland Security. On April 7, they issued a temporary rule that prohibits exports of personal protective equipment being used to treat COVID-19 without explicit approval by the Federal Emergency Management Agency. Lastly, companies might be able to use a sophisticated transfer pricing strategy to achieve significant duty savings and conserve cash. Retroactive transfer pricing adjustments are generally considered part of the customs value of previously imported goods and may need to be reported to U.S. Customs and Border Protection. By utilizing CBP’s reconciliation program companies can take advantage of any retroactive transfer price adjustments by reducing previously declared dutiable values. They can also help provide liquidity which some companies are in dire need of during these times. During this pandemic, the import and export industry is changing constantly. To stay updated reach out to us or stay updated her on our monthly blog.
Import and Export Company Guide
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Venable LLP is a law firm headquartered in our nation’s capital and one that ranked 64th in the 2017 AmLaw 100 survey. They recently hosted a webinar geared towards assisting companies that are involved in international trade and how they can navigate around the global coronavirus pandemic. Today we will be going over a few important topics that they discussed to help importers and exporters during this economic slowdown. Venable attorneys suggested looking back at how the import and export industry handled both the Great Recession and 9/11. Understanding how companies dealt with both economic slowdowns can provide valuable insight in terms of responding to the COVID-19 recession. Look to our country’s history to help us get through struggles that we face today. Venable attorneys also suggested monitoring for any regulatory changes that may ease certain restrictions on import clearance, or provide relief by means of tariff payment deferrals, and consider whether the stimulus package may benefit business operations, among other changes, according to Lexology. Venable attorneys collectively advise import and export companies to reach out to local, state, and/or national government contacts and stakeholders in order to stay up to date and be open to any developing opportunities. For example, there have been various changes made to the CARES Act, specifically targeted towards small businesses, financial services, air carriers, and related workers. With these changes come opportunities for subcontracting to support the government in providing services to help contain the epidemic. Although the coronavirus pandemic has caused an economic slowdown there are still ways that importers and exporters can capitalize on opportunities. Look at our history, monitor for changes, and take advantage of every new opportunity that will come your way. For more information on the import and export industry, stay updated here on our monthly blog.
Coronavirus Impact on Importers & Exporters
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The Coronavirus pandemic is threatening a global recession. The virus is causing major disruptions to businesses around the world. Supply and demand shocks in China have led to other countries, like the US, fearing a prolonged global slowdown or even a recession. Policy makers are making quick calls in response to help cushion the economic blow of the epidemic. Specifically, the U.S. Federal Reserve delivered an emergency rate cut at the beginning of March. According to Reuters Business News, shortages of vital parts and components from China last month cost other countries and their industries $50 billion. And things are not projected to get any better. Analysts are saying that many businesses in China, businesses that U.S. companies partner with, are taking longer to reopen than expected. Some are saying that there is a chance that businesses will not return to normal production until late April/early May. Firms that had not shut down or ones that have reopened are suffering from shortages of parts and other raw materials as well as labor. According to a survey by China’s customs administration that was released earlier this month, over 80% of foreign trading companies in China have returned to work. However, less than a third of small and medium-sized businesses are operating normally. A workforce that employs about 80% of China’s labor force. The scare had caused China to postpone January’s data release and they had decided to instead combine the first two months on the year. That data has since been released and showed that China’s exports shrank by 17.2% in January and February combined due to the Coronavirus’ impact. We are still learning more about the virus and it’s impacts on the import and export industry so make sure to stay updated here on our monthly blog for updated information!
US Trade and Investment Policy Updates
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What is DrawbackContact usIt has been a while since we have discussed recent news regarding U.S. trade and investment policies. Things continue to change rapidly, and it is important to understand what is going on for all importers and exporters. The Presidential Administration has released numerous trade proclamations, executive orders, and has signed major legislation with trade implications within the past couple of months. Below are some of the developments you should keep an eye on. At the end of last month, January 21, 2020, the Presidential Administration issued a new executive order on importer of record criteria. This executive order is intended to implement the administration’s policy to prevent the circumvention of U.S. laws and the avoidance of U.S. duties, taxes and fees in e-commerce transactions. On January 29, 2020 the president signed the U.S.-Mexico-Canada Agreement (USMCA) that implemented legislation into law. The USMCA will take effect of the first day of the third month after the last country notifies the others that it has completed all of their domestic procedures for ratification. On January 15, 2020 the United States and China concluded their Phase One Agreement. China has agreed to purchase $200 billion more of U.S. manufactured goods than they did in 2017. The agreement is called the Economic and Trade Agreement Between the United States of America and the People’s Republic of China. On December 13, 2019 the Department of Justice came out with their revised policy regarding voluntary self-disclosures of export control and sanctions violations (VSD Policy). The VSD Policy encourages companies to voluntarily disclose all potentially criminal export control and sanctions violations directly to the Department of Justice. These are only a few of the recent changes that The Administration has made. As an import or export business, it is crucial to stay updated on all of these changes. For more information stay updated on our monthly blog.Improving Import Benefits
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If you are already in the import business and looking to improve your benefits here are some things you might want to consider. The first thing you can do is work with a government-regulated trading program. Doing this will be more than worth the investment because they will help you navigate doing business with countries with strict regulations. Many programs are restrictive and overbearing but they do have many benefits for foreign importers including reduced risk when trading with a government-approved firm. Working with a government-regulated trading program is also a good idea if you want to increase your security. A second thing you can do to improve your import benefits is to hire a third-party risk assessment. A compliance consultant or firm will help you assess risk and evaluate your import logistics. Many import companies have a staff member dedicated to compliance, but the downside is that often times staff members who are familiar with business operations, overlook potential threats. Hiring a third-party will eliminate this risk and best alert you of risks before they arise. The last thing you can do to improve your import benefits is to develop a niche! For example, if you are running a new import business, you might be only importing one product. However, certain forms of the product may sell better than others. Compare the products that cost the most to import based on things like cost per product, customs, and shipping fees, to your most profitable products based on highest demand. Then ask yourself if there is a way to eliminate products that are costly and low-volume sellers. Generally speaking, you want to put all of your efforts towards products that are cheapest to obtain and the ones that bring in the highest revenue. Work with a government-regulated trading program, hire a third-party risk assessment consultant/firm, and develop a niche to improve your import benefits! For more tips on importing reach out to us here at Dutycalc.
Different Players
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Contact us If you are looking to start an import/export business one of the first things you must understand are the different kinds players. Understanding what each of these different players do is essential to running a successful import/export business. Sure, there are importers and exporters but there are many variations on the main theme. Today we will focus on three different players – an export management company (EMC), export trading company (ETC), and import/export merchants. EMC: These guys handle export operations for any domestic company that wants to sell its product overseas but is unsure how to do so. An EMC can do everything from hiring dealers, invoicing your customers, communicating with distributors and representatives, handling advertising and marketing promotions, overseeing marking and packaging, arranging shipping, and much more. These guys basically do it all. EMCs typically specialize by product, foreign market, or both. ETC: While EMCs are taking care of all of the merchandising to sell and focusing on seeking out buyers, an ETC is a bit different. They attack the other side of the trading coin. ETCs usually specialize in identifying what foreign buyers want to spend their money on and then they hunt down domestic sources willing to export. ETCs will often times take title to the good and sometimes they work on a commission basis. Import/Export Merchant: This is somewhat of a generic title that basically identifies a person who is an international entrepreneur that has no specific client base and does not specialize in any one industry or line of products. Instead this person purchases goods directly from a domestic or foreign manufacturer and then packs, ships, and resells the goods. Unlike an EMC, an import/export merchant assumes all risks as well as profits. Understand how each of these players differ and you will be in much better position to make those big business decisions going forward. For more information on the import/export industry, stay tuned on our blog.
Mitigating the Impact of Tariffs
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Importers and exporters within the United States are looking for ways to mitigate the impact of recent tariffs that have been levied on hundreds of billions of dollars’ worth of goods. Though policy changes seem to be continuously changing month to month, there are ways to avoid or reduce duties. Below are a few strategies that companies can use to work around these duties. Businesses can request to exclude specific products from the tariffs through the Department of Commerce and the Office of the United States Trade Representative. In order to do this, businesses must explain how and why their imported goods are critical to the United States economy. When a convincing case has been made, the request has been approved. Beforehand, businesses need to review the exclusions granted on List 1-3 to determine if their own imports are covered. Businesses can shift operations away from one country to another to escape duty increases. Essentially, businesses should change the imported product’s country of origin. For example, the United States Customs and Border Protection has found that the complex assembly of numerous parts, modules, or subassemblies into dedicated machines results in a substantial transformation of the components so that their country of origin is where the finished product was produced. This might be an expensive and difficult change, but it could result in saving on increased tariffs. Businesses can file for duty drawback. This is probably the most effective way to get back money from these tariffs. Using resources like those offered from Dutycalc can help businesses get a refund of up to 99% of duties and fees paid on imported goods. Use these strategies to help mitigate the impact of tariffs. For more information on anything regarding the import and export industry, please reach out to us here at Dutycalc.
Take Your Business Global
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Doing business with international companies is a very daunting yet rewarding task, if done correctly. If you are in the import and export industry looking for ways to improve the way you trade across borders, here are three tips from our experts at DutyCalc.
For more tips or more information about DutyCalc, visit our website or contact us directly! We look forward to doing business with you!
Understanding Risks
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Entering the global marketplace is a challenge that requires education, experience, and a driven mindset. Along with these qualities you must understand that this industry comes with risks that could lead to significant repercussions. Before entering the international marketplace, understand these risks and how to avoid them.
One risk that import and export businesses face is unpredictable shipping logistics. When its all said and done, your business success is dependent on whether you can ship goods safely and efficiently. You need to make sure that your product gets from point A to point B on time. You need to account for everything that could possibly go wrong from an employee calling in sick to damage to the cargo. The best way to mitigate this risk is to stay organized, be prepared, and partner with a reliable freight forwarder that will help you ship your goods without a hitch.
Another risk that import and export businesses face is not knowing enough about the current market. For example, did you know that exports contracted 6% last month which narrowed the trade deficit to $13.45 billion? Did you know that this was the second time that exports contracted in the current fiscal year? If not, you need to do more research on the current market. With the trade war causing changes to the global marketplace daily, it is important to consider those changes before you decide to enter the industry.
The last risk that import and export businesses face is running into problems at the border. Customs is one of the biggest, if not the biggest, hurdle that importers and exporters have to face. Customs rules are not uniform throughout the world. To avoid significant slowdowns at international customs, again, do your research or hire experts in customs law and trade compliance to help you navigate this area of the business.
Bottom line is that the import and export business is one with opportunity but is also one that comes with risks. To find success in this industry understand all of the risks, stay organized, prepare for the worst, and know how to handle logistics. If you have all of these qualities, you will be that much closer to finding success in the import and export industry.
Starting Your Import Export Business
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Starting your own business is hard. Starting your own import/export business is even harder. There is much more to understand and things can go really bad really fast if you are not careful. That being said, if you have the experience, education, grit, and drive to take on this industry you can be successful. If you are looking to get into the import/export industry by starting your own business here are a few pointers that we recommend you follow.
You need a strong online presence. Without an online presence you will not be able to have a networked import/export business. The goal of this is to balance the flow of communications, sell products online, and most importantly build your customer base to drive profits for your international business. Having a professional blog on your website will allow you to have a continuous flow of engaging communications with your clients, something that most customers want in brand new companies.
Along with an online presence you need to find out what you want to sell. This includes understanding which markets are good to enter. We recommend that you find a product or industry that you are passionate about and that you think could sell in international markets. Looking for which markets to enter is where your trend-spotting skills come in to play. In general, the best products are ones that are just starting to become popular or show some promise to being so in the future. Do your research and think before you begin because finding the right product and the right market is probably the biggest decision you will make.
When you have your online presence and product/industry decided, focus on your logistics. Logistics is the most complex aspect of importing and exporting. Think about it, you have to take a product created somewhere and sell it somewhere else. For example, how do the grapes from the vineyard in South Africa make it to the wine glasses of drinkers in California? Every successful business has a strong logistics team, plan, and strategy that makes the flow very easy for all employees. When you get your logistics down to a science, you will be ready to hit the ground running.
Building a strong online presence, figuring out what to sell and where, and getting logistics down is all very important in this industry. However, these are only three of the many aspects that make a successful import/export business. Bottom line is that this industry is a complex system that requires nothing but hard work and determination.
For more recommendations or for more general information on the import/export industry give us a call or browse our website.
