Impact Of The War
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The war in Ukraine continues to impact the global economy as changes in other countries are beginning to happen. For example, recently we have seen a global food crisis as Russia is blocking vital fertilizer exports that are needed by farmers elsewhere. This restriction then caused China and its firms to stop selling fertilizer to other countries in order to preserve supplies at home. Because China is a massive producer, consumer, and trader of thousands of essential goods across the globe (like fertilizer), the impact of such restrictions are being felt everywhere.
Steel is another example. China is a huge supplier of steel and they were once accused of generating overcapacity, with its low-priced exports forcing steelmakers out of business in the United States and Europe. Now, China is imposing export restrictions on steel which has triggered higher prices worldwide and has added more unwelcome pressures to inflation. China Steel Corp., the nation’s largest steelmaker, said at the end of Q1 that they were raising steel prices 5.83% on average for shipments in Q2 to reflect the cost hikes caused by economic sanctions against Russia.
Fertilizer and steel are only two goods where we have seen big changes. Step away from actual products and we still have problems like supply chain issues and global logistics. There are still not enough people to help unload the docs. Import and export businesses are struggling to get in and out of Russia and Ukraine. Everything from actual goods to worldwide logistics has been negatively impacted by the war.
All countries will continue to feel the lasting impact by this war and unfortunately the longer the war goes, the harder it will be to recover. For more information on the war in Ukraine stay updated here on our monthly blog.
Increasing Fuel Costs Continue
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From high tech companies like Apple and Samsung to local mom and pop shops, everyone continues to struggle with sourcing product. The COVID-19 pandemic started it and the conflicts between Ukraine and Russia only made things more difficult. Things like increased shipping costs and freight shortages play a role in the global supply chain struggle.
We have all seen the gas prices recently and unfortunately it is not looking like they will be going down any time soon. The national average for a gallon of gas is now over $4.25 according to AAA. Some experts say that we might see a slight decline after May but the national average is still expected to remain over $4 until the end of the year. Not only is it more expensive to fill up your car’s gas tank but that also means it is more expensive to fill up freight trucks and air cargo jets.
Climbing oil prices translate directly to higher diesel prices. The United States diesel prices are up significantly from last year and are expected to go higher as sanctions are mounted against Russia, the third-largest oil producer in the world. Higher fuel costs from climbing oil prices caused by the hostilities will continue to be felt by shippers across the globe. Ocean carriers who continue to serve ports in the region have introduced War Risk Surcharges for these shipments. This translates to an additional $40-$50/TEU. Similar to gasoline prices, while a temporary dip in available supply of exports could explain the slight easing in freight costs, all signs point to continued elevated volumes in the coming months.
Expect prices to continue to increase and when they do decrease it will be very minimal. Hopefully by the beginning of next year we will see prices return back to what they once were.
International Trade With Russia
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Russia invaded Ukraine about a month ago and since then the U.S. and allies have pursued a series of economic sanctions against Russia in retaliation for the invasion. On Friday March 11, President Biden said that the U.S. and other G-7 nations will deny Russia from a favored nation status. This meaning that the U.S. and allies will revoke Russia’s most-favored nation trade status. How will this impact the U.S.? Today we will break down some of the numbers.
According to the Census Bureau, Russia was the U.S.’ 23rd largest trading partner, totaling $36.1 billion in two-way goods trade in 2021. $29.1 billion of which account for Russian products into the U.S.
60% of what the U.S. imports from Russia is in energy, including oil, coal, and natural. In 2021 the U.S. imported an average of 209,000 barrels per day of crude oil from Russia. Russian oil accounts for about 3% of what the U.S. imports each year, but that is still enough of a jump to drive up gasoline prices for all of us.
Energy aside, other goods imported from Russia will see an increase as well if they have not already. The move to revoke Russia’s most-favored nation trade status will cause the U.S. tariff rate on Russia caviar to jump from 15% to 30% and levies on plywood will increase from 0 to 30%, according to the Wall Street Journal. Vodka will also be subject to a tariff of $1.78 per liter.
As the war continues the U.S. and allies will continue to do what they can to support Ukraine, even if it is just an economic blow. However, doing so will likely lead to more inflation not just in the U.S. but globally.
For more information on import and export news please stay tuned here on our monthly blog.
Expedited Shipping
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As a business one of your top priorities is to satisfy your customers, right? You want to keep them happy so they keep doing business with you (aka spending money). If you are an importer one of the best things you can offer your customers is expedited shipping. Sure, lead times are through the roof because of the problem at the ports, but if you can navigate around those barriers and offer quicker shipping, this can really help your business grow. Here are the benefits to offering expedited shipping.
If you offer expedited shipping, you can offer your customers more products. By this we mean, you can ship time sensitive products like perishable goods or government documents. If your business offers a product that is time sensitive, expedited shipping will allow your business to ensure that your things arrive at their ultimate destination while still viable.
Additionally, have you ever been part of an inventory or cycle count? If you have, you know that it is a massive headache if you store a lot a product. The more product you are in charge of the more likely you are to lose it. This is the last thing you want to tell your customers. Expedited shipping allows your business to maintain a lean inventory. Lean inventory reduces the number of products you store at your facility and this will reduce overall inventory costs, thus saving you money.
Lastly, the most important reason you should offer expedited shipping is because you create an improved customer service experience through decreased transit times and the transparency of delivery processes. If customers can get their products quicker they tend to be a lot happier. If they can place their order, track it, and get it in their hands in a timely manner, as consumers they will have no reason to spend their money anywhere else.
Expedited shipping is a great way to keep your customers happy and keep your business ahead of your competitors. Consider offering expedited shipping if you do not already because it can really help all parties involved.
Movement At The Ports
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Last October the Los Angeles Harbor Commission implemented a “Container Excess Dwell Fee” that was directed at ocean carriers to improve cargo movement on container terminals. This fee charges carriers $100 a day per container left on the dock. Carriers have a maximum of nine days to move containers by truck before the fines start accruing and six days if transporting by rail. At the time of implementation, this fee was set to last until the end of January.
Since October, there has been significant improvement at both the Long Beach port and Los Angeles port. In November, Mario Cordero who is the executive director of the Port of Long Beach reported that since the announcement of the new fees both ports have seen lingering cargo containers reduce by about 33%. To date, Gene Seroka who is the executive director of the Port of Los Angeles reported that import cargo lingering nine days or more has declined by 60% at the Port of Los Angeles. There are still more containers than normal but the fee has definitely helped move things along. The ports are pleased with the progress and employees at both are hoping that this is just the start. Because of the proven success of the Container Excess Dwell Fee, the Los Angeles Harbor Commission voted 5-0 to extend the fee.
Although there has been progress in logistics at the ports, Cordero believes that there are still national supply chain issues that need to be addressed. Things like truckers, marine terminal operators, warehouses, railroads, port authorities, etc. all need to be prioritized just like the ports were. Sure, it will take time but the good news is that there is at least a conversation happening with regard to the need to have a transformational change.
Cordero is absolutely right. The fact that we are moving things at the port is great. But there needs to be changes to the entire supply chain to really make a lasting impact.
For more information on import news please reach out to us.
Importing Wholesale Products
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China provides more than 20% of total U.S. imports year after year making them the largest U.S trading partner. Although there have been shaky relations between the two countries the trend shows little deviation over time. There is no sign that business will slow down and because of that, new wholesale importers should think about a few things before they do business with China.
First, you need to think about whether or not the products you are importing are marketable here in the U.S. For example, what makes the product you are importing from China unique? What are the product’s benefits and economical properties? Does the product you are importing from China have sustainability? Try to stay away from things like electronics, baby items, digestible items, things that are complex, inherently dangerous, and products with a patent or trademark.
Secondly, you need to think about profitability. Make sure you run your financials and strategize before making any payments to China. What is your landed cost per unit? What does your import from China sell for in the U.S.? What is your profit margin and return on investment? If you do not think about these things and “know your numbers” your business will fail. Prepare before you purchase.
Lastly, ask yourself if the products you are importing will be able to sell. Know your target market demographics. Know where your imports will sell best. Know why your imports will be successful. Make sure your imports from China are competitive. If you have any hesitation with any of these things you need to re-evaluate what you are importing.
Importing wholesale products from China is a smart way to make good money if you do it right. It is easy to overlook the small things and doing so can really hurt a business. Take these things into consideration and really think about all the financial details before giving yourself the green light.
Export License
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The export business can be tricky because some products require you to have an export license and some do not. Export compliance is a monster in itself but you must know the rules and regulations if you plan on keeping your export business afloat. Today we are going to highlight some of the main things you have to know regarding an export license.
To begin, understand that in most cases you will not need an export license. About 95 percent of all items exported from the U.S. do not require an export license. Only a small percentage of all U.S. export transactions require licenses from the government. That being said just because your product might be among the 95 percent that does not require a license that does not mean that you can sell in anywhere and to anyone. It is up to you, the exporter to determine whether the product requires a license and to research the end use of the product. You must perform your due diligence regarding every product and every transaction.
On the flip side, there are some products that do require an export license and are subject to the Export Administration Regulations (EAR) administered by the Bureau of Industry and Security (BIS). The first step is knowing your item’s Export Control Classification Number (ECCN). These are found on the Commerce Control List (CCL) and identify reasons for control which indicate licensing requirements to certain destinations. If you find out that your product does require an export license you can apply for one through the Simplified Network Application Process Redesign. There is no fee associated with submitting a license application or a commodity classification request to BIS.
There is a lot to understand before doing business overseas so take the time to learn it all before deciding to enter the industry. For any questions regarding the import and export industry please reach out to us here at Duty Calc, we are here to help!
Mitigating Risk
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Doing business and mitigating risk internationally can be tricky, especially if you import and export. There is so much to know about the import and export business and if you do not know all of the rules and regulations then your business can fail very quickly. One way to ensure that your business succeeds when importing and exporting is to mitigate risks where you can. Today we are going to go over ways you and your business can mitigate risk when importing and exporting.
Pay attention to the details and do not take short cuts. Do this by developing formal import and export policies and standard operating procedures. This is like business 101. Create a customs manual specific to your operation. A document like this will be an overview of your business. You will articulate where you import from and export to. You will state any customs programs you participate in and outline your key international processes. This will ensure that no step is overlooked when doing business. All employees need to have a good understanding of this document.
Be organized and document everything. This is important because Customs can review your previous five years’ worth of import transactions. If there is anything that looks odd or if Customs thinks you are breaking the law then your business is in big trouble. The best way to record keep is to do it electronically through the cloud or outsource it to a trade partner such as a customs broker.
Invest time in and prioritize self-audits. Again, this is to avoid problems with Customs. You need to make sure that your trade processes are current with things like the classification of your goods or parts database, any required customs or government agency documentation, or maybe a NAFTA Certificate of Origin. Self-audit annually at the very least. To be safe it is always recommended to do a mid-year or quarterly review as well.
Doing these things from the get go is the best way to mitigate all risks when it comes to importing and exporting. Working with a customs broker is never a bad idea but if you have a good foundation, a broker is not always necessary. Do the right things up front so your business can survive the tricky import and export industry.
