COVID-19 Impact on Imports and Exports
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What is DrawbackContact usThe COVID-19 pandemic has no doubt affected both U.S. imports and U.S. exports significantly. Because the U.S. imports more than they export, U.S. imports have overall gone down more in U.S. dollars than exports. That being said both sides have seen drastic changes because of the COVID-19 pandemic. For example, imports of crude oil have decreased by ~40% since the beginning of the COVID-19 pandemic. This makes sense simply because people are driving a lot less. This led to a price decrease and we have seen that oil prices have been down dramatically as of recent. Also, things like cell phone and television imports are down. We have seen that on average people are holding off on purchasing these expensive technology devices. This might be due to lack of income or simply the fear of going out to retail stores. And although these industries have seen a decrease, some industries have seen a drastic increase. Medical devices and equipment for example. U.S. imports of medical equipment are holding up and imports of pharmaceuticals are up ~15%. We are seeing that this pandemic has created opportunities for some industries yet created serious problems for others. On the U.S. export side of things two of the biggest exports, aircraft and automobile parts, have seen a drastic drop of 30-40%. But like the scenario with crude oil, it makes sense. Airlines all over the world are cutting back their expansion plans. People are holding their money tight and pushing back those big purchases for things like autos. On the other hand, industries like semiconductors do not seem to be suffering as much. U.S. semiconductor exports increased by 12% since the beginning of the pandemic. This partly reflects that Asia is recovering quickly from the recession. So, though exports have been down overall in the U.S. some industries are seeing a slight surge. Overall, the import and export business in the U.S. is hurting. Most industries are suffering yet there are some that are benefiting. You can expect that if the COVID-19 cases in the U.S continue to rise these import and export trends will continue. It will not be until a vaccine is safely tested and distributed or case numbers decrease that we see a change in the import and export business.
Importing from China
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Many companies within the U.S. import goods from China. Last year China’s trade surplus reached $422 billion U.S. dollars. Why? Well, China is a low-cost labor country, their raw materials cost about 1/10th of U.S. raw materials, and the Chinese are simply the best designers. Their vision of product design across industries is second to none. That being said, it is not hard to see why many companies choose to import from China. If you run a company that is looking to import goods from China, well, that is not a bad idea at all. But, you should consider doing a few things.
Define your product’s quality benchmark. In order to do this, you and your team need to work on three design aspects. First work on your ideal design and specifications. Then, finalize the flow of work to be carried out on raw materials. Lastly, decide on a benchmark. Know what your ideal quality standards are and your acceptable levels of flaws.
Next, you need to communicate quality standards to the supplier. Define things like protocols and timing. Communicate in person as much as possible. Form that relationship and do not get comfortable doing business only online.
You should also ensure that your product’s quality criteria is fulfilled by the supplier. In other words, compare what they give you to the benchmark that your company has created. A good way to ensure that your product is up to your standards is to implement pre-production audits, in-progress audits, and post-production audits. In these audits, you can sample test and make sure everything is on track.
Lastly, delegate a responsible authority for conducting those quality control audits. It can be you, it can be someone on your team, it can be a hired on experienced professional, or it can be through a contract with a third party. Whichever option you choose, make sure someone is in charge of checking the quality of your products through audits.
Importing from China can have various benefits but highly consider doing these things when doing business with them. You will be in a much better position to succeed if you follow these suggestions.
For more information on importing and exporting stay updated here on our monthly blog.
Foreign Goods Safe? Risky?
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The coronavirus has caused a lot of uncertainty this year across the globe. What is safe? Who is safe? What can we do? What can’t we do? So many questions. So little answers. Because of the uncertainty, consumers are questioning their every move including where they choose to buy from and which goods they choose to buy. CNBC reported that in April the market research firm, Kantar, surveyed 45,000 people across 17 counties. In the study, they found that a third of global consumers are now worried that products imported from outside countries is a safety risk. Countries perceived China and the U.S. as high risk with 47% of them saying that they were far less in favor of buying American and Chinese products. An executive from Kanter also said that people were beginning to favor locally-produced goods even though the price point was higher.
The question is, is there really a risk in foreign goods? According to the CDC and the British government, the risk is low. The CDC says that the virus can survive for a short period of time on some surfaces but is mostly spread via respiratory droplets. It is unlikely that consumers contract the virus from international mail, products, or packaging. Similarly, the British government says that the risk of contraction from imported food and packaging from affected countries is low. They justify their position by arguing that their laws require all exporters to follow the proper controls during the packing and shipping process to ensure good hygiene is met. So, if you are concerned about the safety of foreign goods the CDC and the British government claim that you are safe. The best way to avoid the virus is to wear a mask, limit your time around others, and stay 6 feet away from everybody. For more information on the import and export business, stay updated here on our monthly blog.
Varying Cargo Volumes
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The COVID-19 pandemic has caused havoc across the globe. Importers and exporters are scrambling as some industries are booming while others are really struggling. It has been a mixed bag in terms of cargo volumes received last month. In May of 2020 the Port of Oakland and the Port of Los Angeles reported significant drops in cargo volumes while the Port of Long Beach reported significant growth. Oakland reported this month that the loaded box volume is projected to continue to decline as it did last month. Los Angeles moved 29.8% less in May than it did a year ago. To date, overall cargo volumes have decreased 18.7% compared to last year’s numbers. Keep in mind that May 2019 set a pretty high bar as it was the busiest month in the Port of Los Angeles’ 114-year history. The decline seems really drastic for the month of May but this is in large part because of the great month they had a year ago. In turn, the Port of Long Beach has received a shift of some services from the Port of Los Angeles and they have seen a 10% increase in their normal business traffic. The Port of Long Beach moved 628,205 TEUs last month which is a 9.5% increase from May 2019. Imports grew 7.6% to 312,590 TEUs while exports increased 11.6% to 134,556 TEUs. Though the Port of Long Beach has seen impactful growth Los Angeles’ Port Executive Director Gene Seroka says that, “any notion of economic recovery in the shipping industry is a little bit too early to discuss.” Overall, this year the cargo statistics show a 7.8% decrease compared to the same time period just a year ago. Until we see consistent growth in the majority of Ports, we cannot assume that the U.S. economy is beginning to recover.
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.