Importing and Exporting Done Right
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The import and export industry is huge. There is so much to learn and understand especially if you are new. If you want to get into this booming industry but do not know where to start, you are in luck. Today we are going to give you some helpful tips on how to import and export the right way.
The first thing you need to do is get into the habit of staying updated on industry news. Monitor rule, tariff, and status changes. For example, keep an eye on overseas suppliers in case they make changes that affect your tariff obligations. Similarly, watch for tariffs themselves, in government regulations, and in the status of customers. A good example of this is what happened when the U.K. officially left the EU at the end of last year. This move changed the industry drastically. So, stay updated and keep your eye on international news because one single move could influence the entire industry.
The second thing you need to learn is how to leverage programs that reduce tariffs. Gaining a tariff advantage is not an easy task as it requires initial vetting and having appropriate controls in place with the foreign supplier. However, doing so could save you a lot of money. For example, even when a product is made in a country with good tariff opportunities, it might not qualify if the manufacturer imported some of its components. Also, a product that meets the bar for tariff advantages today might not qualify tomorrow if your supplier starts to buy materials in another country. Be careful and be proactive in leveraging programs that help you stay away from those high-tariff loopholes.
Lastly, pay attention to design. A products design can influence tariff obligations just as much as its origin. For example, whether a jacket is lined or not lined, or has zippers or stitches, could impact the tariff. Depending on the case, it could cost less in tariffs to import components and assemble them in the U.S. than to import the finished product. Think strategically when it comes to design and you could save your company loads of money.
There is so much to know about the import and export business. These three tips are only the tip of the iceberg. For more tips and information stay updated here on our monthly blog.
Duty Drawback 101
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If you are new to the import and export business then it can be hard to understand what duty drawback is. Duty drawback is similar to how you are refunded sales tax when you return an item to a store. You essentially claim a duty refund when you export an item that was previously imported. It is a refund of duties, fees and taxes paid on goods imported into the U.S. that are subsequently exported from the U.S. With that said there are three major types of drawback. Unused merchandise drawback, manufacturing drawback, and rejected merchandise drawback.
Unused merchandise duty drawback is when you import something and then export it in the same, unused condition. For example, you import 50 generators paying Customs duties of $500 or $10 per generator. You come to realize that you only need 30 generators and you want to export the remaining 20 to a foreign customer. The unused merchandise can then be exported and you will qualify for a refund for the duty you originally paid.
Manufacturing drawback is slightly different. This type of drawback applies when you import an item that is then manufactured into a different item. For example, if you imported bicycle tires and export finished bicycles, then you can get the duty you paid for the bicycle tires refunded when you export the finished product.
Rejected merchandise drawback is when imported merchandise does not conform to sample or specifications, shipped without consent, or determined to be defective at the time of import. For example, if one of those generators or a few of those bicycle tires arrive in bad condition or are simply the wrong model that you ordered then you qualify for rejected merchandise drawback. You qualify to get a duty refund on all of the defective products.
Understanding duty drawback can be challenging especially if you are new to the import and export industry. If you have any questions please do not hesitate to reach out to us here at DutyCalc.
Biden and U.S. Trade Policy
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With inauguration right around the corner there are expected to be changes in the White House. Some very drastic changes, some very minor. One of the minor changes, at least for now, will be U.S. trade policy. President-elect Joe Biden is expected to take a more measured and multilateral approach to trade policy than President Trump. However, experts say that he is unlikely to make significant short-term changes to the tariffs and other restrictions imposed by President Trump. Though they seem to be each other’s worst enemy and cannot seem to agree on anything during this election season, Republicans and Democrats do agree on the need for the U.S. to take a tougher line on trade with China. President-elect Joe Biden probably will not levy any new tariffs on China but on the other hand he will likely maintain those already in place until a better solution to the problems the tariffs were designed to address become available. President-elect Joe Biden does intend to enlist the help of major trading partners to resolve longstanding trade grievances with China. With that said, the White House is likely to be much more proactive in advancing efforts to secure reforms at the WTO that will enable that body to more effectively address not only China but also various other trade issues. Another big reason why President-elect Joe Biden is not expected to make that many changes to U.S. trade policy is because he is focused on fixing this country. He is focused on domestic policy. He is focusing on his plan for economic recovery. He is focusing on alleviating the pandemic. He is focusing on how to bring America back together. Sure, the U.S. trade policy subject should not be slept on but the priority right now is his country. As mentioned before, with inauguration around the corner many things are going to change. For more information on the latest news regarding tariffs stay tuned here on our monthly blog.
Insurance Types for Your Import Export Business
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To run your import/export business successfully you need to make sure various parts of your business are insured. This includes employees, export credit risk insurance, and cargo insurance. Today we will be breaking down what each of these three types of insurances entail for your import/export business. To begin, you need to care for your employees. Most insurance plans cover illnesses or injuries that your employee might incur on the job. One thing to be aware of is that workers’ compensation insurance laws vary among states so you should check with your insurance agent for details in your area. Another thing to be aware of is that employees that work from home might have different policies. For example, if your employee gets injured in their home office, your homeowners’ insurance may refuse to pay on the grounds that it’s actually a workers’ comp case. You will also need export credit risk insurance. You can purchase several types of export credit risk insurances that are designed specifically for the new exporter and small to mid-sized enterprises. These policies protect you in the event that your foreign buyer decides not to pay you for either commercial or political reasons. Cargo insurance is the last kind of insurance that you will need. The cost of insurance usually runs about 1 percent of the insured value. With cargo insurance you will get peace of mind and, in the event of a cargo misadventure, your insurance coverage should include enough to repay you for not only lost or damaged products but for your extra time and trouble and those lost profits. Choosing to insure your employees, export credit risk, and your cargo is something that all import and export businesses should do. Your business will survive when the unthinkable happens and be able to handle any financial bumps in the road. For more information on import/export businesses stay updated here on our monthly blog.
Biden Administration & China
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With the Biden administration taking over the White House this election it is apparent that many things will be changing. One thing, however, that is not projected to change that much is the trade tension between the U.S. and China. Earlier this year Biden wrote, “The United States does need to get tough with China” in a “Foreign Affairs” article. He went on to say, “If China has its way, it will keep robbing the United States and American companies of their technology and intellectual property. It will also keep using subsidies to give its state-owned enterprises an unfair advantage – and a leg up on dominating the technologies and industries of the future.” With that said China is hopeful that because there is new blood in the White House, this new Biden administration will welcome new negotiations. China’s Vice Foreign Minister Le Yucheng believes that the Biden administration would “meet China halfway” according to state media. Xu Hongcai, deputy director of the Economics Policy Commission at the China Association of Policy Science believes that “Biden is reasonable” and “Biden, Obama, they understand the basics of holding a dialogue.” In Biden’s acceptance speech the ongoing trade war with China was absent. Since Biden’s acceptance speech he has still yet to bring up the issue. How Biden will actually handle the intense trade war that the Trump administration has left him, is still an unknown. What we do know is that Biden will have to prove that he can work more effectively with U.S. allies in order to win the heart and soul of the nation that is now in his hands. More news and updates will be coming up quickly as the White House transition continues. For information on the ongoing trade war between the U.S. and China, please stay updated here on our monthly blog or reach out to us here at DutyCalc.
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.
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.
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.
