International Trade Myths
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International trade has many economic benefits. Free trade allows consumers to buy more, better-quality products at significantly lower costs. With free trade we get economic growth, enhanced efficiency, and increased innovation. These are some of the realities that come with international free trade. What we need to be warry of are the myths that are often associated with international trade.
First, more exports do not necessarily mean more wealth. It is actually the total level of trade that reflects economic wealth. This means total imports and total exports. More exports increase wealth only because they allow us to buy more imports and give non-Americans greater incentives to invest into the economy. If we only export and restrict imports it leaves our economy worse off.
Secondly, many think that free trade means domestic jobs go overseas. False. What really happens depends on the industry. For example, with free trade jobs in highly inefficient industries might be reduced. On the flip side, it frees up resources to create jobs in highly efficient industries, boosting overall wages and improving living standards. Protectionism might “save” some jobs but that comes with a cost. The cost of opportunities and input costs will swell for industries downstream.
Lastly, this sounds counterintuitive but trade deficits are good for us. This is because a trade deficit is usually a signal that global investors are confident in our economic future. Our trade deficit might be larger than it would otherwise be if a trading partner chooses to keep the price of its currency artificially low, but this practice harms the trading partner, not us.
While international trade can have some downsides, overall, there are so many benefits and we have to weed out the misconceptions that are often discussed with this topic. Bust these myths and know the benefits of international trade!
Gas Prices Up & Down
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During the past two years, we have seen gas prices skyrocket. The cost of gas spiked significantly, reaching highs that this country has never seen before. But if you have been paying attention, these past 3 months have been different. According to NBC News, for 98 consecutive days this summer, American drivers experienced declining gas prices thanks in part to a slower worldwide demand for oil. Unfortunately, we are beginning to see prices go back up.
In late September a cut in oil production signaled by the OPEC+ group sent global crude prices higher, pushing prices back up at the pump here in the United States. Major oil producing countries including Saudi Arabia and Russia announced that they are cutting oil production by 2 million barrels per day. According to AAA, the national average for a gallon of gas climbed to $3.92 on October 10th.
Many parts of the United States will see slight increases but Californians and regions surrounding the Great Lakes are in for some super high prices. Patrick De Haan, Head of Petroleum Analysis at GasBuddy says that for the past few weeks, an onslaught of refinery issues both in the west coast and the Great Lakes is the reason why gas prices have tremendously increased. De Haan says refinery issues include undergoing seasonal maintenance along with minor issues that, when put together, greatly limits the ability for refineries to produce gas. It is the combination of planned maintenance, but more so the unexpected outage that have caused prices to soar in some regions. De Haan said that he expects prices to rise as much as $0.30 from their September lows, which would put them at around $4.00 a gallon as an average across the country.
The summer months were good for us as gas prices finally started to come down from the COVID-19 pandemic but unfortunately we are going to see prices surge again until at least the end of the year.
Russia’s Financial Crisis
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If you want to run your own business or if you have just launched your start up this article is for you. Today we are going to go over the best ways to take your young business and make it profitable as soon as possible. What does becoming profitable mean? In short, it means that your business generates a profit rather than a loss. A profit occurs when you generate more income than you spend. So, what are the best business practices to accomplish that?
First, you’ll have to come up with your product or service. When coming up with your product or service, the best thing to choose is something that you have an interest in. You need to center your business around products or services that you truly enjoy learning about. Stay within your area of interest and understanding or ‘circle of competence’. Remember, if you can sell someone of your why you can sell any product or service.
Next, you’ll need to have a business map or strategy. You won’t be able to get where you’re going if you don’t have an outlined path. How do you get from point A to point B? This first step incorporates different scenarios so that you’re ready for any problems or conflicts that might arise on your route. Your map should include a plan for how to make a profit. What can you do today, this week, this month to start improving your business’ quality of profit ratio? That is the point of a business map.
Lastly, you’ll need to understand the financials through and through. If you want to run your own business or startup you, not someone you hire, need to understand every financial part of the business. Running a business and staying in business relies on being profitable. If you don’t know your numbers you are just setting up yourself for failure. You wouldn’t fly a plane without knowing how to read the gauges, and the same applies to business. If you can’t tell if you’re making or losing money, you don’t understand the controls. So, understand the financials so you don’t crash your business.
If you can find a product or service that drives and interests you, follow a strong business map, and understand all of the financials of your business becoming profitable won’t be an issue. Do these things and your business will be in good hands
Becoming Profitable
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If you want to run your own business or if you have just launched your start up this article is for you. Today we are going to go over the best ways to take your young business and make it profitable as soon as possible. What does becoming profitable mean? In short, it means that your business generates a profit rather than a loss. A profit occurs when you generate more income than you spend. So, what are the best business practices to accomplish that?
First, you’ll have to come up with your product or service. When coming up with your product or service, the best thing to choose is something that you have an interest in. You need to center your business around products or services that you truly enjoy learning about. Stay within your area of interest and understanding or ‘circle of competence’. Remember, if you can sell someone of your why you can sell any product or service.
Next, you’ll need to have a business map or strategy. You won’t be able to get where you’re going if you don’t have an outlined path. How do you get from point A to point B? This first step incorporates different scenarios so that you’re ready for any problems or conflicts that might arise on your route. Your map should include a plan for how to make a profit. What can you do today, this week, this month to start improving your business’ quality of profit ratio? That is the point of a business map.
Lastly, you’ll need to understand the financials through and through. If you want to run your own business or startup you, not someone you hire, need to understand every financial part of the business. Running a business and staying in business relies on being profitable. If you don’t know your numbers you are just setting up yourself for failure. You wouldn’t fly a plane without knowing how to read the gauges, and the same applies to business. If you can’t tell if you’re making or losing money, you don’t understand the controls. So, understand the financials so you don’t crash your business.
If you can find a product or service that drives and interests you, follow a strong business map, and understand all of the financials of your business becoming profitable won’t be an issue. Do these things and your business will be in good hands
Assessing Your Competitive Advantage
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If you’re looking to start your own business, importing and/or exporting might be an option for you. However, before you jump the gun one thing you need to determine is what makes your business better than the competition. What is your competitive advantage? Today we are going to give you tips on how to find your competitive advantage and how to use it properly.
One of the most impactful things you can do is talk to your customers. Both your existing customers and prospective customers. Customer feedback offers a wealth of information that will help you understand your current positioning in the market and industry as a whole. They will give you insights into potential new offerings and could very well give you the answer you’re looking for: what your competitive advantage should be.
Another thing you can do is perform a competitive audit. Marketing audits track the marketing tactics your competitors use. Does your competitor publish content marketing? Do they use Google Adwords? What social media channels do they post to and are they affective? Take tactics that work and implement them into your business. The ones that don’t work, make them better and use them to your advantage.
Lastly, once you’ve found your competitive advantage, don’t make it a secret! Communicate your advantage to your customers and make sure it is backed by proven facts. This is called a value proposition and will become the defining statement of your company. The goal is to not only hook your customers on your value proposition but to also engage in a “tell me more” conversation.
Nailing your competitive advantage is only one of the critical elements in a strategic business plan but one of the most important. The competitive advantage is what can make or break your business so invest time in figuring out what the right answer is before doing anything else.
Navigating Duty Drawback
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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.
Importing and exporting between nations is complex. It is very time-consuming and requires expertise to ensure your business maintains profit margins, complies with international regulations, and fulfills customer demands efficiently. As you may know, there are costs of customs duties. What you may not know is how to navigate what is known as duty drawback. Duty drawback is an opportunity for reimbursement on customs duties and taxes. Today we are going to go over a few of the best things you can do to navigate and maximize your duty drawback.
There are many forms that will need to be filled out to start the duty drawback process. A few examples include proof of duties paid, an entry summary, the proof of import, and the proof of export. Forms such as these can stack up and often get lost. The best thing you can do is get organized and stay organized. Maintaining organized and complete records is essential to getting your money back. If you want to apply for duty drawback and maximize the amount you get, make record-keeping your number one priority.
Another thing you should know is that legally, only the exporting company of record is entitled to receive the drawback. As an exporter, you can endorse the drawback rights back to the manufacturer if you are two separate entities.
Lastly, do not bank on getting your drawback right away. Once your drawback claim is under CBP review, it can take several years before everything is complete. You can receive money faster by getting pre-approval from the CBP through the accelerated payment program and this will allow you to get your money back in as little as a few weeks but just remember that duty drawback is not a process with a quick turnaround time.
There is so much to know about duty drawback that it can be tough to navigate. Use these tips to help get you started and if you have any more questions please reach out to the experts here at Duty Calc. We are here to help.
China Trade Policy
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President Biden took office in January and has yet to show any real progress in the trade war with China. Many United States companies want the Biden Administration to drop tariffs on Chinese goods and provide clarity about the current relationship with China. The relationship between the United States and China is still hurting from the last administration and companies are looking for President Biden to fix it as it has been nine months since he took office.
A New York Times article by Thomas Kaplan and Alan Rappeport reminds us that in June, Biden issued an executive order adding more Chinese companies to a prohibition on American investments in Chinese firms that have links to the country’s military or that sell surveillance technology used to repress dissent or religious minorities. In July, Biden expanded the list of Chinese officials under sanctions by the United States for their role in undermining Hong Kong’s democratic institutions. That being said President Biden and his top advisers have yet to elucidate how they view economic relations with Beijing, saying they will make the administration’s approach known once a broad review of China trade policy concludes.
The problem with this is that businesses do not want to wait around. The United States’ trade relationship with China is one of the largest in the world, economically, and companies are getting impatient. Businesses have been waiting for Biden to change course from Trump’s trade policies and are losing money with tariffs in place. Businesses are being forced to borrow more from banks and having to pass along costs of import duties to their customers. The impact these tariffs have are causing major financial hardships across the entire business supply chain and Biden is in the driver’s seat and needs to make some adjustments.
The trade war did not work and as promised, Biden needs to take action to help companies that are struggling. For more information on the trade war with China stay updated here on our monthly blog.
Import and Export Job Opportunities
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There is so much opportunity in the import and export industry. According to the U.S. Department of Commerce, imports account for about $1.2 trillion in goods while American companies export about $772 billion worth of goods to over one hundred countries overseas. With that said, that means that there are plenty of job opportunities in this industry. The demand is there and is not looking like it is going to slow down. Today we are going to look at three job opportunities within the import and export industry that you might want to consider!
Consider becoming a product sourcing agent. A product sourcing agent conveniently plugs into the export value chain. It requires little financial investment to start and does not require previous experience in the field to get started. This job entails constantly making contact and maintaining relationships with exporters. You will deal with farmers, local buying agents, and commodity merchants.
Another area you can consider is becoming an import and export broker. A trade agent or customs broker is someone who sends and receives goods to and from different countries. You will work with both importers and exporters by helping them prepare necessary documents for moving their products. This job requires working with clients and establishing connections in foreign companies.
If you are specialized in a certain industry, you can go overseas and ask to be a manufacturer representative. You will have the edge because you are the expert in the industry or a certain market. Foreign companies are constantly looking for experts to market their product in countries with a lot of potential opportunity. This might require a lot of travel and regional work but it is a job that is rewarding and fun at the same time.
If the import and export industry is one that interests you consider these job opportunities as there is high demand for workers during this time!
For more information on the import and export industry please reach out to us here at Duty Calc.
Strong June Long Beach
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The Port of Long Beach is the second-busiest container port in the United States and it is a major gateway for US-Asian trade. It was ranked as the number one container port in the Western Hemisphere (2000-2020) and handled 9.2 million twenty-foot equivalent units (TEUs) in 2020. However, during the pandemic we saw the Port of Long Beach back up and slow down significantly. Now that the country has opened back up we are seeing that consumers are warming back up in terms of spending. Just in time for summertime recreation and entertainment.
According to DC Velocity cargo volume through the Port of Long Beach rose 20% year-over-year in June. As mentioned before this is due to the strong and increasing e-commerce activity. The port moved 724,297 TEUs during the month of June, with imports rising nearly 19% and exports relatively flat. Empty containers moved through the port jumped 36% to 250,249 TEUs.
Experts anticipate that this busy summer will drive much of the cargo movement through the rest of this year. Long Beach Harbor Commission President Frank Colonna said, “We’re optimistic that this is shaping up to be one of our business years on record as we continue to overcome the challenges related to COVID-19. We will continue to collaborate with our waterfront workers and industry partners to move cargo quickly and efficiently through the supply chain during this time of ongoing economic recovery.”
If there is a lot of activity going on at the Port of Long Beach that is a good sign for our economy. If the port is doing well the economy is doing well. Hopefully, this rising activity and increased movement at the ports continues as the summer progresses.
For more information on the import and export industry stay updated here on our monthly blog!
Importing and Exporting Done Right: Part 2
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A couple of months ago we outlined some helpful tips on how to import and export the right way. Today we are going to continue that conversation by giving you three more tips. Let us get started!
Having the right logistics strategy and even making changes can yield savings on tariffs. For example, Donald Hoffman who is the president of Harmony Logistics Group in Oakdale, New York, and chairman of the Long Island Import Export Association (LIIEA) once helped a company that used to move product from Morocco to France for repackaging, and then shipped it to the U.S. This logistics move helped save the company a lot of money because they took advantage of the Morocco Free Trade Agreement. This agreement allowed the company to direct-ship their product from Morocco and come in duty-free. This logistics strategy seemed like a big move at the time but ended up helping the company save a good amount of money.
In addition to this, creating a formal operation run by an expert is crucial to having success whether you are an importer or exporter. You must develop a formal program to manage functions, with written policies and processes. Ideally, a company that imports or exports significant volumes will put a staff member in charge of meeting all applicable tax and regulatory obligations, even when the company also uses a customs broker or other provider. The last thing you want is to lose money because a product was misclassified, someone failed to file a declaration, or because a product was exported to a person on the U.S. government’s denied parties list. Put someone in charge of the operation to avoid such problems.
The third thing you can do to put yourself in the best position in this industry is to understand requirements on both sides of the border. There are different regulations in terms of time frames, hours of service, and ways that you can load freight into certain types of equipment. For example, if you are exporting to Mexico, you will need a government-authorized trading partner south of the border. Not every company in Mexico can legally import cargo. Similarly, if you are exporting to Mexico from the U.S. you must be carful about where in Mexico you plan to ship. This is because big cities might have the industrial parks with sufficient infrastructure to receive all kinds of shipments. However, some less-developed areas, tractor-trailers sometimes require special permits. If you understand rules on both sides of the border you will be fine. It is just a matter of doing your homework.
Use these tips to help you nail importing and exporting. It can be a hard and daunting task to get everything in place but if you do it right you can have great success. For more information on importing and exporting stay updated here on our monthly blog.
