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.
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.
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.
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.
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.
Reinstated Tariff on Aluminum
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In March of 2018, former President Donald Trump imposed a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports from a variety of countries, including the United Arab Emirates (UAE). On his final day in office Trump lifted the aluminum tariff. However, that did not last long as on February 1, current President Joe Biden reinstated the 10 percent aluminum tariff on imports from the UAE. As predicted by experts that covered the Biden administration this reinstatement is no surprise.
The reinstatement suggests that it is unlikely that the Biden administration will remove that aluminum tariffs imposed by the Trump administration. In a statement regarding the issue Biden said, “In my view, the available evidence indicates that imports from the UAE may still displace domestic production, and thereby threaten to impair our national security.” Union workers applauded Bidens move saying that Trump’s plan to lift tariffs on imports from the UAE would undermine the effectiveness of the program and essentially exempt the vast majority of aluminum imports. That being said, not everybody is happy with Biden’s reinstatement. Sure, union workers are all for it but manufacturers across the country are left disappointed.
These tariffs have sparked an outcry from downstream American industries that use steel and aluminum to make products like cars, boats, recreational vehicles, and cans. With the new tariff in place, it will increase costs for these manufacturers and narrow their profit margins making it even more difficult for their products to compete on the global market. The reinstated tariff on aluminum is one of Biden’s first big moves as the new president of the United States. What Biden will do going forward regarding imports and exports as a whole is not particularly clear but he has indicated that things will not change all that much. For the latest updates on import and export news stay updated 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.
