On
September 24, 2018, the Office of the United States Trade Representative (USTR)
increased the tariff by 10% on thousands of HTS subheadings as a result of the
Section 301 Sanctions. To add insult to injury, the tariff rate will increase
another 15% on January 2, 2019 for a total increase of 25%. Although 286
subheadings were eliminated from the original projected list of 6,031
subheadings, the final list still contains 5,745 which comprises mostly of
consumer products purchased and used every day.
This
increase is affecting every aspect of the supply chain – starting with the
Chinese factories, international freight forwarders, customs brokers,
importers, and consumers. Increased duty means importers may need to increase
their prices or accept smaller profit margins on what are already considered tight.
Increased prices may equal fewer sales which can result in fewer orders placed
with the factory which triggers a decrease in international shipments and so on
and so forth.
The Harmonized Tariff Schedule of the United States indicates this
tariff increase as “Temporary Legislation” which simply means that it’s not
permanent – at least for now. Hopefully, the U.S. and China will get past this
Trade War which will result in a favorable decision for all. But in the
meantime, what can be done? A couple of solutions come to mind.
China has unequivocally the largest number of factories
manufacturing consumer goods sold in the United States. As I type this article,
I can safely say that, with the exception of a few items on my desk, everything
else was manufactured in China. Even many of the items I have in my home
– furnishings, footwear, and clothing – are made in China. However, every once
in a while, I do find objects that are made elsewhere such as Vietnam,
Malaysia, or Taiwan. This comes as no surprise to me since Western Overseas
moves cargo into the U.S. from many countries including China. There could be a
number of reasons why the importer of my jeans chose to source from Vietnam
instead of China. But what about you? Is it time to start thinking outside the
box and consider sourcing from another country especially in light of the
recent Trade War?
As of today, October 15, 2018, the United States has 14 Free Trade
Agreements with 20 countries including Australia, Chile, South Korea, and Singapore
just to name a few. The U.S. also has a trade preference program called the
Generalized System of Preferences (GSP) which provides opportunities for 120 of
the world’s poorest countries to grow their economies. The largest benefit of
sourcing from one of these countries is the ability to import certain goods
duty-free or at a reduced duty rate. The goods must meet certain qualifications
in order to be eligible and there is an increase in record-keeping involved for
both the factory and importer. However, any increase in manufacturing costs
might still be far less than a 25% duty increase for Chinese made goods.
If you are still on the fence about sourcing outside of China,
consider other ways to import your product. No, I’m not talking about circumventing
the system to avoid paying higher duties. What I’m talking about is making
slight changes to, adding to, or marketing your products which could possibly
categorize your product into a different HTS code.
About the Author:
Your Western Overseas representative can guide you through
different Trade Preference programs including the Free Trade Agreements and GSP
and can offer advice or suggestions on how to most cost effectively import your
goods into the United States. There’s no need to piece-meal your shipping needs
to multiple vendors. Western Overseas is a Customs Broker, Int’l Freight
Forwarder, Domestic trucker, Marine Cargo Insurance agent, a Warehouse and
Distribution Center, and an Amazon FBA Prep/Forwarding Center. We are one of
the very few companies offering full door-to-door service and everything else
in between. If you are looking for a One-stop Shop, the search is over. Feel
free to contact us at: ecommerce@westernoverseas.com.
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