The freight world was thrust into turmoil over President Donald Trump’s 10% tariffs on freight transportation across both the Canadian and Mexican borders and as high as 35% on China and other countries.
It’s 10%, that is, except for auto parts, which got a 25% tariff. And then there are entire industries employing small armies of lobbyists who will formally petition the Trump administrations for exemptions, changes, reductions and other fine-print alterations.
Confusion reigns. As Thomas Barkin, president of the Richmond Federal Reserve, told the New York Times the entire, clumsy tariff procedure is “like driving through zero visibility, pull over and turn on your hazards’ type of fog.”
Businesses, large and small, have put their decision-making “on pause,” at least until the fog lifts. But it is vital that shippers develop a tariff management plan to capitalize on this confusing, unexpected development in world transport and trade.
In a webinar this week organized by Tranzact Technologies, the National Industrial Transportation League (NIT League), the Council for Supply Chain Management Professionals (CSCMP), and the Global Shippers Forum, shippers were encouraged to be flexible and current on the fluid cross-border freight situation.
Experts said don’t be afraid to ask for legal help for your specific tariff situation.
A Thompson Hine law partner, Dan Ujczo, warned there are minefields on all areas. “Be very mindful under U.S. Customs regulations, you are responsible for all sourcing records of where imported goods actually come from,” Ujczo said. “Get some help if you are unsure. It’s a very complicated subject.”
As of press time, U.S. Customs had not released any update on standard tariffs, and any related data.
Ann Warner, who has performed legal work for the NIT League, said the best thing shippers can do is notify your Congressional representatives to tell them how these tariffs are affecting your business.
Holly Pearce, Director, N.A. Logistics + Warehousing for Otis Elevator, said the additional container cost on China vessel lanes might add as much as $1,000 to a one-way journey from the Far East. But there are four lessons on how to handle post-tariff life.
- Understand where your sourcing countries are, add the cost of tariffs to the freight cost and share with your executive teams.
- Understand your customs bond’s limits. If your invoice was $1 million, increase that amount to cover additional transaction fees. “If you have insufficient bond, it’s going to limit your ability to get your freight out of port,” Pearce said.
- Examine expanding into foreign trade zones. These work for goods taken out of bonding facilities, eliminating U.S. duties on foreign-made goods.
- Consider near-shoring. Be aware that is a long-term project that cannot be set up overnight.
“You have to know whether your suppliers and your customers are open to sharing additional costs when extraordinary expenses apply either because of tariffs or other unexpected reason,” Pearce said.
There is also supplier optionality—secondary and tertiary areas of supply in case of higher-than-expected costs. Pearce said that, “In the case of autos, (cost increases) won’t be the original equipment manufacturer. It’s going to come from the middlemen.”
And she added that one of the things to will focus on is this: “With tariffs imminent, what’s your plan?”
As shippers think through what their plans should really look like, industry experts said there are a couple of components that shippers will need for building a quality tariff protection plan.
The first thing cited was that shippers need good data that helps them identify the items and issues that could be affected by the tariffs.
Secondly, savvy shippers have and use good tools and technology to assess the effectiveness of the processes and strategies they are changing in response to the tariff situation. Tools such as Constellation TMS and other data analytics platform, help greatly.
But mostly shippers need money and a plan to cope with the newest wrinkle in the freight transportation sweepstakes.
