Navigating the New Chinese Import Tariffs

By now there’s a good chance you’ve seen the news that a fresh round of import tariffs have been announced by the U.S. Administration. The Chinese have responded in kind. While Flexport believes that global trade is absolutely essential to a free and prosperous society, our immediate focus in the coming weeks will be on the impact to our clients. We also believe these algorithmically chosen new taxes–which were “drafted to achieve the lowest consumer impact”–are navigable by a resilient supply chain industry.

If you need a quick refresher: The Office of the United States Trade Representative (USTR) has published the list of about 1300 harmonized tariff codes (HTS) of items imported from China that may be subject to 25% additional tariffs levied on imported goods (duties) under the Section 301 process.

Impact Analysis

The proposal to apply 25% additional tariffs on the 1300 product categories has real-world implications for many businesses and their employees. All-told, if demand stays the same, the total value of these duties for Flexport clients will equal 2.6% of Flexport’s yearly commercial value of shipped goods. Looking at proprietary data, had these same tariffs been in place in 2017, it could have cost 173 of their clients $13,641,334 in additional customs duties. Some clients will see the majority (or entirety) of their supply chains affected.

These tariffs affect a wide range of industries and commodity types. The harmonized tariff codes impacted include pharmaceutical and chemical products, high-tech machinery, and even furniture.

What Businesses Can Do

There’s a public review and comment process, and Flexport strongly encourages all business owners and interested parties to file comments per the instructions in the official notice. The comment period ends on May 11, 2018, after which the USTR office will hold a public hearing on May 15, 2018, in Washington DC. Rebuttals are due post hearing by May 22, 2018.

Recommendations for Affected Businesses:

1. Review the list for HTS that you import. Search for your own HTS code to see how much volume is actually imported into the US, and potentially spot other countries that export the same goods.
2. File comments of how this will negatively impact your business by May 11, 2018.
3. Estimate the financial impact to your business and think now about how you want to proceed:

• Can you absorb the increase in duties or will you pass these fees along to your buyers?
• Will you change what you import?
• Can you source these same items from suppliers not in China?
• Consider doing fulfillment at origin, so that your products can be cleared through customs individually already consigned to the end consumer, which if the goods are under $800 per parcel, will exempt them from Customs duties altogether.