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Embracing the South American Ecommerce Marketplace

south american

Embracing the South American Ecommerce Marketplace

Ecommerce is on the rise in South America. Double-digit growth is expected for 2019 with sales of $71.34 billion (USD), tying it with the Middle East and Africa as the world’s second-fastest-growing retail ecommerce market. 

That’s great news for shippers looking to expand their online retail presence in South America.

A diamond in the rough

Online retailers in South America have been struggling for years to overcome several obstacles to success, including extensive customs delays, poor transportation infrastructure, and the lack of end-to-end supply chain visibility. Progress has been made on all three of these “challenges,” but more work is necessary to ensure the region’s continued double-digit growth. 

Within each challenge lies opportunity

While these obstacles may keep a few shippers from expanding into South America, others are viewing the area as a “diamond in the rough” and working diligently to reap the rewards of this truly untapped region. 

Having the right information is the first step to wading through the muck and mire of this complicated ecommerce marketplace:

South America customs vary by country

Red tape and bureaucracy pose the biggest obstacles for importing products into South American countries. In addition to customs taxes, tariffs, and fees, it can take 30+ days for some goods to be cleared through customs, especially in Brazil and Argentina. As a result, inventory builds up, costs rise, and customers wait longer for their products to arrive. In comparison, however, Chilean customs are very similar to the U.S. and allow products to flow through relatively quickly.

As you can tell, customs procedures can differ significantly, making it difficult for shippers to ensure compliance with each region’s unique customs. For a more seamless process, it’s essential shippers work with a customs broker or third party logistics provider (3PL) with local offices in the area. They’ll know the customs standards and understand the paperwork necessary to ensure products are approved for import.

Free trade agreements 

The United States-Chile trade agreement allows all U.S. exports of consumer and industrial products to enter Chile duty free. While still in the works, the United States-Brazil free trade agreement can help facilitate trade and boost investment between the two countries, especially in infrastructure. The United States-Colombia Trade Promotion Agreement eliminates tariffs on 80% of U.S. consumer and industrial imports into Colombia. 

South America infrastructure at port and inland

South America is hobbled by its inadequate infrastructure, and it’s probably not going to change anytime soon. Roads remain the primary means of transportation, but 60% are unpaved, hampering the speed of delivery by truck to inland locations. Improvements are slowly occurring, thanks to increased government funding (but corruption hampers many efforts). It’s worth mentioning that China, the largest trading partner of Brazil, Chile, and Peru, invests heavily in the region, providing more than $140 billion (USD) in loans for infrastructure improvements in the past decade, according to The Business Year.  

While surface transportation remains stagnant, ocean freight shows promise. According to icontainers.com, routes going to and from South America represent 15% of the total number of trade services.

The largest container port in South America is in the city of Santos in Brazil’s Sao Paulo state. Its location provides easy access to the hinterlands via the Serra do Mar mountain range. More than 40% of Brazil’s containers are handled by the Port of Santos as well as nearly 33% of its trade, and 60 % of Brazil’s GDP, according to JOC.com

In 2018, Brazil’s busiest container cargo port handled 4.3 million TEUs, compared with 3.85 million TEUs in 2017. 

For Argentina, Zarate serves as the critical port for roll-on/roll-off (ro-ro) and breakbulk cargo, while Buenos Aires and Rosario serve as the top container ports. Only two countries in South America are landlocked, Paraguay and Bolivia. 

Shippers and ocean carriers using the Port of Santos have been complaining about congestion and labor disputes at the port, and about politicization and time-consuming bureaucracy. That’s why it’s essential that shippers must have the latest information on traffic through these South American ports. Global freight forwarding companies in the area will have the newest information available to help you choose the right port of entry for your freight.

End-to-end supply chain visibility

Most online retailers and carriers understand that the sale is not complete until the product is delivered to the consumer. If merchandise is damaged during transport or arrives much later than promised, it reflects poorly on both parties and undermines consumer trust in ecommerce purchases. 

Lack of adequate infrastructure has forced many online retailers to put logistics on the back burner, focusing on the user experience through purchase. That’s why many products take weeks to arrive at the customer’s door, setting a bad precedent that must change. 

The South America trucking industry is highly fragmented, with providers ranging from owner-operators (about one-third of the industry) to sizable fleet operators and experienced freight forwarders who may not own any trucks at all, according to Tire Business newspaper. 

Final mile, LTL services paramount in South America

Once your product reaches port in South America and makes it through customs, how it gets delivered to the customer’s door can add extensive costs to your supply chain. Less than truckload (LTL) and final mile services are paramount to successfully operating in the region. Especially those carriers that can provide GPS freight tracking capabilities, such as C.H. Robinson’s Navisphere® technology

Final thoughts

Yes, there are obstacles to operating a supply chain in South American countries. Knowing the ins and outs of each country’s unique customs procedure, understanding which South American ports are best for your freight, and being able to track your shipments end-to-end will ensure your success in the region. Shippers who realize the potential of this “diamond in the rough” marketplace should work with a freight forwarder who will be extra focused and diligent in ensuring their freight moves quickly from customs fiscal warehouses to the final destinations. 

Enlist the aid of a global freight forwarding provider, like C.H. Robinson, who offers a global suite of services and has offices in the region that can help navigate any disruption in your supply chain.

Start the discussion with an expert in South America to accelerate your ecommerce trade. 

Goods

Is Your Supply Chain Prepared for Potential U.S. Tariffs on EU Goods?

Transatlantic tariffs came closer to reality in recent months after the United States Trade Representative (USTR) proposed tariffs on a list of products from the European Union (EU). 

Unfortunately, even if you’ve already gone through something similar with goods imported from China, the same strategy may not be effective for the tariffs on EU goods. This is due in large part to the types of proposed commodities from the EU.

The good news is there are things you can do today to adjust your import strategy to maintain compliance while insulating your company from the proposed tariffs.

Up to $25 billion worth of EU goods at stake

The USTR announcements in April and July proposed tariffs targeting up to $25 billion worth of goods. This includes items such as new aircraft and aircraft parts, foods ranging from seafood and meat to cheese and pasta, wine and whiskey, and even ceramics and cleaning chemicals. 

To date, the USTR has only provided a preliminary commodity list for the proposed U.S. tariffs on EU goods. No percentages have been announced, leaving many to wonder if the tariffs will be manageable—in the 5-10% range—or more substantial, like the 25% tariffs applied to China imports. 

On top of the tariffs, when the French Senate announced a 3% tax on revenue from digital services earned in France, President Trump threatened a counter-tax on French wine. But it’s unclear if this tax will come to fruition or fizzle out—especially since the USTR’s tariff list already includes many types of wine. 

5 key questions to insulate your supply chain

Looking for the best way to prepare your business from the potential tariff increases? Answering these key questions may help you adapt and insulate your company. 

-Do you have a plan to cover the costs? 

You may not be able to avoid paying the tariffs, but there are various strategies you may consider to help cover their costs. 

While not ideal, you could increase prices to end consumers. It may not be feasible to recover the entire cost of an added tariff, but you can at least offset a small portion of the tariff this way.

You can also adjust the cost of the goods with suppliers and manufacturers to cover a portion of the tariff. Just remember: pricing changes still need to meet the valuation regulations with U.S. Customs and Border Protection (CBP). 

-Will you need to increase your customs bond? 

The smallest customs bond an importer can hold is $50,000. That used to be enough for many importers to cover generally 10% of the duties and taxes you expect to pay CBP. 

Unfortunately, as many importers from China are learning, a 25% tariff on products can quickly exceed your bond amount. And bond insufficiency can shut down all your imports while resulting in delays and added expenses. 

To help avoid bond insufficiency, consider any increased duty amounts in advance of your next bond renewal period. And don’t wait to do this until the last minute, because raising your customs bond with your surety company can take up to four weeks. 

-Do you re-export goods brought into the U.S.? 

Duty drawback programs can’t be used by every importer. But if you can take advantage of them, they can result in big savings for your company.

In fact, you can get back 99% of certain import duties, taxes, and fees on imported goods that you re-export out of the U.S. Just be aware that you still need to pay the duties up front. And you might need to wait up to two years to get your refund. 

-Are your product classifications current and accurate?

With potential tariffs looming, consider reviewing your product classifications and make sure they’re accurate. If you find an issue, discuss it with your broker or customs counsel to discuss how you can properly rectify the issue, and avoid penalties from doing it incorrectly.

And while we’re on the topic of product classifications, never change them to evade tariffs. CBP will be on the lookout for this kind of activity, and the penalties for noncompliance can be steep.

-Do you have the support you need?

Changing your customs brokers may not sound appealing, but ensuring they provide all the services you need to stay compliant should be your top priority when working with them.

Your provider should help make sure you pay the appropriate duty rates for your products. And they should have people and services available globally to support your freight wherever it is located throughout the world. 

Also, consider simplifying your support by working with one provider that offers not only customs brokerage and trade compliance services but also global ocean and air freight logistics services. 

If you only employ one strategy…

Discuss your import strategy with your customs attorney or customs compliance expert. Bringing in specialized expertise is the most effective way to analyze how these tariffs could affect your products, your supply chain, and your business. 

If you don’t yet have a customs broker who can meet all your needs in today’s changing environment, consider C.H. Robinson’s customs compliance services. With over 100 licensed customs brokers in North America, and a Trusted Advisor® approach, our experts are ready to help.

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Ben Bidwell serves as the Director of U.S. Customs at  C.H. Robinson

lean supply chain

LEAN OR AGILE? FOR A COMPETITIVE ADVANTAGE IN THE SUPPLY CHAIN, THE ANSWER IS BOTH

Maintaining competitive advantage in the global logistics playing field is no easy task. There are hundreds of companies striving to earn the loyalty and business of global and domestic clients and the competition is becoming more intense with each passing day. Thanks to technology, companies are now able to take a step back and truly evaluate what structures make the most sense to meet customer demands in unpredictable markets.

Technology offering features such as predictive analytics are enabling logistics leaders to employ proactive measures for even the most complex of disruptions. However, readily available technology does not prove successful without careful consideration of the right platform and what supply chain management structure will meet the needs for specific company goals and customer demands. Company A might require a lean approach, while company B requires characteristics of both lean and agile supply chain structures. Before diving into which one benefits the most, it’s important to understand the differences between the two. 

An agile supply chain structure focuses heavily on layered benefits including visibility, predictability, and speed in terms of reaction times. Lean supply chain focuses on the most cost-effective options, ultimately reducing costs and recovering what’s been spent. Both are extremely important and attainable, but the trick is finding the right balance between the two while recruiting the best partners fit to support meeting the needs of customers. This element is critical in maintaining competitive advantage and ultimately makes or breaks customer relationships. 

“Everyone is striving to find that balance between having an agile supply chain and a lean supply chain because logistics and transportation costs fall to the bottom line,” explains Matt Castle, vice president, Global Forwarding Products and Services at C.H. Robinson. “These costs need to be recovered at some point in time, regardless of what business you’re in. There’s always going to be a focus on ensuring a lean supply chain in terms of cost and the economy, as well as how to find that balance of also maintaining flexibility based on the needs of the business. Having that agility can be a major differentiator in delivering on customer expectations.”

Castle adds: “Another question to think about is how to approach diversification in your supplier base. There can obviously be restraints based on a particular importer or exporter in terms of where they’re sourcing or buying product and availability, but I recommend ensuring you have an outlet from a secondary supplier. It’s worth the front-end legwork from a planning perspective to ensure you have a multitude of choices.”

The advantages of agile supply chain go far beyond mastering efficiencies or recovering costs and requires taking a holistic look at all the moving parts of your business. Implementing this type of approach relies heavily on planning and thinking differently in approaching the management of customer expectations while ensuring your business can offer a level of flexibility your competitors can’t offer. 

“When I think about an agile supply chain, I think about having flexibility—the ability to adapt at a quick pace, speed and the ability to recover from a certain level of uncertainty,” Castle says. “I believe it’s important to collaborate with a company that has a diverse portfolio of services. This is so businesses are able to adjust quickly from an ocean service to an air service, from an intermodal to a truckload, or even breaking down at a warehouse facility, LTL or small parcel.

“Having a provider that can seamlessly move from one product to the next is extremely important. It’s also important to ensure you’re engaging with a provider that has a global footprint. There are different scenarios playing out in different countries, so your ability to have a presence that can engage a global environment is critical.”

Any business implementing an agile supply chain approach must ensure supporting providers and partners are a good fit. Choosing the right third-party logistics provider can determine just how quickly your business can recover from an unpredictable situation and continue operations. Uncertainties cannot be completely eliminated, but they can be managed in a way that your business and customer relations do not suffer with the right partner. Without this, an agile supply chain structure is limited. 

“When thinking about uncertainty in the supply chain, having a third-party logistics provider that’s multimodal or that offers a variety of products allows you to seamlessly move from one product to the next,” Castle advises. “That is one of the best defenses against being able to navigate any level of uncertainty–from speeding up or slowing down products. It comes back to having some level of a global presence, as it’s something a lot of importers and exporters are trying to navigate today.”

Technology is equally important when aligning operations with an agile approach. This also requires careful consideration of what works in terms of what kind of products and the regions associated with operations. The technology needs to provide a level of visibility that enables your business to react to a variety of disruptors–from weather to policy, disruptions can come in different forms and require proactive, quick solutions to mitigate additional risks. 

“Put simply, it’s a matter of having product available–whatever your business may be, to either sell or have within the production cycle so that you’re not ending up with a plant shutdown,” Castle says. “An agile supply chain creates an opportunity to deliver product on the shelf that a competitor isn’t able to.”

“For C.H. Robinson, Navisphere is our technology platform. Managing any kind of supply chain is about how you bring visibility to what’s happening with the movement of your goods. What’s changing in terms of expectations around technology is how do you start to weave different factors in so that it starts to align with more predictive elements.”

____________________________________________________________________

Matt Castle is vice president of Air Freight Products and Services at C.H. Robinson. He joined C.H. Robinson in 1996 and has 25+ years of experience in the transportation industry. Castle is responsible for driving growth through global airfreight product. He received his degree in Aviation Administration and Management from the University of North Dakota.

ecommerce

In the Push for Faster Ecommerce Deliveries, How Can Logistics Stay Agile?

Today’s consumer isn’t used to waiting. They expect to get whatever product they want, wherever they want it, as soon as possible.  Perhaps nowhere is this more true than in the world of ecommerce. Customers look forward to their online purchases arriving faster than ever – sometimes on the same day that they click “purchase.” And with drone doorstop delivery on the horizon, compressed delivery timelines show no sign of stopping anytime soon.

Faster ecommerce delivery has created revolutionary convenience for consumers, but it’s also generated major transportation hurdles for companies to overcome. As a result, companies that want to deliver ecommerce shipments at the speeds that customers expect need to consider how to adapt all elements of their supply chains.

Managing more intricate logistics

Some companies that raced in to capture an early share of ecommerce market struggled to keep up while also keeping costs down. But that’s to be expected with a more complex distribution model.

Instead of shipping mostly to stores, companies now must determine if their supply chains can quickly move orders to many consumers in many locations. To do this, they must be able to proactively coordinate shipments whether they’re on the ground, on the ocean or in the air. 

Companies can help manage this complexity by taking a more hands-on logistics approach. They should draw on a variety of services and resources, while remaining efficient and visible. 

Many shippers, for example, choose to work with a third-party logistics provider to help facilitate the intricate details of shipments, provide visibility, and help freight arrive in a timely manner. 

Fixed or Flexible?

One of the biggest decisions a company in the ecommerce market will make is how they balance their supply chain. 

For example, a supply chain that’s more focused on fixed infrastructure than the fluid movement of goods can lower a company’s costs in the long run but also make them less agile. While a service-heavy, asset-light supply chain can make a company more flexible but also raise their costs.

Some companies are drawing a line in the sand. Some online businesses, for example, are rejecting ecommerce’s expectation of immediacy. Instead, they’re building supply chains that prioritize volume over speed. 

This has pushed ecommerce sellers to start providing more shipping time options. But it’s still unclear whether having more choices will lead to consumers changing their delivery expectations.

In any case, ecommerce fulfillment encompasses several, often-contradictory considerations of time, cost, and transportation mode. To bring these factors together through informed decision making is a challenging undertaking. But it’s essential for any company that wants to compete as ecommerce continues to grow and its barrier to entry continues to fall. 

Taking the first steps

Data goes hand in hand with ecommerce, so it can be a good area for a company to make its first key investment. 

Specifically, advanced business intelligence and predictive data modeling help companies better understand and forecast consumer demand, and they can then adjust their supply chains accordingly. Through access to this data and integration with service information from their shippers, companies can better identify their priorities and decide where to invest resources. 

Those that don’t know where to start should also know they don’t have to make these big decisions on their own. Industry experts like C.H. Robinson can offer a clear perspective—based on their scale and local experts in offices around the globe—and will understand their specific ecommerce business needs and translate them into productive logistics solutions. 

 

Uncertainty in Today’s Air Market: What it Means for You

Reoccurring annual events, like the holiday season, typically bring predictability to air shipping. But lately, out of the ordinary events have disrupted the seasonality we typically expect. The best way to deal with the ever-changing peaks and valleys in air capacity throughout the year is to know both the historical patterns and potential air market disruptors.

The cyclical nature of air freight

Air freight service predictably follows the law of supply and demand. When shipping volumes spike, space on airlines becomes harder to secure and prices go up. And the opposite is true, too. If shipping volumes diminish, space on airlines becomes readily available and the prices go down.

As you might expect, the holiday peak season is one of the busiest shipping periods of the year around the world—including for air. But there are other seasonal surges to be aware of as well. The graphic below visually represents the seasonality of the air market in years’ past.

New disruptors to the air freight market

We’re just over halfway through 2019, and already it’s quite a different market than we’ve seen in the past. Several disruptors are causing a great deal of uncertainty.

Tariffs on Chinese goods

The ongoing trade war is one of the biggest disruptors to air shipping this year. Earlier tariff changes did not make a huge impact on air shipping. But demand for air freight shifted significantly when enough shippers preemptively repositioned inventory prior to the June 1, 2019, deadline. On May 31, 2019, the United States Trade Representative (USTR) announced the deadline would be extended to June 15, 2019.

Ecommerce and high-tech goods

With the growth of ecommerce and high-tech products flooding our markets, air freight is quickly becoming the go-to mode of transportation for many shippers—any time of year. Combined with the promise of two-day shipping, it’s often the only way to meet customer demands.

Adjust your air freight strategy based on the market

With air freight volumes lower than we’ve seen since the 2008 recession, now may be the ideal time to update your air freight shipping strategy.

Choosing air freight can be a strategic way to lower inventory levels in the United States. Finding a balance between inventory costs without sacrificing customer delivery expectations often requires expertise. The air experts at C.H. Robinson are available in offices around the globe to help manage your air freight and ensure any problems are resolved in real-time.

You may even consider that if air freight rates dip low enough, you could make up the difference (at least in part) of the added tariffs on Chinese goods.

The air freight market is a complex ecosystem that will likely remain uncertain for some time. While this uncertainty lasts, you may want to switch to a quarterly planning strategy to avoid a long-term commitment when you don’t know what’s coming.

What’s going to happen?

While inventories in the United States remain high, it’s likely that air shipping volumes will remain low. The best way to insulate your company and your relationships from today’s air market is to stay flexible. Adapt quickly to ensure you can take advantage of soft markets while still buying appropriately during peak seasons.

2019 Tariff Changes: Expectations and Supply Chain Strategies

If you’re currently navigating the impact of tariff changes as well as the potentially additional billions of dollars’ worth of tariffs on Chinese goods, we have the information you need to understand what’s changing—and just as important—what you can do about it.

What is a tariff?

In the United States, a tariff is a tax on imported goods. Tariffs are a major source of revenue and can promote/encourage domestic products.

How do tariffs work for section 301?

Tariffs can make trade with another country more costly. There are several types of tariffs, each with their own rules, but section 301 tariffs are based on a percentage of the item’s value. This is called an ad valorem tariff.

For example, plastic eyeglass cases in List 3 fall under the Harmonized Tariff Number 4202.32 1000, with the general rate of duty: 12.1 cent per kilo and 4.6% based on value. Now, with the Section 301 duties added in, there’s an additional 25% charge on top of the others. This simple product, which sells for less than $10 USD could be charged 29.6% plus 12.1 cents per kilo in tariffs.

What tariffs are changing?

Since we’ve previously covered the tariff changes from 2018, I won’t go into detail about them here. Instead, let’s focus on the most recent Section 301 trade actions that have taken place. There have been three major announcements regarding tariffs with China:

Section 301 List 3 tariffs

On May 9, 2019, the United States Trade Representative (USTR) formally announced Section 301 List 3 tariffs would increase to 25% from 10%, effective Friday, May 10, 2019. However, unique to how the Section 301 tariffs were previously implemented, this increase added some specific date criteria. The 10% tariff would still apply to goods exported prior to May 10, 2019, and entered into the United States before June 15, 2019. This was originally noted by the USTR as June 1, 2019, but updated on May 31 to extend an additional 15 days.

Proposed List 4 tariffs

In another major announcement, on May 13, 2019, the USTR published a notice requesting comments on a proposed List 4. The proposed fourth list of tariffs would impact about $300 billion USD in Chinese origin goods at a 25% tariff rate. This could go into effect as soon as late July or August 2019. If List 4 does go into effect, the Section 301 tariffs would cover over 96% of all U.S. imports from China. Public comments regarding List 4 are due into the USTR by June 17, 2019, when a public hearing will commence.

China’s tariffs on U.S. goods

These changes and proposals have not gone unnoticed by China. On May 13, 2019, the Chinese Government announced they will raise tariffs on $60 billion worth of U.S. goods. These increases in tariffs affect the three retaliatory tariff lists put into place by China in 2018, and raise the initial tariffs rates, depending upon the harmonized tariff code 10%, 20%, or 25%.

What do tariff changes mean for your supply chain?

At C.H. Robinson, we strive to be your Trusted Advisor® experts by providing you with information on matters affecting your supply chain. By leveraging data from 18 million shipments a year, we are able to deliver an information advantage to the over 200,000 companies that conduct business on our global platform, creating better outcomes for our customers, carriers, and employees.

That’s why we’ve recorded our top transportation, customs, and trade policy experts explaining the ongoing tariff changes. The discussion will help you understand:

-The current state of tariffs

-The impact on global and domestic transportation strategies

-What you can do right now

Watch the discussion and consider how you will manage potential disruptions to your supply chain as tariff developments continue to unfold.

Next steps

Done watching the video? If you would like more information or have questions about the information covered in the recording, please connect with one of our trade experts.

This blog originally appeared on chrobinson.com. Republished with permission.

The Trade War Latest: What Supply Chain Professionals Should Consider

With the May 10 increase in duty rates on certain Chinese-made imports—and China’s subsequent retaliation on U.S.-made goods—I think we can all safely agree the United States and China are in a fully-fledged trade war. So, in an atmosphere of uncertainty, what are the key elements supply chain professionals should consider to stay ahead?

Impacts to cash flow

Over the last six months, increasing duty rates from both countries have impacted cash flows in several ways.

For U.S. exporters (especially in agricultural products), China sales are down, resulting in cash flow constraints on the income side. For U.S. importers, duty payments have increased substantially on certain products, leading to much higher cash flow consumption on the cost side.

The old adage that two things move in transportation, goods and money, has never been truer than in today’s climate. As I’ve been discussing the latest tariff changes with importers, a few recurring questions seem to be on most companies’ minds:

-Will our supply chain be more impacted by the policy changes affecting China-to-U.S. freight or U.S.-to-China freight?

-What ripple effects will those impacts have on other areas of our business?

-Will we need to increase our U.S. customs bond?

At C.H. Robinson, we’re constantly monitoring the situation and communicating with our customers on potential consequences for their businesses. Because we’re a comprehensive third-party logistics (3PL) provider—offering customs brokerage and trade compliance services as well as global ocean and air freight logistics—we use our unique market perspective to see end-to-end impacts and help manage our customers’ complete supply chains in unpredictable times.

Will there be a surge of imports trying to beat List 4?

In late 2018, many U.S. importers pulled forward inventory in anticipation of potential tariff increases threatened for January 1, 2019. That threat was ultimately delayed until May 10, but talk of a next round of tariffs has already begun.

This new list of tariffs would be known as List 4 and would affect almost all currently unimpacted Chinese-made goods. That list still must make its way through a formal review process, but the new tariffs could be implemented as soon as late July or early August. Whether we will see importers again pull forward their inventory to try and beat potential duty increases remains to be seen.

Changing U.S. domestic freight flows

One of the repercussions of the U.S.-China trade war that has not received as much attention is the impact of the dispute on domestic freight patterns.

Indeed, the trade war has disrupted some U.S. trucking lanes, including an out-of-cycle surge in demand in Southern California related to the pull-forward of inventory in late 2018. Additionally, frozen pork and chicken, typically exported to China, has been routed to domestic cold storage instead, straining domestic refrigerated trucking capacity.

Now that the cost to import from China has increased, companies may find it cheaper to fulfill product with pre-tariff inventory from a warehouse 1,000 miles away (instead of new inventory assessed a 25% duty). As a result, several questions are beginning to emerge: Will companies in fact try to draw inventory from far-away domestic warehouses with lower landed costs? Will new suppliers require the establishment of new lanes? How would these shifts impact carrier networks that gain or lose freight? Only time will tell.

When will this trade war end?

Whether your company has been positively or negatively impacted by the trade war, uncertainty abounds; current policies and rules (in addition to new ones) may or may not be in effect six months, one year, or five years from now. Therefore, for many businesses, scenario planning increasingly appears to be essential:

-What will your company do if current tariff levels are maintained for one month? Three months? Six months? Longer?

-What will your company do if tariffs increase? Are you making any process adjustments now to prepare for such a possibility?

-How would your company react to an announcement of a deal ending the trade war?

As you plan, make sure to bring your transportation provider and customs broker into the conversation to assess the transportation costs of new lanes, new suppliers, and shifting regulatory and compliance concerns. With close collaboration, deep business intelligence, and proactive planning, providers and businesses can make the most of these unpredictable times by mitigating risk and finding opportunity.


This originally appeared on chrobinson.com. Republished with permission.



trade

Realign Your Trade Compliance Program with a Midyear Review

The complexities of importing and exporting goods in the United States means it’s easy to overlook process changes and forget to make updates in a timely manner. However, if not caught quickly, outdated information or imprecise processes can add unnecessary fees and penalties. If left to accrue over the course of a full year, these costs can be staggering.

That’s why I recommend a midyear customs review. If something is off base with your customs compliance program you can rapidly realign as needed. Use C.H. Robinson’s comprehensive checklist to guide your own midyear customs process review.

Midyear customs clearance checklist

1. Review customs broker powers of attorney

Revisit powers of attorney (POAs) and revoke any from U.S. customs brokers with whom you no longer wish to work. Remember, any POA you extend should have an expiration period, providing a natural time to review. If you aren’t sure of existing POAs, you can see all U.S. customs brokers transacting business on your behalf by requesting your Importer Trade Activity (ITRAC) data (see #11)

2. Update names and addresses on file with U.S. Customs

U.S. Customs and Border Protection (CBP) uses contact information from CBP Form 5106 to communicate with Importers of Record. If you have recently moved, or have not reviewed the information listed on CBP Form 5106 in a while, re-validate the information you have on file so you will receive all pertinent and time-sensitive correspondences the CBP sends.

3. Ensure bond amount is sufficient

If your import activity has changed, or you anticipate a large increase in activity during the remaining half of the year, your bond may need updating. CBP can determine your bond is insufficient and may require you to increase your bond amount. A midyear review and update is a proactive move.

4. Consider changing listing multiple principals on the same bond

Having multiple entities on one bond can bring cost savings. But be sure to decide if the risks are worth the reward. When sharing a bond, each entity shares liability if CBP issues a demand against the bond. In addition, if any entities terminate the bond, this can disrupt the other entities within the bond.

5. Check customs broker instructions

Review and document any customs broker instructions you send to U.S. customs brokers regularly—from Harmonized Tariff Schedule (HTS) classification rules and related party verification instructions to anti-dumping/countervailing duty instructions—to ensure your customs broker declares entities to the CBP according to your wishes.

6. Request updated certificates of origin

Be proactive with foreign suppliers and obtain updated annual blanket certificates of origin (COO) for any program in which you’d like to claim preference. And provide any updated COOs to your U.S. customs broker. Not obtaining COOs in a timely fashion may lead to unnecessary annual duty costs.

7. Update free trade agreement instructions

Revise any instructions pertaining to free trade agreements (FTAs) so your U.S. customs broker has proper direction about how you would like to file entries that may be eligible for FTAs.

8. Obtain your manufacturer’s affidavits

If you utilize a U.S. goods return program, found under Heading 9801, be sure you have obtained your manufacturer’s affidavits for the rest of the year. Share these affidavits with your U.S. customs broker and record them within any customs broker instructions.

9. Review anti-dumping/countervailing duties products

The CBP can investigate any potential anti-dumping/countervailing duties (AD/CVD) evasion allegations. Accurate case numbers, rates, etc. are critical for reporting upon entry. Even if you are disclaiming AD/CVD, document your product details internally, explaining why your product does not fall within the scope of the order.

10. Provide reconciliation flagging instructions to U.S. customs broker

If you are a reconciliation participant, approved by CBP, flagging of entries is the responsibility of the importer. Now is the time to send your U.S. customs broker written direction with any flagging instructions you would like established or changed.

11. Request import activity records from CBP

ITRAC provides a wealth of information you can use to create or improve your import compliance program. Likely, you’ll need tools, like C.H. Robinson’s Global Trade Reports®, to transform the raw ITRAC data into user-friendly dashboards and reports.

12. Sign up for the ACE Portal

The ACE Secure Data Portal is a powerful way to manage trade compliance programs. This powerful tool enables you to receive paperless notifications from CBP, monitor your brokers, audit entries in real time, and much more.

13. Request export activity data

Similar to ITRAC data for import activity, request your Electronic Export Information (EEI) from the Census Bureau, Foreign Trade Division. If you are the filer in the Automated Export System (AES) using the ACE Export Portal, you can review your EEI on a regular basis.

14. Check U.S. Import HTS Classification and Export Classification

Review and communicate any updates to your HTS Classification Database and your Export Schedule B Number to proper stakeholders—both internally and externally.

15. Reduce liability with marine cargo insurance

Steamship lines and air cargo providers have limited legal and financial responsibility for international cargo. Marine cargo insurance plans can reduce your company’s financial exposure and bring new efficiencies.

16. Protect trademark and trade names

Make sure the CBP has any and all of your trademarks and trade names protected and recorded. This allows CBP to help you combat potential counterfeit products or infringement.

17. Request manifest confidential treatment

You can request confidential treatment of inward and outward manifest information. However, note that there are mandatory biannual renewal requirements. In addition, account for all possible variations of names within your request.

18. Review your denied party screening program

Look at which parties you are screening, and how often. This can ensure your program is appropriate for your current business model and bring potential risks to your attention.

19. Perform internal and external training

Regularly schedule time to ensure adequate training is happening with appropriate stakeholders. This keeps all parties, especially new employees, up to date with changes.

20. Address priority trade issues

Be sure that your compliance program addresses each one of the CBP’s initiatives to mitigate the risks of priority trade issues.

Smooth customs clearance doesn’t just happen

Careful planning and regular reviews of your customs processes are critical components to a strong trade compliance program.

If a midyear review seems unfeasible or this list seems daunting to conduct all at once, consider bringing in an outside expert like C.H. Robinson to guide you through the process. The most important part is to ensure you review, update, and communicate any changes to these areas of your compliance program on a consistent basis.

What Transportation Professionals Need to Know About the U.S.-Mexico Border Situation

On March 27, U.S. Customs and Border Protection issued a notice detailing the re-assignment of over 750 officers from various ports of entry along the U.S.-Mexico border to help process people crossing the border. This past weekend, rhetoric increased significantly regarding the potential of closing the border completely. While this threat is not new, it certainly feels different this time around, and specifically raises questions for those involved in regular cross border freight movements. With the news that Secretary Nielsen is cutting short a trip to Europe, what can supply chain professionals anticipate regarding cross-border operations?

Fluid announcements

We have seen over the course of this administration that policy is often refined and revised from the first announcement or tweet to the final policy implementation. It is clear that the White House has received tremendous feedback from businesses regarding the impacts of border delays and closures across the country. It appears that some type of new policy is being seriously considered at the border, but as of today the final details are still to be determined.

Scenario planning

While we may not know if and how policy may change and impact freight for a few days or weeks, we can scenario plan for a reasonable number of outcomes. Some of those may be:

-A temporary total closure that aims to extract policy goals much like the government shutdown in January

-A partial closure at the border based on type of vehicle, product, or mode

-A partial closure at the border based on port of entry or days of the week to reassign more resources to processing people

-Continued uncertainty as policy making is delayed

Supply chain strategies

In addition, supply chain professionals can consider the following strategies to mitigate U.S.-Mexico border delays in an uncertain atmosphere:

Look for opportunities to convert modes of services

With possible closures effecting ports of entry along the U.S. southern border, additional planning will be needed. Work with your account managers and transportation service providers to review time critical and urgent freight shipments. Access a broad network of transportation modes to mitigate against the risk of closures by leveraging air and rail services to make sure your freight keeps moving.

Utilize warehouses and secured carrier yards as drop points

Should your freight get stuck at the border due to the closure, make sure your transportation service provider has secure trailer yards and warehouses to temporarily store your shipment. If the freight can be delayed prior to dispatch, consider holding the shipment at your facility to diminish unplanned demurrages and delay in transit.

Get your customs documents in order

Work with both your U.S. and Mexican customs broker to pre-validate all customs documents prior to dispatching your shipment. Additional delays can be avoided once the ports of entry open by making sure all paperwork is correct and ready to be transmitted immediately to customs. This includes verifying all commercial invoices, certificates of origins, POAs, Bills of Lading, and special import/export permits.

Actively communicate with your procurement team

Make sure that all internal team members and external customers understand the current volatility and are validating purchase orders before being shipped to or from the border. Should port of entries close, and commercial traffic disrupted, freight arriving to the border without prior preparation could experience significant clearance delays.

Resources to monitor the situation

C.H. Robinson will be issuing a client advisory daily on the U.S.-Mexico border situation with both on the ground updates regarding port delays and operational impacts, as well as policy updates from Washington, D.C.

C.H. ROBINSON TAKES GLOBAL OPTIMIZATIONS ONE STEP FURTHER

C.H. Robinson–known as the “Original 3PL”–lives up to its reputation of taking market challenges in stride through predictive and proactive approaches so their customers don’t have to. If there’s a better way to operate, C.H. Robinson is determined to propose a strategy to its customers with their success as the forerunner, eliminating costly mistakes and wasted time. The company boasts an impressive global network of more than 124,000 customers who depend on the expertise of C.H. Robinson to navigate the ever-changing marketplace while providing clear visibility from start to finish. The leading third-party logistics provider offers a full suite of global logistics services and understands the importance of gauging market risks and evaluating the best solutions to continue operations.

“We are constantly trying to keep our ears on the market to know what’s coming and what’s to be expected and how we can navigate those waters,” explains Vince Santinello, Business Development, Ocean Services at C.H. Robinson. “Specifically, in relation to the ocean market, we are looking at how the tariffs themselves are going to impact the market this year. And second, looking at the IMO 2020 and what that overall impact could be.”

While the recent tariff concerns and quickly approaching IMO 2020 regulation spark global concerns for many carriers and customers, C.H. Robinson continues utilizing proactive research to provide cost-effective, strategic solutions for its customer base. The company takes the value of market challenges and evaluates what factors can be modified for a better and more successful future in the ocean market.

“The incremental volume changes that came with the last tariff announcement impacted the ports and when that happened, we talked to our customers about moving forward with port diversification and clear visibility of transit times while looking through their supply chains,” Santinello says. “It’s important for us to understand what’s happened in the past, then we can start putting models together to help move forward.”

IMO 2020 continues making news headlines as industry players consider next steps and potential roadblocks. C.H. Robinson continues leveraging its broad network of carriers and manufacturers, analyzing trends to determine the next best course of action to successfully predict the impact the regulation will have.

“Carriers today don’t know what that financial impact will be,” Santinello concedes. “The difference between high-Sulphur fuels and low-Sulphur fuels right now is an average of $250 more per ton. This will have a cost impact on our customers’ business.

“We’re working to understand how it’s going to impact the bottom line and it all goes back to us looking at alternative routing so we can reduce that overall impact of cost. Additionally, looking at when their cargo is moving and possibly shifting lead times to avoid potential impact as much as possible.”

C.H. Robinson takes its additional services portfolio and carefully evaluates how they can expand it to not only exceed customer needs but to “reinvent the wheel” when it comes to innovative, strategic and proactive solutions in an unpredictable market. Instead of limiting customers to traditional approaches, C.H. Robinson employs global alternatives to keep businesses going.

“Port diversification is a major point for us to discuss this year and looking at moving cargo inland via Los Angeles, Canada and the East Coast,” Santinello says. “We see value in utilizing the multiple services C.H. Robinson offers, such as air, ocean and surface transportation, in order to best serve our customers. We’re continuing to look at what other services that we can offer within our network.”

C.H. Robinson takes pride in its unique, innovative and comprehensive technology platform, Navisphere, taking scalable global technology to new depths. The all-in-one solution provides customers with unmatched visibility and accurate data immediately, conserving time and creating efficiencies across the board–from ocean, air and domestic shipments. Not only does this platform provide streamlined operations for C.H. Robinson’s customers, but it directly impacts the level of quality received by the customer’s clients.

“Technology is always going to be a key factor and it’s something that C.H. Robinson has seen for years,” Santinello says. “We continue to invest in our own platform because at the end of the day, it’s about visibility, it’s about accurate data and we can assess that at a moment’s notice.”

Considering day-to-day improvements needed, C.H. Robinson takes proactive measures one step farther with Navisphere as they use past experiences to address current issues while predicting market challenges and potential solutions.

“Real-time visibility through Navisphere allows our customer to see where their freight is at any given moment so they can adjust manufacturing as need-be and due dates for their own customers,” Santinello says. “Once we have an accurate depiction of what real market transit times are, we can assess what other issues might be present and address those further upstream.”

Vince Santinello joined C.H. Robinson in 2015. He brings 15+ years of ocean logistics experience. He grew up through the ranks with previous NVOCCs, taking on the responsibilities of negotiating pricing, terms and developing superb ocean carrier relationships. As part of the C.H. Robinson family, Vince is the Ocean Business Development & Route Manager focusing on the Transpacific Eastbound Trade.  He primarily works with all North American branches to help ensure success and collaborates closely with C.H. Robinson’s Carrier Management Team to guarantee the expectations of offices and customers are represented