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5 Steps for Improving Customs Efficiency

With 28 percent of U.S. GDP now related to trade, businesses across a variety of industries are wrestling with the complexities of customs brokerage. The U.S. collects $95 million in duties each day, and companies need a plan to ensure they’re not paying more than their fair share. Supply chain professionals also have to manage individual countries’ trade requirements, complete extensive documentation, and maintain accurate classifications for their imports – all while keeping up with a constantly changing environment.

While customs brokerage has a reputation for being cumbersome, growing trade tensions and a flurry of regulatory activity are making the process even more difficult. Last week’s announcement regarding a potential 25 percent tariff increase on over 6,000 products, up from the originally planned 10 percent, is just one of the most recent examples of the challenges inherent in managing the already volatile supply trade landscape. The U.S. government is increasingly scrutinizing every shipment that arrives at port, and staying current on regulations like the recent changes to duty refunds is becoming even more time-consuming for importers. Meanwhile, some ocean carriers are cutting back on service between Asia and the U.S. in response to U.S.-Chinese tariffs. That decrease in capacity prompted double-digit increases in spot rates in July, making it even more important to manage customs cost-effectively.

By establishing effective customs brokerage tools and processes, businesses can keep shipments on track, avoid paying for fines and penalties, and make the most of their time and resources. Here are five key areas to consider:

  1. Stay up to date on harmonized tariff classifications. Inaccurate classifications can leave your goods stranded at the border or subject you to hefty fines. In the wake of the U.S.’ confirmed new tariffs on nearly 800 items, now is an ideal time to review classifications. Collecting all shipment data into a single platform makes this task infinitely easier, while also allowing businesses to see shipment status easily and reroute goods as needed if a shipment gets stuck.
  2. Take a hard look at your sourcing. With the U.S.-China trade battle continuing to escalate, many U.S. companies that import Chinese goods are considering their alternatives. When vetting your vendor list, take all the pros and cons into account, including applicable duties, vendor reliability and how quickly goods can travel from a particular destination. For example, some wooden furniture importers are choosing Thailand and Vietnam for production over China, despite its strong transportation and port infrastructure, because Chinese goods are subject to AD and CV duties that can lead to retroactive changes in tariff rates and slow liquidation.
  3. Use ACE to your advantage. The Automated Commercial Environment (ACE) saved businesses $52 million in 2017 by automating filings for U.S. Customs and Border Protection and dozens of partner agencies. In addition to streamlining the filing process, ACE also gives businesses a ready-made view into all historical filing data. That means businesses no longer have to worry about losing data during brokerage or port changes, and they can also uncover information to enhance efficiency, such as ports where they’ve had a history of exams.
  4. Put the government to work for you. While it requires some time upfront, obtaining C-TPAT certification from the U.S. government can ultimately help accelerate your supply chain by reducing the amount of cargo called for exams. In addition, taking part in the U.S. Foreign Trade Zone program can help businesses significantly improve their bottom lines by deferring, reducing or even eliminating import duties. An experienced supply chain partner can help you determine which programs fit your business best and guide you through the process.
  5. Build a sound audit process. Without an established auditing program, businesses can become overwhelmed with time-consuming post-amendment entry corrections, shipment delays and even fines. Whether you manage the process yourself or rely on an external provider, make auditing a priority. Your supply chain partner can help you evaluate your internal processes, including recruiting and training people with the right skills, while providing the peace of mind that your filings are accurate.

For global importers and exporters, customs brokerage is more than just a checkpoint along the way – it’s a critical component of the supply chain. By partnering with a provider who understands your business and the rapidly evolving trade landscape, your business can boost operational efficiency as well as customs compliance.

Taking On Tariffs

On July 6, U.S. customs agents began collecting duties on more than 800 Chinese goods worth $34 billion, affecting those who import electronics, vehicle parts and accessories, chemicals, and more. A second phase of the tariffs, which must go through public review first, would levy 10 percent tariffs on an additional 280 items. China has promised to go tit-for-tat by slating $34 billion in U.S. exports for 25 percent duties, including soybeans, lobsters, sport utility vehicles and whiskey.

These tariffs come on the heels of steel and aluminum duties announced earlier this year, with many manufacturers still trying to decipher the potential impact to their organizations. Businesses have filed more than 20,000 exemption requests for steel and aluminum tariffs so far, but the U.S. government had processed fewer than 100 of them as of the end of June. As the world’s two biggest economies gear up for this latest round of tariffs, they could be just the tip of the iceberg. President Trump has threatened to unleash up to $400 billion in additional duties if China retaliates, and increased inspections on both sides could make it harder to move goods across the border.

Staying ahead in a changing environment

For U.S. importers and exporters, these tariffs are one more economic hit amid rising overall costs. U.S. business logistics costs clocked in at 7.7 percent of nominal GDP in 2017, up from 7.6 percent in 2016, as rising fuel costs and shrinking capacity put pressure on supply chain budgets. Beyond the financial impact, the current trade environment is forcing businesses to spend time and resources to ensure customs compliance – or else risk additional fines and penalties.

As Chinese tariffs go into effect, here are two steps businesses can take right away to stay compliant and minimize the financial impact.

  • Review harmonized tariff classifications. Now is the ideal time to review your list of imported goods to make sure items are classified correctly. As a best practice, businesses should review their classifications twice a year (and more often if their commodities fall into frequently updated categories). With the U.S. government scrutinizing every shipment, you could be subject to penalties if you inadvertently miss an item slated for tariffs. On the other hand, some businesses may be pleasantly surprised to find that items they thought were subject to tariffs actually aren’t. Unsure about a particular item? Request a ruling from the U.S. government. A centralized supply chain platform makes it easier to review all classifications in one spot, while an experienced customs broker can help ensure accuracy.
  • Apply for an exemption. The U.S. government recently announced that it will be accepting exemption requests for items included in the latest round of Chinese tariffs. Although there’s not an official form available yet, you can start gathering information now to make your case. Typically, the government will ask to review details on the type of product, the quantity imported, and tariff and customs-related documentation. Your supply chain partner can help you gather the appropriate materials to submit your request. Be warned, however, that exemption relief will likely take a while. For steel and aluminum tariffs, the government estimated 90 days for a response, but applications are taking longer than that to process.

Long-term considerations

While new and impending tariffs have many businesses concerned, be careful about knee-jerk reactions that could have longer-term implications. The economic effects of tariffs are significant for some industries, but the overall scope is still relatively small, considering that the U.S. trades nearly $5 trillion in goods annually, as AGL CEO Jon Slangerup recently told Journal of Commerce.

As trade tensions continue to brew, businesses will need to remain vigilant about customs compliance while also evaluating potential adjustments to their supply chains. The right partner can help you source new factories or materials, manage importing and exporting requirements, and make sure your supply chain stays competitive in an uncertain environment.