Ship, ship, ship!!!! That’s the message this month. This week, President Trump announced an extended 90-day delay on the tariffs imposed on China. This means that until November 9th, products imported to the US from China will continue to have a 30% tariff. In January, 30% would have been an awful number. Since then, we’re seeing that this is likely the best we’re going to get. This is far better than the anticipated 54% that was threatened for August 12th or the even worse option of defaulting to the February 145% tariffs.
Tariff turmoil this year is the norm, and understanding it can be painful, especially when tariff numbers keep changing on a consistent basis. Let’s talk a little bit about understanding tariffs and how they work. Here are some things to think about before your production in China or any other country even starts.
What are you producing and eventually shipping? Look up the HTS Code for your product. You will need this number to clear customs in the US, and it determines what your tariff numbers will be. https://hts.usitc.gov/
What tariffs or duties are attached to this HTS Code? Many websites have tariff trackers, which are handy to get a quick snapshot of what you can expect to pay. Our favorite is https://tariffs.flexport.com/ from Flexport Logistics. You plug in the information requested, and it will tell you the current tariffs attached to that product.
What country are you producing in? Each country has a specific reciprocal tariff rate. The country you are in and the HTS Code combined determine the tariffs you’re paying when importing to the USA.
Are there duties or previous tariffs you didn’t anticipate? The tariff tracker you use should also let you know if there are additional tariffs or duties other than just the reciprocal and fentanyl tariffs applied this year. Some products have base duties that automatically apply. In the first Trump term, 301 tariffs were implemented, which put a 7.5% – 25% tariff on specific products. Those tariffs or duties still apply today, on top of the current reciprocal and fentanyl tariffs.
What is your product made of? Copper? Aluminum? Steel? All of these materials carry additional tariffs under section 232 of the Harmonized Tariff Schedule.
Tariffs stack! One tariff does not override the others. For example, enamel pins made of aluminum in China will carry the following tariffs and duties: 11% base duty, 20% Fentanyl tariff, 10% China reciprocal tariff, 7.5% 301 tariff, and 50% aluminum tariff. That is a 98.5% tariff for enamel pins. If you paid $10,000 for your bulk order of pins and have to pay a 98.5% tariff, it will cost you $9,850 just to get your product into the USA. That is in tariffs alone. That’s not a shipping cost or a manufacturing cost. That’s just to cross the US border.
Watch your dates!! The tariffs applicable to your product are the tariffs in place when your goods ENTER the USA, not when they leave the origin country. If there’s a 10% tariff when you ship your goods, but it’s jumped to 50% by the time they arrive in the USA, you are paying the 50%. Some “on the water” exclusions apply, but not always, so your arrival date is very important.
Transshipping to other countries. Transshipment is a “country of origin” scam, lately used to export out of a country that has a lower tariff. Although the rules here are very blurred and not yet defined, transshipping can cause an additional 40% tariff penalty. We’re still waiting for the official “rules of origin” to be announced. This is how it works: you have a component made in China (let’s say dice) and then ship that component to Vietnam to be assembled into a finished product (board game) which claims to be “made in Vietnam”, then you ship from Vietnam to the USA. You will likely be paying an additional 40% of your commercial value of the finished good as a transshipment penalty. This is because the dice were not made in Vietnam, so the country of origin claim is a lie. That original component must go through significant changes in order to be considered a product of the final country of origin. Putting the China dice in a Vietnam box and saying it was “made in Vietnam” will result in a transshipment penalty.
Now let’s take a look at what’s happening at ports and with vessels! Despite it being peak season shipping, the August 1st General Rate Increase (GRI) on vessels has been cancelled. Peak Season Surcharges have also been cancelled. Tariff uncertainty has shippers being cautious this year. I expect to see a small uptick in shipments now that the China tariff delay has been announced.
China Ports
Although busy, China’s ports are on time, and vessel space is available. You may run into rolling or delayed vessel schedules, but this is weather-related, as China and Southern Asia are experiencing heavy storms and flooding.
UK Ports
I don’t usually mention UK ports, but lately, they have been experiencing congestion and bottlenecks, causing delays upon arrival or departure.
US Ports East, West & Gulf
Most US ports are running on time with very few delays. Savannah and Norfolk are seeing week delays with incoming vessels, likely due to storms in the area.
Rail
Most rail yards are experiencing week-long delays before goods get on the move again. Plan accordingly!
That’s all the excitement I can take for this month, folks. I’ll continue to monitor all shipping situations and keep you updated on the latest and greatest in the State of Freight! Enjoy your month!
