We’re five months into the new year, and so far it’s been a rollercoaster ride! It’s the kind of ride you can’t get off of fast enough. Tariffs have consumed the toy and game industry since early April, making it nearly impossible to ship anything from China and make a profit. US ports are looking at up to a 30% drop in volume this month. Blank and cancelled sailings out of China to the US are prevalent. Here’s the latest news regarding US ports and the state of freight.
China & Hong Kong Ports
We are already experiencing many blank and/or cancelled sailings this month due to low volumes of exports from China. China currently has a 145%+ tariff on toys and games exporting to the US. Despite the term “China tariff”, it’s US importers and producers who pay that price. This is causing many companies to cancel or hold their manufacturing until a better tariff number emerges. No one knows when that will happen. In the meantime, completely manufactured goods will likely not be shipping to local US warehouses anytime soon. If you are shipping your goods to the US, be prepared for your vessel schedule to roll or cancel/change as vessels and carriers adjust their routes to accommodate the lower volumes and demand.
US Ports Down in Import Volumes
This month marks a time when all ships coming into US ports will have some kind of tariff attached to all its cargo. If you ship out of China, that’s 145% tariff on your commercial cost. For America’s ports, especially the busiest ports of Long Beach and Los Angeles, it also means there’s a huge slowdown in import volumes. This is due to tariff instability as importers paused or cancelled shipping to wait out the tariffs. Long Beach is already seeing a 20% decline in imports from China and this is just the beginning. What does this mean to you other than a hefty tax from the US government? Lower imports mean fewer jobs for the port worker, trucker, rail, freight stations, etc. Layoffs are on the horizon for these workers, which, for you, means fewer people to process your goods when they come to the port. This isn’t only happening on the West Coast. Ports all over the US will see less product coming in over last year’s volumes. This slows the supply chain, and we will likely be seeing longer delays in the months to come.
How To Navigate Shipping in These Conditions
You may be asking yourself, “What Can I Do To Mitigate Costs At This Time?”.
- Know your tariffs. You should be well aware of what HTS Codes you need to ship under and what percentage tariff you will need to pay. Freight Forwarders or your Logistics Coordinator can help you figure out what tariffs apply to your shipment and what cost will be due upon arrival at the US port.
- Hold your goods in China until the tariff situation changes. For those of you who have domestic stock in your US warehouses, holding your China shipments until the storm settles is your best option.
- Look into a bonded warehouse. Whether it’s in China or the US, securing space in a bonded warehouse can help to spread out your expenses over time. Goods can be shipped piecemeal, so you don’t have to pay the tariff all at once. Goods will still have to go through customs entry, but tariffs can be deferred until the goods are removed from the warehouse
- Look into FTZ or Foreign Trade Zones. Similar to a bonded warehouse and located 60 miles or less from any US port, these warehouses allow you to enter goods into the country without initially clearing customs. Goods are not taxed or tariffed until they are removed from the FTZ warehouse. You pay the current tariff and clear customs at the time of removal from the warehouse, not entry. These are especially handy in these times because your goods can be accessed domestically, and it gives you the option to wait until tariffs drop before clearing customs and removing them from the warehouse, resulting in deferred and reduced tariff costs.
Conditions at US Ocean Ports
With import volumes down, there is little to no waiting at any US ports. Vessels arriving now are quickly making their calls in to berth and unload without delays. This is expected to be the case in the next few weeks at least.
Rail Conditions
US West Coast rail yards, including LAX, LGB, OAK, SEA, and TAC are seeing 5-day delays upon arrival. US East Coast rail yards have a 3 to 6-day wait to board. The Gulf coast is looking at a 7-day wait, and Canadian rails at Vancouver and Prince Rupert are seeing delays of 5 – 9 days.
Air Freight
Pricing is down, as is volume. Again, this is due to tariff uncertainty and de minimis updates placing tariffs on air shipments under $800 when none existed previously.
With shipping conditions and tariff situations changing at breakneck speed, it’s hard to keep up with all the changes. Ask your forwarders questions, ask for options, and keep reading GPI’s State of Freight. We’ll keep you updated on the latest freight news month to month. Have a freight May everyone!
