Trade wars got you down? Here are five steps you can take right now to shield your company from some of the negative impacts of today’s ever-changing global trade environment.
With new and amended global trade policies surfacing almost weekly right now, importers and exporters are managing a host of new opportunities and complexities. And while volatility has almost become the “new normal” on the global trade front, there are steps that shippers can take to shield themselves from the negative impacts of today’s evolving global trade environment.
“Trade tensions have already been very disruptive to US businesses impacted by product- and origin-specific tariffs levied throughout 2018 and flowing into 2019,” JOC’s Rick Brumett points out. “Uncertainty fueled by adversarial posturing between international trading partners and an environment of increased trade scrutiny more broadly threatens all industry sectors,” Brumett writes. “Added layers of administrative enforcement creates additional risk for any importer/exporter operating internationally.”
For example, the Trade Facilitation and Trade Enforcement Act (TFTEA) mandates that U.S. Customs & Border Protection (CBP) increases its trade enforcement and revenue generation activities, while the Automated Commercial Environment (ACE) reduces the number of hard copy shipping documents that CBP sees at the time of entry.
“Regulations are complex and constantly changing, making the environment even more complicated,” Brumett writes. “Trading partners leveraging tariffs and threats create volatility for businesses reliant on shipments that cross US borders. These issues disrupt business cycles and create financial risk that can jeopardize profit.”
The Best Offense is a Good Defense
Now for the good news: Shippers looking to get out in front of these and other challenges while growing their import and export businesses can deploy some specific strategies to help ensure the smoothest (and cheapest) process possible. Here are five that you can start using today:
- Educate yourself on the details. This isn’t the time to bury your head in the sand and hope that the situation somehow works itself out on its own. Like it or not, we’re all operating in an environment where trade volatility and tariff wars have become the “new normal.” By educating yourself on the changes that apply to your company and its shipments, and by keeping abreast of any new regulations that might impact it, you can avoid any unexpected surprises or fines.
- Get some backup suppliers. The U.S.-China trade war has prompted many shippers to find alternate sources of supply. You can borrow a page from their playbooks by seeking out reputable, reliable suppliers in countries that aren’t impacted by the increased tariffs. For example, some Chinese producers are reportedly circumventing the tariffs by shifting production to countries like Vietnam, Serbia, and Mexico. These are just a few of the countries where American firms may want to look to find alternate sources of supply.
- Pay attention to the financial risk. According to JOC, the potential imposition of fines and other penalties requires extensive research and close governance of ongoing trade compliance programs to remain abreast of each sovereign nation’s trade regulations and agreements. “The compliance target is ever-moving,” Brumett writes. “To mitigate the risk of noncompliance, companies must scrutinize every detail of their trade process to identify gaps that increase exposure to financial risk.”
- Stay flexible and adaptable. By using “what if?” scenarios and supply chain planning contingencies, shippers can stay flexible and adaptable during the most volatile global trade periods. Contingency planning will help you prepare in advance for when a new regulation or tariff is introduced, and it will help you react to any related problems. And while it’s often impossible to predict where and when the next change will come, planning ahead allows you to be proactive while also minimizing potential losses before they even occur.
- Collaborate with an experienced logistics provider. Thoroughly assess your organization’s overall sales projections while also factoring in the more unpredictable trade-related challenges that could come smack in the middle of your busiest season. Use historical data, for example, and then factor in the previous year’s numbers to develop an accurate forecast. Then, share those numbers with your logistics providers. The more these valued partners know about your business and the potential sales numbers, the better. Good transparency in this area allows your logistics partner to manage carriers to their capacity commitments and then tweak forecasts based on actual results (not just guesswork).
As Benjamin Franklin once said, “By failing to prepare, you are preparing to fail.” Nowhere is this more accurate than in the current global trade environment, where good planning is the foundation for ongoing success. Be sure to plan for a wide spectrum of contingencies, seek out alternate suppliers, and consider all supply chain options—from the point of raw materials to delivery to the end customer. “As they say,” Industry Week points out, “sometimes the best offense is a good defense.”