65 Billion Parcels Were Shipped in 2016
Parcel shipping is a booming business. Especially e-commerce has had a big impact on shipping volumes and spend. In total, there were 65 billion parcels shipped worldwide in 2016, according to Pitney Bowes. This constitutes a 48 percent increase compared to 2014.
The United States is the biggest market by parcel spend ($96 billion) but cedes the top spot to China when it comes to sheer volume (31 billion units). This chart considers parcels that were shipped from business-to-business, business-to-consumer, consumer-to-business and consumer consigned shipments with a weight up to 31.5 kg (70 pounds).
Trump is making things harder for e-commerce sellers… China import tariffs and what you can do about it to stay profitable as a seller
Talks continue to heat up in the US-China “trade war” recently. So far two China tariff lists have already taken effect in July and August respectively and now there is a third one looming. And this one could be the one that affects your products.
To give you a background, here are the lists of items covered in the three China Tariffs lists so far.
- China Tariffs List 1: $34 Billion – 25% increase in tariffs – Took effect on July 6, 2018
- China Tariffs List 2: $16 Billion – 25% increase in tariffs – Took effect on Aug 23, 2018
- “$200 Billion list” – 10% or 25% increase in tariffs proposed – uncertain when they will take effect
Lists 1 and 2 have already taken effect in July and August of 2018 and if your product is listed that means that there will be an additional 25% duty rate on top of your current duty rate for products imported into the US from China.
The third “$200 billion” list is proposed by Trump to face an additional 10% or 25% duty. Talks are still underway and it’s uncertain when and if they will take effect.
There has been a lot of misunderstanding as to exactly how much the tariff will amount to. To be clear this is an EXTRA 10% or 25% on top of the current duty that you’re paying.
For example, if your product’s HS code is mention on the above list(s) and you’re currently paying 5% duty prior to these new tariffs, and if the 25% passes now you will be paying 30% duties (5% + 25%)!
Not sure? Ask your Customs Brokerage or Freight forwarder to clarify if they will be covered.
To give you an idea of size of the impact of these tariffs… The three lists total about $250 billion in products. This is about half of all China imports in 2017 according to US Census data.
What can you do?
1) Check if your products are affected by checking the HS Code. As a best practice, you should check the accuracy of your tariff code with your customs broker.
2) If you are affected and if you are it looks like it will be an extra 25% duty on top of what you’re already paying, decide how/if you can absorb the cost.
Some vendors say that they will pass the costs onto the consumer. But there’s a big jump from a 10% increase versus a 25% increase. At 10% the cost, while painful, might be able to be absorbed by the customer, supplier, and retailer.
At 25%, customers may vanish… along with your profits.
3) The logical conclusion is to source outside of China but it’s easier said than done.
Though countries in SE Asia and South Asia may not be prone to tariffs, it is often harder to find quality suppliers. In many instances, labor costs may not be significantly cheaper than were once thought. In other instances, you may find that there is a lower productivity from suppliers outside of China.
Besides that, there may be longer lead times for shipping in these other countries as their supply chains are not as efficient as the ones in China. Furthermore, there may be additional hidden costs (graft, etc) in these other countries that will chip away at your dreams of finding a cheap supplier away from China.
Ultimately this leads us to…
4) Dealing with Uncertainty
This is the only certainty. That things with the trade tariffs and trade war will be UNCERTAIN. Businesses now are holding back on investments because they are not certain what will happen after the midterm elections in the US.
UPDATE June 18, 2018
On June 15, 2018, the US Trade Representative office released the list of items that will be hit with an additional 25% tariff or import duty.
This initiative was spearheaded by Donald Trump and Robert Lighthizer in an effort to protect against China’s alleged unfair trade practices.
Here is the list of items affected
As you can see most of the items listed are not consumer goods which you typically find on Amazon. Instead it covers mainly items related to heavy industries such as aircrafts, vehicles, manufacturing related tools and equipment, as well as electronic components.
According to the US Trade Representative Office – the idea is to counterbalance against the “Made in China 2025” initiatives and policies that China is using to push their homegrown technology and innovation.
- The total value of this is $50 billion in 2018 trade figures
- The tariff rate will be an additional 25%
- “The list does not include goods commonly purchased by American consumers such as cellular telephones or televisions.”
Note that the items affected cover products imported from China only. Products manufactured in and imported from other countries such as India, Vietnam, and Mexico are not affected by these policies.
How will this affect online sellers?
I conducted a completely informal survey of Amazon sellers, and the products they are selling are not affected. But the key is in the details so check the list yourself.
Were your products affected by the new China tariff? If so, what will you do about it? Comment below and let me know.
In March of 2018, President Trump just signed a measure that the US will impose $50 billion in tariffs on Chinese imports. Sources say that import duties on Chinese products will rise to a flat rate of 25% if the details of the measure come to pass (more on that later)!