September 6, 2019
Navigating Tariff Uncertainty with Airfreight
If there’s anything to learn from the past few weeks in global freight, it’s that tariff announcements can be anything but straightforward. After initially announcing an additional 10% tariff on $300 billion worth of goods imported from China set to take effect on September 1 and December 15, the White House followed up with a flurry of rate adjustments. Tariffs taking effect October 1 will now be at 30% instead of 25%, while the September 1 tariffs rose from 10% to 15%. A little confused? You’re not the only one.
There’s one thing for certain about tariff increases and deadlines — landed costs can face increases as high as tens of thousands of dollars, and there will be a rush of companies aiming to get goods imported before more tariffs take effect. Additionally, logistics can become a jigsaw puzzle as businesses look for the fastest, most cost-effective ways to get product into the United States.
With so many ebbs and flows in response to trade uncertainty, how can you navigate pending tariffs and continuing volatility?
Make Sense of the Situation
As tariffs and market volatility become more unpredictable, it can be especially challenging to understand value of service, particularly in pricing for airfreight. Concerns over price, specifically mitigating price volatility and partner relationships to protect supply chains, can become monumental for businesses of all sizes. It’s important to note that prices for airfreight tend to be reflective of a single moment in time, making them particularly difficult to plan for. Additionally, lack of transparency into overall pricing and transit times can cause even more confusion across the supply chain.
To help mitigate this confusion, there are a few key questions to ask in regard to pricing, including:
Is my price fixed or floating?
Who carries price and service risk?
What is my real transit time?
How will additional shipments and spot pricing be supported?
Answering these questions can help ensure you’re getting a realistic estimate of air freight costs and timelines in particularly volatile market circumstances.
Reduce Your Risk
Risk mitigation strategies rely on a key tenet: trust. The first step toward reducing risk in a volatile market is working with supply chain partners who deliver transparent quotes and are willing to share price risk. In fact, in some cases, supply chain partners may share tariff-related concerns and work to develop creative solutions to mitigate tariff exposure.
Case in point, Flexport worked with our airfreight team to coordinate a flight landing two hours earlier on September 1 — giving clients the opportunity to save thousands of dollars on tariffs. Work with a forwarder to set requirements for your relationship and agree upon them to ensure quality of service moving forward.
“Price is the most important input when choosing an air freight strategy, but can lead to higher costs overall,” says Tony Crisafulli, Sr. Director, Global Bid Management at Flexport. “Working with a forwarder that can explain processes and is willing to work as a strategic partner can help ensure short- and long-term success.”
To learn more about strategies to reduce or limit increasing supply chain costs, connect with a Flexport specialist today!