US Box Imports Continue Growing Ahead Of Threatened Tariffs

Imports at major US retail container ports are expected to grow steadily throughout the summer despite the prospect of heavy tariffs on goods from China, according to the monthly Global Port Tracker report released today by the National Retail Federation and Hackett Associates.

“With proposed tariffs yet to be officially imposed, retailers are stocking up on merchandise that could soon cost considerably more,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “If tariffs do take effect, there’s no quick or easy way to switch where these products come from.”

Ben Hackett, founder of Hackett Associates, said: “Despite the threats and risks to trade, we continue to see solid expansion and our models are projecting this to continue throughout the year. This is driven by a high level of confidence as the economy remains strong and unemployment is at its lowest level in nearly two decades.”

Ports covered by Global Port Tracker handled 1.54 million teu (Twenty-Foot Equivalent Units) in March, the latest month for which after-the-fact numbers are available. That was down 8.6% from February because of Lunar New Year factory shutdowns in Asia but down only 0.7%, year-over-year.

April was estimated at 1.73 million TEU, up 6.4% year-over-year. May is forecast at 1.82 million TEU, up 4.3% from last year; June also at 1.82 million TEU, up 6.1%; July at 1.9 million TEU, up 5.5%; August at 1.92 million TEU, up 4.6%, and September at 1.82 million TEU, up 2.1%.The numbers forecast for July and August would each set new records for the number of containers imported in a single month, beating the previous high of 1.83 million TEU in August 2017.

The first half of 2018 is expected to total 10.4 million TEU, an increase of 5.8% over the first half of 2017. The total for 2017 was 20.5 million TEU, up 7.6% from 2016’s previous record of 19.1 million TEU.

Lloyd’s Loading List last week reported that there were several potential solutions available to help shippers avoid the full impact of new US tariffs on Chinese imports due to be implemented this summer, according to one US customs expert, including ‘tariff engineering’. But simply changing the origin or tax code of imported products in a bid to ‘game’ the system could lead to criminal charges, they warned.

Although the tariff threats issued by China and the US have not yet entered force, and the two sides could still pull back from the brink, shippers should still be urgently preparing for their implementation, according to Brenda Espeleta, VP of customs at US forwarder Flexport.

She said one means of doing so would be to bring forward China to the US import shipment dates, a strategy that a number of shipping analysts contacted by Lloyd’s Loading List suggested might already have been deployed by beneficial cargo owners (BCOs) and their forwarding partners, helping partially explain why container line April GRIs have found traction on the Transpacific box trade to the US.

“If you want to try and evade these duties, get (shipments) to the US before these 25% duties are applicable,” said Espeleta. “If your manufacturer has products ready, or if they can speed up the production in their factory, ship it soon.

“We already know you’ll have probably until the end of May at the soonest. It may be as late as July, but I wouldn’t want to bank on that. So obviously the sooner you can get product here, then you would be saving on that punitive duty.”

Another means by which companies can avoid the full negative impact of tariffs is by re-organising supply chains and production processes.

This “tariff engineering” is “perfectly legal” and simply involves ensuring that the products imported fall outside the categories that are penalised, according to Espeleta.

“If you (can) alter the product a little bit — maybe ship the parts to the US and assemble it, or leave out a component of the item that you’re importing so that it no longer has the essential character that’s described within that (tariff) heading, you can find, in many cases, an alternate heading, or a group of headings, that you can apply to the parts so it would not fall under these punitive 25% duties,” she said.

“Tariff engineering is actually a big area that many companies utilize to avoid tariffs on a regular basis before we even started considering these new 25% duties,” she added. Espeleta said manufacturers could also look at sourcing product from alternative countries to China.

Global Port Tracker, which is produced for NRF by the consulting firm Hackett Associates, covers the US ports of Los Angeles/Long Beach, Oakland, Seattle and Tacoma on the West Coast; New York/New Jersey, Port of Virginia, Charleston, Savannah, Port Everglades, Miami and Jacksonville on the East Coast, and Houston on the Gulf Coast.

NRF is the world’s largest retail trade association, representing discount and department stores, home goods and specialty stores, high street merchants, grocers, wholesalers, chain restaurants and internet retailers from the United States and more than 45 countries.