New EU Tariffs & Strategies On Mitigating Cost
EU Import Tariffs
In a statement made on Monday, April 8, 2019, the United States Trade Representative (USTR) announced a preliminary list of EU commodities eligible for additional import tariffs. This statement comes in response to a recent ruling by the World Trade Organization (WTO) that found EU subsidies were being directed towards Airbus, resulting in “adverse effects to the United States.”
Additionally, the USTR has calculated an estimated negative impact from the EU subsidies at “$11 billion in trade each year.” This estimate is currently being challenged by the EU and evaluated by a WTO arbitrator. The United States is planning to put into effect a countermeasure worth $11.2 billion per year on qualified EU imports. You can find the preliminary product list here to which the U.S. plans to apply additional import duties.
7 Ways to Mitigate Tariff Costs
The newest EU tariffs being discussed–in addition to tariffs on $250 billion of Chinese goods, the still-developing USMCA agreement with Mexico and Canada, and soaring costs of commercial freight at the US/Mexico border–drive home the need for a cost mitigation plan for your supply chain. Consequently, we have compiled a list of 8 strategies that you can implement to mitigate the new tariff costs:
- Reclassification – Tariffs are placed on different classifications of products. The first way to avoid new tariffs is by reclassifying items into related, yet unaffected categories. One downfall to this approach is the possibility that your reclassified items may be subject to the entirely different tariffs.
- Engineering – This would involve buying parts and materials for your item that do not fall under any of the current tariff umbrellas. However, this could prove difficult for your engineering team(s), depending on the items and overall complexity of your product.
- Buying Ahead – This is the strategy that many companies have started utilizing when the tariffs went into effect. And while this is effective for stockpiling inventory, it can be difficult to forecast a budget for these scenarios with gridlocks and fluctuating lead times.
- Sharing Tariffs – If your company has buying power with the supplier(s) of your tariffed goods, then you may be able to negotiate sharing the tariff burden in order to maintain a profitable partnership. Granted, this tactic will not work if your supplier knows they have little competition.
- Changing Supplier Locations – If your supplier has locations in countries unaffected by the new tariff policies (China to be specific), then another way to avoid tariffs is sourcing from those other locations.
- Finding New Suppliers – Searching for a new supplier, while time-consuming, may be worthwhile for your supply chain in avoiding the new tariff policies. Southeast Asia–specifically Thailand and Vietnam–is becoming a hot spot for the global supply chain.
- Insourcing – From start to finish, moving your inventory production in-house would help you divert the tariff crisis altogether. However, purchasing and setting up the necessary equipment may prove to be both an expensive and time-consuming venture.
BM2 Freight Services, Inc.
Phone: (859) 308-5100
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