Ask Ahab

Issue 83

Dear Ahab:

I’ve been reading up on tariffs lately and I am wondering if you know of any tactics I can utilize in my supply chain strategy to protect my business from these wild tariff fluctuations and make sure I’m successful?

– Lading in the Wings

Dear Lading in the Wings:

While there’s no “one size fits all” tariff plan, I’d recommend looking into warehouses. With the help of a bonded warehousing partner, you can bring your cargo to the United States and store it for up to five years in a bonded warehouse before it clears customs. That last part of the description is crucial, because you do not have to pay tariffs until your cargo clears customs. In other words, you can wait out the tariffs with your cargo in the U.S. or wait out tariffs with your cargo overseas.

The other option you can take advantage of is Free Trade Zones (FTZ), which are specific areas near ports through which companies can move goods into or out of a country with duties reduced or removed. For duty purposes, the companies that ship into or out of an FTZ are considered outside the United States, allowing cargo to traverse the zone without incurring import duties. You’ll need to read up on which FTZ allows which cargo through, and what restrictions exist for each FTZ, but it’s a compelling way to tip the supply chain scales in your favor.

It’ll require some research and advanced planning, but if you’re able to make bonded warehouses and Free Trade Zones part of your playbook, you’ll be well-equipped to meet the tariff challenges of today . . . and tomorrow.

Dear Ahab:

After seeing reports about two court rulings that said the Trump Administration’s use of the International Emergency Economic Powers Act (IEEPA) to impose reciprocal tariffs was unlawful, I was wondering if this means that I no longer have to pay tariffs?

– Ever Hopeful

Dear Ever Hopeful:

The courts striking down some trump tariffs is a big deal for our industry, but we need to be careful and avoid seeing this for something bigger than it is. The courts didn’t outlaw tariffs entirely, they just said the ability to use IEEPA to impose reciprocal tariffs was unlawful. Also, because the government appealed those court rulings, you’ll still have to pay the reciprocal tariffs until there is a ruling on the appeal.

Even then, regardless of the outcome of the appeals ruling, there is a strong likelihood that the case will be appealed to the Supreme Court before a final decision on the use of IEEPA to impose reciprocal tariffs is put to bed. In short, this is going to take a while. Also, you can bet that the Trump Administration is looking for additional options that will allow them to continue to impose reciprocal tariffs. Chances are they already have something they can use should the courts rule against their initial justification.

Therefore, take advantage of the current suspensions of reciprocal tariffs and ship your cargo as quickly as possible. Hopefully, by the time the courts make their decisions we will all have some clarity – and plenty of cargo stateside.

Dear Ahab:

What advice do you have for a shipper who’s just feeling all tariff-ed out right now? Between the introduction and rolling back of all these tariffs, and now the court decisions, I’m just exhausted.

— Duty Patootie

Dear Duty Patootie:

I’m hearing this sentiment from an increasing number of industry insiders. You’re not alone! The best advice I can give is to keep a level head. Remember, the market will eventually adjust, and the role of tariffs in the supply chain will make itself clear.