Trade uncertainties have gone global

Technology – The Crucible of the Matter

Technology becomes a huge enabler in all this. It is essential in everything from updating duties in real time, to insuring customs compliance, to analyzing the tradeoff between, say, logistics costs and landed costs, or lower tariffs and higher transportation costs and longer lead time. It’s vital for determining how quickly goods need to be shipped to avoid higher duties and which vessels and ports offer the most appropriate ways of transporting.

“Technology is the only way that you can get to get to the end of the tunnel,” said Wayne Slossberg, admittedly not an unbiased source. Slossberg is senior vice president at QuestaWeb, a Clark, NJ-based technology provider of global trade management software.

But the complexity of import duties alone demand sophisticated responses. Just one example: In the US, the harmonized tariff codes “can literally change in minutes,” explained Slossberg. The only way possible to keep current is to be linked electronically to customs data, which software such as that offered by QuestaWeb provides.

That data is necessary to determine not just the price of the items being directly affected, but the impact as well on the cost of a finished good and on business in general, said Rich Roche, Mohawk’s vice president of international transportation. “We’re able to run reports and cross-reference and come up with what the new duties would be and what their total impact would be,” he said.

As we are all aware, technologies are evolving rapidly and logistics is no exception. Technological resources will be directed toward solving increasingly more thorny trade-related issues. Data analytics is one area that could prove invaluable. Terri Sandine is Mohawk’s’ IT director. She explains how, as companies like hers collect data on how tariffs are being leveled and what their outcomes are, machine learning can be harnessed to predict likely courses of action based on past behavior. This, she said, might enable companies such as Mohawk to recommend strategies and action before the tariffs are actually imposed, in anticipation of such events. 

Trade Shocks No Longer Shocking

As trade disputes widen and become more capricious, the terrain is becoming more unsettled. The new abnormal is becoming increasingly normal. On a day early this month, Trump said he would impose tariffs on steel and aluminum imports from Argentina and Brazil because of supposed currency manipulation. Both countries had been exempted when Trump first ordered the steel and aluminum tariffs last year. Then, the following day, Trump launched a trade missile strike against France, threatening billions of dollars of duties on French luxury products because of French taxes on digital services.

The world barely blinked.

Asian advisory firm Dezan Shira & Associates produces China Briefing, which offers a daily timeline of what it terms the US-China trade war. China Briefing marks “day 1” as July 6, 2018, when US Customs began collecting a 25% duty on 818 imported Chinese product categories. But the site traces the war to March 23, 2018, when the US imposed a 25% tariff on most steel imports, and a 10% tariff on aluminum.

So, we’re at Day 500+ and counting. That doesn’t mean we should become inured to this brave new world of trade shocks. It does mean there’s no excuse for some forward planning. 

Risk reduction is key, both in the shorter and in the longer terms. 

Pittelli, for one, suggests a two-tiered strategy for American companies, although this approach is applicable for others as well: One team looks at the more immediate issue of trade compliance. Another delves into future supply chain diversification. React as quickly and as sensibly to what’s at hand, while planning on ways to minimize future trade shocks. 

One big lesson has come from these 500-odd days of escalating trade tensions: Source diversification is essential. That doesn’t mean simply trading out a factory in China for one in Vietnam, however. For logistics providers, it involves investigating lift capabilities, both sea and air, as well as port, rail, airport and road infrastructure. It involves such factors as speed to market and reliability. “As [clients] develop new and immature supply chains, we’re finding ourselves having to move in multiple directions to ensure that their products aren’t interrupted, the supply chain is not interrupted,” said Kuhn.

Logistics providers must work closely with shippers to arrive at sensible solutions. This may mean, for example, diversifying suppliers, not necessarily countries, at least in the shorter term. It may mean adding more port options, or more carriers, both land and sea. Panicked decisions are rarely advantageous.