Chances are that your business has experienced either a drop in sales or an increase in costs due to the US-China trade war. You’ve likely experienced both. Since this series has covered how the trade wars began, the details of current and pending tariffs, and which types of business are being impacted, you may now be thinking “Great. Now what? How does my business stay afloat?” This article is dedicated to going over some trade war tariff solutions that your business can persue to help reduce the costs and risk caused by the US-China trade wars.
If you want to catch up on how we got here with the trade war or the impact it is having on US and Chineses businesses, be sure to read the other articles in this series.
Trade War Tariff Solution: Source Goods from Countries Outside of China
This is a thought that many similarly impacted businesses are having. According to a survey conducted by the CNBC, 65% of American businesses consider looking for suppliers outside of China. It is a valid option to consider, but takes a lot of planning to implement. Let’s face it, you probably spent significant time finding your current supplier, testing their capabilities, and making sure they are trustworthy and dependable businesses. Simply looking elsewhere is a timely process. You need to do proper due diligence, test the quality of the products as you strive to deliver the same quality your customers have come to expect. Your job, and that of marketplaces, is to maximize customer experiences and minimize negative reviews, so the last thing you would want is to partner with an unreliable supplier.
How to Find Other Asian Country Suppliers
- Using Search Engines
The most obvious way is to simply use your favorite search engine. Using keywords relevant to the products you’re looking to sell combined with words like supplier, sourcing, wholesaler, distributor or manufacturer and a country name is one way to do it. For instance, “mobile phone accessories Vietnamese supplier”.
- Reach Out to Your Network
Another way is to make use of that network that you’ve been building over the years. It’s likely some of the entrepreneurs you met at that trade show or event imports goods from other countries in Asia — or knows someone who does.
- Use Platforms That Bring Merchants and Buyers Together
You could make use of websites like globalsources.com. Platforms such as these list out a whole range of products and their manufacturers, so you can contact them directly. Alibaba may be known as a Chinese platform, but it is not just limited to Chinese merchants. You can simply use their search bar, switch its search feature from products to suppliers and type in a country name. For instance, Vietnam, India or Thailand. This search query will present you with a list of all suppliers from that country. China Importal created an extensive guide for suppliers and manufacturers in Vietnam. These are just some examples. You will be able to find many more for other countries as well.
Trade War Tariff Solution: Shipping Through Hong Kong
While Hong Kong is technically part of China, it has been a special administrative region since the British returned the city to the People’s Republic of China in July, 1997. There is a border separating the two regions and Hong Kong has its own set of laws. It is considered the second most free economy in the world after Singapore, while China ranks somewhere in the low 100s. Companies should think of Hong Kong as a city conveniently located near their Chinese manufacturer — with excellent infrastructure, and where English is widely spoken.
Hong Kong may not be recognized as an independent nation, but it does have its privileges pertaining to international trade. One of such privileges is that while the trade wars rage in mainland China, those tariffs do not apply to parcels passing through Hong Kong. Already being a tax-free haven for entrepreneurs worldwide, the US further increased the De Minimis from $200 in 2016 to $800 today on inbound shipments from Hong Kong. This threshold allows US businesses to ship parcels from Hong Kong to the United States up to a value of $800, duty and tax-free. No duties or taxes are collected. The De Minimis is meant for and applies primarily to individual parcels shipped from a business to consumers, but is also used as a loophole for B2B shipments. Shipping your goods from your supplier in China to Hong Kong is also tax free.
So, Why Isn’t Everyone Shipping from Hong Kong Instead of China?
There may not be enough knowledge within the industry about the threshold. Perhaps entrepreneurs worry that shipping through Hong Kong may take more time as it needs to go from the supplier to a Hong Kong-based warehouse. This is far from the truth. Shipments coming from Hong Kong are generally cleared much faster than those from mainland China and with the city’s excellent port and courier selection, goods can be sent to the US as fast as within a day. Hong Kong has an excellent infrastructure to facilitate fast shipping.
One thing to keep in mind are the labor costs, which is much lower in China. That means your storage and order picking costs will generally be lower than in Hong Kong, allowing you to save some money. However, dissatisfied customers who wait forever to receive their package will also cost you money in the long run. It’s definitely is a trade off.
Trade War Tariff Solution: Partner with Floship
Floship is a leading e-commerce order fulfillment provider based in Hong Kong and run by forward-thinking management. As a company, they have over 5 years experience shipping goods primarily made in China, from Hong Kong to the rest of the world. Their founders understand US business owners and recognized early on that there would be a need for a shipping solution that allows entrepreneurs to minimize the impact of any enacted trade war tariff.
Floship’s goal is to alleviate international shipping concerns such as shipping delays, high fulfillment costs, and reliability of Hong Kong based warehouses and couriers. This is done tailoring a solid shipping strategy for every business customer looking to ship China-made products to US customers.
Orders can be stored and processed in Floship’s warehouses in Hong Kong. The entire fulfillment process is automated and facilitated by proprietary software that connects to over 65 e-commerce platforms and marketplaces, such as Newegg, with their warehouse and a long list of couriers. Orders are generally picked and packed within 24 hours and no manual syncing is required. You can choose what couriers you’d like to ship your orders with, be it by air or sea freight.
We don’t just offer shipping solutions. We offer our expertise. We offer a thorough consultation, try to understand your business and take it from there. – Steve Suh, Floship Founder
Benefits for Shipping Parcels Under $800
As previously discussed, shipping through Hong Kong allows you to avoid tariffs as long as you keep the value of your parcels under the threshold of the $800. This strategy allows you to have improved lead times as parcels shipped through Hong Kong generally experience more lenient inspections and thus don’t stay stuck at customs as long as goods shipped directly from China.
Benefits for Shipping Large Quantities
Right now, you may choose to ship large quantities of inventory from China to the US, just to keep the costs manageable and make sure you have enough stock at your local warehouse to manage orders that come in. However, this makes it difficult to react to market changes and trends. You may end up sitting on left-over stock due to a sudden yet significant drop in demand. Shipping from Hong Kong has much faster lead times and thus, you would be able to react faster to market changes. This allows you to order smaller quantities at a time, and quickly order and ship more within days.
Benefits for Battery Shippers
It is prohibited to ship parcels containing batteries directly from China, be it by air freight or sea freight. After manufacturing, such products are usually transported to Hong Kong where parcel shipments are arranged accordingly. Many of the world’s top international postal carriers have operations in Hong Kong capable of handling battery product shipments. Deliveries can be made direct to consumers worldwide in as fast as 1-2 days.
Things to Keep in Mind When Shipping Batteries
- Make sure you have the latest MSDS / UN 38.3 documents ready as these documents are required for approval when shipping via air
- Typically, if the battery is contained inside the product, postal and express carriers will accept shipping the products
- There would usually be a 1-2 day delay when picking and packing in China versus picking and packing in Hong Kong due to the transport of battery parcel shipments from China to Hong Kong
Update: Shipping During a Pandemic
As if adjusting your business to the ongoing US-China trade wars wasn’t enough, businesses now have a much larger concern. COVID-19, better known as the coronavirus is causing further delays on shipments from China (among other countries), manufacturing delays and people are increasingly avoiding brick & mortar stores.
With millions of people worldwide staying indoors to prevent getting infected, there are definitely opportunities to continue growing your e-commerce business. A March 3rd study by eMarketer shows that 27% of Americans were avoiding going to physical stores, and you can bet that has drastically increased recently. In other countries, this percentage is even higher. There are also an increasing number of professionals working from home. This presents opportunities for online businesses, such as your own. However, ports around the world are heavily restricted due to precautions, how do you ensure that you can continue to deliver?
Be sure to check out this article on shipping e-commerce orders internationally during the coronavirus pandemic and learn your best options to get orders to your customers on time.