Top 12 Importing Do’s and Don’ts

Top 12 Importing Do’s and Don’ts

To operate a supply chain that meets today’s global logistics challenges, importers need to rethink some approaches. These 12 strategies can be key components of a comprehensive plan.

Every month through July 2022, U.S. import volumes set new records. While August import volumes fell short of a record, they were still 18% higher than pre-pandemic levels in August 2019, reports Descartes Systems Group, which provides software for logistics-intensive businesses.

Consumer demand, which continues to defy predictions, drives many of the delays and higher costs that importers continue to confront, says Chris Jones, Descartes executive vice president of industry and services.

As volumes surge, so does importing complexity. “Imports used to happen relatively simply, with a nice handoff from overseas to the domestic part of the supply chain,” says Brett Parker, chief commercial officer with EDRAY, which offers a managed services platform for international shippers.

He compares the previous process to a relay race. Now, however, more steps happen in unison and importers must decide between a growing number of ports and carriers. “Processes that were cobbled together over the past 20 years don’t work,” he adds.

Importers need some new strategies to address today’s global logistics challenges, Parker recommends. While no single solution meets all challenges, the following strategies can be key components of a comprehensive approach.

1. Gain Visibility to Your Shipments

When you know where your goods and shipments are, you can make more informed decisions. And given advances in visibility technology, it’s possible to access shipment locations in real time, or near real time.

Of course, it’s generally not possible to shift goods while they’re on the ocean. However, knowledge lets you intelligently adjust deployment decisions.

2. Assemble a Triage Team Across Functions

To operate in an ever-changing geopolitical environment, companies need to have triage teams at the ready. These teams are cross-functional groups that can evaluate supply chain, logistics, and other operational challenges from multiple perspectives and then move quickly, explains Cari N. Stinebower, partner and member of the regulatory defense and investigations practice with Winston & Strawn LLP, an international law firm based in Chicago.

Say a company has a robust joint venture with Russia and the political environment there deteriorates. Shutting or moving operations may be difficult, due to Russian restrictions on divestments and moving funds, Stinebower says. An established triage team can intelligently assess the situation and then act.

Latin America is another area where a triage team may be useful. In particular, the closer ties between Colombia and Venezuela have prompted concerns, Stinebower says.

Many companies had viewed Colombia as a stable trading partner. In contrast, the U.S. State Department has expressed concerns about corruption, a volatile regulatory environment, and the difficulty companies face repatriating earnings out of Venezuela.

“This shift is triggering a pause for many companies that had been considering taking advantage of Colombia’s free trade zone,” Stinebower adds.

3. Engage Your Trade Associations

Trade associations can help businesses collectively discuss with the U.S. government the challenges that arise when engaging in cross-border trade, Stinebower says. They also can assist companies in crafting programs to address these challenges.

For example, the Footwear Distributors and Retailers of America, noting that 99% of shoes sold in America are imported, has developed sourcing and compliance programs for its members. It also offers training to help industry leaders understand shifts and trends, and how best to address challenges.

4. Try New Approaches to Secure Inventory

In their efforts to minimize lost sales, many businesses have been pulling forward, or placing inventory orders ever further in advance. This practice will likely persist for a while, as it provides more leeway to identify optimal points of origin and destination, says Judah Levine, head of research with Freightos, a digital booking platform for international shipping.

To control costs while reducing the risk of delays, importers can prioritize some shipments, and then allocate the rest over time and/or between carriers, suppliers, and freight forwarders. If demand abruptly changes, importers that order early may need to mark down their goods or hold them over to the following season, Levine notes.

Another approach is to commit money to factories to secure production time. “It’s similar to a retainer, but working in partnership so that you can be nimble and pivot,” says Karl Hatt, vice president with global supply chain services firm Tompkins Solutions.

Component parts and raw materials become less flexible the more value-add that’s put into them, so committing resources to a finished product limits an importer’s ability to change them back to raw materials that can be reassigned to another product.

“Committing to production capacity without fully committing to the finished product allows the materials to be held longer in a flexible state,” Hatt says.

5. Work With Your Carriers

Until recently, when the spot shipping market proved more favorable, some shippers tried to renegotiate their carrier contracts or simply ignored them and moved to the spot market.

“That’s not happening now,” Levine says. Shippers are sticking with their carriers, preferring to strengthen these relationships and gain stability in their ability to access capacity.

At the same time, importers should ensure their carrier and supplier agreements allow for flexibility, recommends Spencer Shute, senior consultant with Proxima, a procurement and supply chain consultancy. Service-level agreements (SLAs) should include actionable, corrective plans that can help eliminate or reduce risk.

6. Continually Assess Trade Lanes and Ports

Given ongoing shifts in port delays, it makes sense to regularly review trade lanes and ports. While the shortest ocean route from Asia to North America is to the West Coast, congestion at these ports had meant some shipments languished for weeks.

Timely information needs to guide decisions to change ports. When numerous importers shifted to East Coast ports to avoid congestion, wait times jumped at the ports in Savannah, Georgia, Charleston, South Carolina, and New York/New Jersey. Trends in port delays are more dynamic than in the past.

It’s also worth monitoring the labor situation on the West Coast. The contract between the Pacific Maritime Association and the International Longshore and Warehouse Union expired in July 2022. However, as of early fall, business was proceeding pretty much as normal.

Another concern is California’s Assembly Bill 5 (AB5), which limits the ability of owner-operator truckers, as well as those in other industries, to operate as independent contractors. While the law faces legal challenges, it has generated confusion.

“With AB5 now set to go into effect, thousands of owner-operators driving in California face an uncertain future,” said Todd Spencer, president of the Owner-Operator Independent Drivers Association, in a recent interview. “Truckers will be at the mercy of the courts to interpret how the law will be applied.”

7. Actively Manage Data and Processes

The complexity of importing today requires an active, hands-on approach. For instance, if the vessel arrives, but the fees associated with a shipment haven’t been paid on time, the goods won’t make it into the terminal. “It all has to be micromanaged,” Parker says.

The same holds true when returning containers. Steamship lines often charge a per-diem if a container isn’t returned on time. However, one might charge $300 and another, $100. Without monitoring the data, an importer might not know about the differences. “Clean, actionable data is big,” Parker says.

Technology and analytics are key, allowing importers to “dig into the granularity of their data,” says Ben Bidwell, director of North American customs and compliance with logistics company C.H. Robinson. These tools enable importers to determine total landed cost, points of origin, and where duties are highest, among other information.

Particularly when dealing with large numbers of stock-keeping units (SKUs), supply chain leaders need to shift manual work to artificial intelligence-based systems that can forecast most orders.

“Modern systems today are able to combine scheduling orders based on constantly updated forecasts,” says Inna Kuznetsova, CEO of ToolsGroup, a supply chain optimization firm.

8. Look for Innovation and Incremental Wins

Supply chain and logistics professionals can find themselves spending inordinate amounts of time simply getting through the day—perhaps searching for a single container or SKU. It’s inefficient and leaves no time to innovate and improve.

With today’s challenging environment, supply chain managers need to identify ways to improve processes. One example is a “peel-off program,” in which containers belonging to participating cargo owners and trucking companies are positioned in separate stacks in the terminal. The trucker takes delivery from the grouped containers on a last-in, first-out basis—essentially “peeling” the containers from the top of the stack, eliminating the need to locate specific containers.

The reduction in congestion, waiting time, and turn times improves terminal service for all users, according to the West Coast MTO Agreement.

To ensure priority freight is moved first, importers can leverage deconsolidation services at the ports. Inland port intermodal (IPI) and reverse inland point intermodal (RIPI) are other ways to minimize delays by moving work away from port congestion.

9. Pay Attention to Customs Priorities

Among U.S. Customs and Border Protection’s priority issues is forced labor.

“Companies have to know if they’re using forced labor,” says Jo-Anne Daniels, president and founder of Trade Resources & Associates.

Products found to have been manufactured with the use of forced labor anywhere in the supply chain could be seized and/or not be allowed to enter the United States, she says.

Checking for forced labor in supply chains often requires mobilizing “boots on the ground” to examine operations, Stinebower says.

10. Know Your Products Thoroughly

Thorough knowledge of your products is essential to “successful and compliant customs transactions,” says Adam Lewis, co-founder and president of Clearit USA, a customs compliance company.

This includes knowing, among other facts, the country of manufacture, the product’s end use, its composition, and, in some cases, the manufacturing process.

“All play a role in identifying, classifying, and assessing the rate of duty for any given product,” Lewis says.

By understanding these details, importers can work with a customs professional to identify the relevant Harmonized Tariff Schedule (HTS) commodity classifications.

Allowing ample time to understand import requirements is similarly critical. “Seemingly straightforward products may require permits and additional documentation, or may be subject to anti-dumping duties,” Lewis says. Determining whether this is the case takes time.

11. Audit and Update Your Compliance Program

To ensure trade compliance programs remain up to date, importers should complete annual self-audits to review customs brokers’ powers of attorney, check names and addresses on file with U.S. Customs, review instructions for customs brokers, and request updated certificates of origin.

Bidwell recommends importers, if they haven’t already done so, determine if they qualify for Section 301 tariff refunds. In early 2022, the Office of the U.S. Trade Representative reinstated 352 previously expired Section 301 tariff exclusions. This opens about $1 billion in potential savings through the end of 2022.

12. Remember People and strong partners

Technology is critical to an effective importing operation. Yet, “no software or technology alone can prevent issues or problems in any company’s supply chain,” says Brian Bourke, chief growth officer with SEKO Logistics.

Solid logistics partners can provide options such as different routings or help convert ocean shipments to air when necessary. They also can offer transload and other warehousing and temporary storage solutions.

Strong partners, along with solid insight, software, and technology “can be the best hedge against increased volatility, uncertainty, ambiguity, and complexity,” Bourke says.

Inflation Reduction Act

Few expect the Inflation Reduction Act of 2022 to have an immediate impact on supply chain operations. Most of the incentives require materials to be sourced and manufacturing to take place within the United States, and are geared to clean energy.

The United States is currently not competitive in this market and has a limited appetite to mine raw materials, notes Spencer Shute, senior consultant with Proxima.

Brian Bourke of SEKO Logistics also anticipates little short-term impact on imports. Yet incentives to decarbonize materials handling equipment at ports, and for electric vehicles and charging infrastructure, could be tipping points for those in the logistics sector who are looking to decarbonize by 2050.

The incentives and investments could reduce the costs to convert to electric and other renewable energy sources.

Chips Ahoy

As products from cars to home appliances become smarter, demand for computer chips has spiked. The median inventory of semiconductor products dropped from 40 days in 2019 to fewer than five in 2021. And from mid-2020 and through 2021, semiconductor fabs, or foundries, operated at greater than 90% capacity, reports the U.S. Department of Commerce.

Automotive companies have experienced the brunt of the shortage, due to their just-in-time manufacturing operations, the complexity of their products, and safety regulations that require the use of specific semiconductors and production facilities.

How can auto and other companies navigate the shortage? Diversifying sourcing could be one solution, but it requires time and may not always be possible due to the availability of labor, materials, energy, and the ability to quickly establish quality controls.

“Implementing a more robust inventory management system that prioritizes fulfillment toward best orders, optimizing replenishment across all company locations and deploying AI-based solutions to reduce waste may be the best ways to preserve profitability,” says Inna Kuznetsova, CEO of ToolsGroup.