In the ever-evolving world of global trade, staying informed about regulatory changes is crucial for businesses of all sizes. We are writing to inform you of significant changes in U.S. customs regulations that will fundamentally reshape global supply chains. These reforms aim to enhance oversight and transparency for low-value shipments, ensuring a fairer and more secure trading environment for all stakeholders.

Key Takeaways

• Introduction of the ELVS Rule: The Entry of Low-Value Shipments (ELVS) rule is set to overhaul the current customs framework, introducing stricter oversight and eliminating certain duty exemptions.
• Increased Reporting Requirements: Importers will now need to provide detailed shipment data, including product descriptions, HTS codes, and supplier information, enabling better risk assessment by customs authorities.
• Impact on E-commerce and Small Importers: Major e-commerce platforms and small businesses importing low-value goods may face higher operational costs and need to adjust their shipping strategies to comply with the new regulations.
• Protection for Domestic Markets: The reforms aim to level the playing field for U.S. businesses by reducing unfair competition from low-cost imports and enhancing the enforcement capabilities of customs authorities.
• Implementation Timeline: The ELVS rule was published on January 17, 2025, with a 60-day public comment period. Final regulations are expected to take effect in the latter half of 2025, following the completion of the feedback process.

The Current Situation: Millions of Shipments with Minimal Oversight

For years, the de minimis provision has governed the importation of low-value shipments into the United States. Under this rule, any shipment valued at $800 or less is exempt from customs duties, detailed reporting, and formal entry requirements. This exemption was initially designed to streamline the processing of small shipments, reducing the administrative burden on customs authorities and saving resources. However, in the era of booming e-commerce, this seemingly beneficial provision has led to unintended consequences.

Every day, over 4 million low-value shipments enter the U.S., many originating from China and other global e-commerce platforms. This surge is driven by the exponential growth of online shopping, where consumers expect fast, affordable shipping for a vast array of products. Unfortunately, this influx has also been exploited for illicit activities:

• Lack of Transparency in the Supply Chain: Limited reporting requirements make it challenging for customs authorities to identify high-risk goods, such as counterfeit products or illegal items.
• Harm to Local Businesses: Cheap imports with minimal oversight create an uneven playing field, allowing foreign competitors to undercut domestic businesses unfairly.
• Strain on Customs Authorities: The sheer volume of shipments overwhelms customs officials, reducing their ability to conduct thorough inspections and increasing the risk of contraband slipping through.

Introducing the ELVS Rule: A Game-Changer for Global Trade

In response to these challenges, the U.S. government has proposed the Entry of Low-Value Shipments (ELVS) rule, a comprehensive reform aimed at overhauling the current customs framework. The ELVS rule introduces several significant changes designed to enhance oversight, reduce illicit trade, and protect domestic markets.

1. Stricter Oversight for Low-Value Shipments

Under the ELVS rule, importers will no longer be able to send low-value shipments with minimal scrutiny. Instead, detailed data must be submitted for each shipment, including:

• Product Descriptions: Clear and accurate descriptions of the goods being imported.
• Harmonized Tariff Schedule (HTS) Codes: Standardized codes that classify the goods for tariff purposes.
• Supplier or Manufacturer Information: Details about the source of the goods to facilitate traceability.

This information will enable customs authorities to conduct risk analyses before the goods arrive, allowing for targeted inspections and reducing the likelihood of high-risk items entering the country unnoticed.

2. Ending Duty Exemptions for Certain Products

The ELVS rule will also eliminate duty exemptions for specific products subject to trade remedies, such as Section 301 tariffs on Chinese imports. Previously exempt from duties under the de minimis provision, these goods will now require full customs processing. This change aims to ensure that trade policies are consistently applied, preventing the circumvention of tariffs and promoting fair trade practices.

3. Formal Entry Requirements for Select Shipments

Customs authorities will gain the discretion to mandate formal entry procedures for low-value shipments when necessary. This means that shipments suspected of smuggling or trade violations will undergo comprehensive inspections, regardless of their declared value. This provision enhances the ability of customs officials to enforce regulations effectively and combat illicit trade.

How Will This Impact the Market? What Businesses Need to Know

The ELVS rule is poised to have far-reaching implications across various sectors of the market. Here’s how different stakeholders might be affected:

• E-commerce Platforms: Companies like AliExpress and Shein, which rely on small, low-cost shipments to deliver products quickly, may need to adjust their shipping strategies or absorb additional costs associated with increased regulatory compliance. This could involve investing in more sophisticated logistics solutions or partnering with customs brokers to ensure adherence to the new requirements.
• Small Importers: Smaller businesses that import inexpensive goods will face higher costs due to the new reporting requirements and potential delays in shipment processing. This could impact their profit margins and competitiveness in the market. To mitigate these effects, small importers may need to streamline their supply chain processes or explore alternative sourcing options.
• Domestic Businesses: U.S. businesses stand to benefit from reduced unfair competition posed by foreign platforms. With stricter oversight on imports, domestic companies can compete on a more level playing field, fostering innovation and growth within the local economy. This protection can lead to increased investment in domestic production and job creation.

Timeline for Implementation: What to Expect

The proposed ELVS rule was published on January 17, 2025, marking the beginning of a 60-day period for public comments and feedback. During this time, stakeholders have the opportunity to voice their opinions and suggest modifications to the rule. Once the feedback process is complete, final decisions will be made, and the rule is expected to take effect in the second half of the year following the publication of the final regulations.

Businesses should prepare for this transition by:

• Reviewing Current Import Practices: Assessing how the new requirements will impact existing operations and identifying areas that need adjustment.
• Training Staff: Ensuring that relevant personnel are educated about the new regulations and understand how to comply with the updated reporting and documentation processes.
• Investing in Technology: Implementing software solutions that can handle the increased data submission and streamline the customs compliance process.

Looking Ahead: Goals and Aspirations of the ELVS Rule

The primary objective of the ELVS rule is to create a fairer, safer, and more transparent trading system. By strengthening customs enforcement capabilities, the U.S. aims to ensure that imported products meet stringent standards for quality, legality, and safety. Additionally, the rule seeks to:

• Enhance Supply Chain Visibility: Improved data collection and reporting will provide customs authorities with better insights into the flow of goods, enabling more effective monitoring and regulation. Enhanced visibility can also help businesses optimize their supply chains, reducing delays and improving efficiency.
• Combat Illicit Trade: By targeting high-risk shipments, the ELVS rule aims to reduce the influx of counterfeit and illegal goods, protecting consumers and legitimate businesses. This effort not only safeguards the integrity of the market but also upholds consumer trust in imported products.
• Promote Economic Fairness: Ensuring that all businesses adhere to the same regulatory standards fosters a more equitable market environment, encouraging fair competition and innovation. This fairness can lead to a more dynamic and resilient economy, benefiting consumers with a wider array of quality products.

However, it’s important to acknowledge that the transition to these new regulations may create short-term uncertainties. Importers and companies will need to adapt to the new requirements and navigate the increased costs, which could impact their operations and profitability during the adjustment period. Businesses should proactively engage with customs brokers and trade compliance experts to smooth this transition and minimize disruptions.

Conclusion: A Fundamental Shift in Global Trade

The ELVS rule represents a groundbreaking measure that has the potential to significantly alter the dynamics of global trade. By shifting the balance of power between international e-commerce platforms and the U.S. domestic market, this regulation aims to create a more equitable and secure trading environment. For businesses and consumers worldwide, staying informed about these developments is essential to effectively manage supply chains and mitigate potential disruptions.

At Unicargo, we are committed to helping our customers and partners navigate these changes seamlessly. Whether you have questions about the new regulations or need assistance adapting your operations to comply with the ELVS rule, our team is here to support you every step of the way.

Feel free to contact us for any assistance regarding this matter, or any other questions you may have.

The post Navigating the New Landscape: How U.S. Customs Reforms Will Transform Global Supply Chains appeared first on Unicargo.

International trade is complex, especially for global traders dealing with regulations, tariffs, and paperwork. One misstep at customs can lead to delays and financial losses. That’s where an Importer of Record (IOR) becomes indispensable. Acting as your trusted representative, the IOR ensures your goods clear customs smoothly and legally.

But what exactly does an IOR handle, and why is this role so critical? This article explores the responsibilities and advantages of working with a professional IOR, highlighting how they can simplify your international transactions, prevent costly errors, and ultimately improve your global supply chain.

Introduction to the Importer of Record (IOR)

In global trade, the Importer of Record (IOR) is a key player. The IOR is the legal entity responsible for ensuring that imported goods meet all legal and regulatory requirements of the destination country. As a global trader, understanding the role of the IOR is important for smooth and compliant operations. The IOR serves as the primary point of contact for customs authorities and takes on significant responsibilities in the import process, including filing accurate customs documentation, paying applicable duties and taxes, ensuring compliance with import regulations, and keeping meticulous records for potential audits. This is especially beneficial for traders who may not have a legal entity established in the importing country.

Pro Tip: Did you know that the IOR is also responsible for ensuring that imported goods comply with product safety and labeling requirements in the destination country? This often overlooked aspect can lead to significant delays and penalties if not handled correctly. Unicargo’s team of experts is well-versed in these details, ensuring your imports meet all necessary standards.

Beyond paperwork, the IOR must possess a deep understanding of complex trade laws, stay up-to-date on constantly changing regulations, and proactively manage potential risks associated with imports. The IOR acts as a guardian of compliance, ensuring your shipments meet all necessary requirements. This is crucial for maintaining the integrity of global supply chains and supporting the smooth flow of international commerce. Failure to comply with import regulations can result in serious consequences, including hefty fines, penalties, and costly shipment delays. This highlights the importance of the IOR’s role in ensuring seamless and compliant international trade.

Roles and Responsibilities of an Importer of Record

The Importer of Record (IOR) plays a key role in ensuring compliance with all customs regulations and overseeing the clearance process for imported goods. The IOR is responsible for accurately calculating and paying duties and taxes associated with each shipment. As the primary point of contact for customs authorities, the IOR is accountable for adhering to all relevant laws and regulations, and effectively handling the complexities of international trade on behalf of the importer.  Let’s break down their key responsibilities:

Compliance and Customs Clearance

Managing compliance and customs clearance is a demanding task. The IOR shoulders the responsibilities of managing documentation, guaranteeing regulatory adherence, and facilitating smooth customs processes. This requires expert knowledge of international trade regulations and customs procedures. They collaborate with customs brokers to prepare and submit accurate documentation, including commercial invoices, packing lists, certificates of origin, and import licenses.

Pro Tip: Leverage Free Trade Agreements (FTAs) to your advantage. Utilizing FTAs can significantly reduce duty costs for eligible goods. Unicargo’s experts can help you identify and choose applicable FTAs, maximizing your cost savings.

Your IOR possesses a deep understanding of import/export regulations, ensuring the correct application of Harmonized System (HS) codes, adherence to country-specific import requirements, and staying updated on evolving trade laws and restrictions. They facilitate customs clearance by coordinating with customs officials, addressing any queries or concerns promptly, and paying import duties and taxes on time. They also manage potential customs audits, maintaining detailed records and demonstrating due diligence in compliance efforts on your behalf.

Payment of Duties and Taxes

Accurate and timely payment of duties and taxes is crucial. Your IOR takes on this responsibility, ensuring all import duties and taxes are calculated correctly and paid on time. This requires a deep understanding of various calculation methodologies and their application to different types of goods. Your IOR will accurately determine the value of your imported goods, apply the correct tariff classifications, calculate applicable duties and taxes (e.g., VAT, GST), and ensure timely payment to customs authorities.

Pro Tip: Consider using duty drawback programs to recover duties paid on imported goods that are subsequently exported or used in the production of exported goods. Unicargo’s expertise in duty drawback can help you maximize your cost recovery potential.

Choosing the Right IOR Service Provider

Choosing the right Importer of Record (IOR) service provider is a critical decision that can significantly impact your operational efficiency, compliance, and bottom line. A professional IOR with experience in handling imports and complex logistical requirements can offer numerous benefits, including simplified customs clearance, regulatory compliance, and reduced liability for your business. Conversely, failing to engage a reputable IOR can expose you to significant risks, such as delays, fines, and legal complications that could severely disrupt your supply chain and damage your reputation.

Benefits of Working with a Professional IOR

Partnering with a professional Importer of Record (IOR) service provider can significantly enhance your import operations and simplify your global supply chain. These experts bring a wealth of benefits to your business, ensuring smooth and efficient international trade processes.

They provide unparalleled expertise in international trade regulations, helping you stay compliant with ever-changing rules and avoid costly mistakes. They streamline the customs clearance process, reducing delays and getting your goods to market faster. By mitigating risks and ensuring compliance, they minimize legal and financial risks associated with importing, protecting your business from potential penalties and reputational damage.

Pro Tip:  A professional IOR can help you leverage Bonded Warehousing to defer duty payments until goods are released into the market, improving cash flow and providing greater flexibility in managing your inventory.

Professional IORs also offer significant cost savings through optimized duty and tax calculations, ensuring you pay the correct amounts without overpaying. They provide access to industry knowledge and best practices, allowing you to leverage their experience to improve your operations.

Risks of Not Using an IOR

Attempting to manage international imports without an Importer of Record (IOR) can expose your business to significant risks and potential problems. Without the expertise of an IOR, you assume full responsibility for compliance with import regulations, a challenging task that can lead to non-compliance, resulting in penalties, fines, shipment delays, and disruptions. Incorrect documentation or missed requirements can cause goods to be held at customs, leading to costly delays and potential storage fees.

Furthermore, you could face legal action for import violations, potentially damaging your brand reputation and impacting your ability to conduct business internationally.

Pro Tip:  Failing to properly classify your goods can lead to significant overpayment of duties. A professional IOR can ensure accurate classification and help you avoid unnecessary costs.

Different Types of IORs

Understanding the different types of Importer of Record (IOR) services available is important for choosing the best approach for your business needs. There are three main types:

• Direct IOR: Your company acts as its own importer of record, assuming all responsibilities and liabilities. This offers full control but requires extensive knowledge of import regulations and processes.
• Indirect IOR: You use a third-party service provider to handle IOR duties on your behalf. This reduces your liability and simplifies the process but may be more expensive.
• IOR Agent: A specialized entity acts as the IOR for multiple companies. This provides expertise and flexibility but may have limited capacity during peak seasons.

When choosing an IOR service, consider your import volume, familiarity with international trade regulations, risk tolerance, and budget.

Pro Tip:  For importers with a global presence, consider an IOR provider with a network of experts in multiple countries to ensure consistent compliance and efficient operations across different markets.

Common Questions about the Importer of Record

Who Can Act as the Importer of Record?

To act as an Importer of Record, you must meet specific legal and financial requirements set by customs authorities in the importing country. This typically includes being a registered legal entity in the importing country, possessing valid import/export authorization, demonstrating financial solvency, and maintaining thorough knowledge of import regulations and compliance procedures.

As the Importer of Record, you assume significant responsibilities for ensuring compliance, paying duties and taxes, and maintaining proper documentation. If you’re unsure about your ability to fulfill these requirements, consider partnering with a licensed customs broker or freight forwarder who can guide you through the process or act as the Importer of Record on your behalf.

Pro Tip:  When choosing an IOR, ensure they have a proven track record of compliance and a deep understanding of the specific regulations governing your industry and the countries you import from.

Importer of Record vs. Consignee

The Importer of Record (IOR) and the consignee are distinct entities with different responsibilities. The IOR bears legal responsibility for the shipment, guarantees compliance with import regulations, pays duties, taxes, and fees, and may or may not take physical possession of the goods. The consignee is the recipient of the imported goods, taking ownership upon arrival and managing storage and distribution, but doesn’t necessarily handle legal or regulatory aspects.

Understanding these distinctions will help you make informed decisions when structuring your import operations.

Pro Tip:  Clearly defining the roles and responsibilities of the IOR and consignee in your import contracts can help avoid confusion and potential disputes.

Changing the Importer of Record

While possible, changing the Importer of Record during the import process can be complex. To do so, you’ll need to follow specific legal procedures and provide updated documentation, including notifying customs authorities, submitting amended import declarations, and transferring duties and responsibilities to the new IOR.

It’s crucial to understand the potential implications of changing the IOR, such as potential delays, additional costs, and possible disruptions to your supply chain.

Pro Tip:  If you’re considering changing your IOR, consult with a professional provider like Unicargo to assess the potential impact and ensure a smooth transition.

Unicargo’s IOR Solutions: Expertise and Efficiency for Global Importers

Unicargo’s IOR solutions are designed to meet the needs of global traders, leveraging deep industry expertise and technology to simplify and improve your import operations. As your trusted importer of record, Unicargo understands the complex landscape of international trade regulations, ensuring compliance and minimizing risks for your shipments.

With Unicargo’s IOR service, you benefit from:

• Extensive Compliance Expertise: Ensuring your imports meet all necessary requirements and minimizing the risk of penalties and delays.
• Seamless Customs Clearance: Facilitating efficient customs clearance, minimizing delays, and ensuring your goods reach their destination on time.
• Efficient Management of Duties and Taxes: Ensuring accurate and timely payments, optimizing your import costs, and minimizing financial risks.
• Real-Time Visibility and Control: Providing real-time tracking and visibility into your shipments, allowing you to monitor progress and make informed decisions.
• Scalability and High-Volume Handling: Managing imports of any size, ensuring efficient processing and timely delivery.
• Global Team, Local Expertise: Our teams are physically present in Asia, EMEA, and North America, providing you with efficient and agile solutions, around the clock.

Unicargo helps you optimize your import operations, reduce costs, and mitigate risks. Partnering with Unicargo allows you to focus on growth while they handle the complexities of international trade.

Contact Unicargo today to schedule a consultation with our experts and discover how our tailored IOR solutions can improve your global import operations and drive significant cost savings for your business.

Additional sources:

World Trade Organization (WTO): www.wto.org

World Customs Organization (WCO): www.wcoomd.org

U.S. Customs and Border Protection (CBP): www.cbp.gov

The post Understanding the Role of an Importer of Record (IOR) appeared first on Unicargo.

However, there’s a savior for this mess: cargo or freight insurance. But what is the purpose of freight insurance, and is cargo insurance worth it?

In this post, we’ll answer these questions, discussing the role and importance of freight insurance for businesses and sharing tips for obtaining & optimizing it. Plus, we’ll guide you through the process of filing a claim. So, let’s jump right in!

The Importance of Cargo Insurance: Key Takeaways

• Cargo insurance protects against the loss of goods during shipment by covering various risks during air, sea, or land transport.
• Different policy types exist, including all-risk coverage, open coverage, total loss only, and more.
• Cargo insurance has exclusions like an inherent vice, improper packaging, and contraband.
• Cargo insurance is essential for businesses to safeguard against transportation risks, theft, natural disasters, regulatory compliance, supply chain disruptions, and geopolitical situations.
• Cargo insurance enhances financial protection, ensures compliance with trade regulations, and boosts a company’s credibility.
• When obtaining cargo insurance, businesses should consider factors like the type of cargo, transportation mode, cargo value, destination, route, and transit duration.
• When dealing with cargo insurance claims, understand your policy, document thoroughly, choose reliable partners, and act promptly.
• In the event of a claim, notify your carrier immediately, gather evidence, inform your insurer, and engage in negotiations for fair compensation.
• Regular assessments, risk management strategies, and strong partnerships with logistics partners help optimize cargo insurance coverage.

Understanding Cargo Insurance

Cargo insurance is a deal between you and the insurance company to protect your goods while shipping. And what does cargo coverage cover? It covers shipments of all sizes, whether on pallets, in containers, or as bulk cargo, or going by air, sea, or road.

Unlike marine insurance, which is mainly for sea transport, cargo insurance combines risks from different shipments to spread the cost of losses.

But what does cargo insurance do, exactly?

You pay a premium to the insurance company, and in return, they compensate you if something happens to your cargo, like natural disasters, accidents, or piracy.

Cargo insurance isn’t one-size-fits-all like carrier liability. It can be tailored for specific trips or set up to cover all your company’s shipments for a certain period. This flexibility is unique compared to other types of insurance.

Besides, if you ever need to make a claim, having cargo insurance can speed up the process because you typically declare the value of your goods before shipping, making it easier to determine the compensation you should receive.

Types of Cargo Insurance Policies

Cargo insurance comes in two primary flavors: one for land and another for marine (which also includes air cargo). Each type has its own set of coverage and protection rules tailored to what the owner or shipper needs based on the risks involved. Here are some common types of cargo insurance policies:

• All Risk Coverage – This insurance provides the most extensive protection, covering all types of physical loss or damage from external causes. It’s ideal for valuable, delicate, or perishable items, safeguarding against accidents, natural disasters, mishandling, piracy, and improper storage.
• Open Cover – An open cover cargo policy is when the insurer covers multiple cargo shipments. There are two types: renewable and permanent/non-renewable. Renewable policies need renewal after a set period, often for single consignments. Whereas permanent/non-renewable policies cover numerous shipments over a longer duration without renewal.
• Total Loss Only – This policy kicks in when the entire shipment is lost. It’s chosen when the risk of partial damage is low, or the cost of such damage is insignificant.
• Named/Specific Perils – This policy covers damage or loss caused by listed perils like fire, theft, or collision. While less comprehensive than All Risk coverage, it can be customized for specific cargo-related risks.
• Contingent – Contingent cargo insurance acts as a contingency plan for shippers. It is designed for complex claims between shippers and carriers. This type of insurance plan kicks in when standard cargo insurance falls short, ensuring you’re covered when you need it most..
• Land Cargo Insurance – Covers cargo moved by land, including trucks and utility vehicles, protecting against theft, collision damages, and other risks in land freight.
• Marine Cargo Insurance – Protects goods transported by sea and can extend to cover air transportation.
• Air Cargo Insurance – Covers goods transported by air, ensuring protection during air transit.

What Cargo Insurance Doesn’t Cover— Common Exclusions and Limitations

Though cargo insurance is vital for protecting goods in transit, there are specific exclusions and limitations to what it covers. However, the coverage details can vary significantly among insurance companies and specific policies. Here, we have mentioned some scenarios that cargo insurance usually doesn’t cover:

• Inherent Vice – This is when goods in transit are damaged due to foreseeable issues from the nature of the products, like unstable chemicals causing explosions.
• Latent Defect – This term refers to unnoticed problems in a product, such as cracks from improper manufacturing that aren’t easily seen upon inspection.
• Improper Packaging – If cargo isn’t securely packed, like using loosely built crates, resulting damage may not be covered by insurance.
• Willful Misconduct by Assured – Cargo insurance excludes damages caused by intentional misconduct, like importing damaged products to make a claim.
• Unexplained Loss or Shortage – Excludes losses occurring due to a vehicle owned, leased, or operated by the insured party. This is because insurance companies assume the insured party will take necessary precautions to avoid theft or damage when the cargo is under their control.
• Limitations – Pharmaceuticals, tobacco, alcohol, and live animals are typically not covered by cargo insurance. This is because pharmaceuticals are sensitive to storage conditions, and tobacco and alcohol face complex regulations. While transporting live animals involves unpredictable risks that are hard to mitigate.

• Cargo in Custody of Another Carrier – Excludes coverage when the shipment is in the custody of another carrier. If damage or loss happens while the load is in their care, the responsibility typically falls on the carrier’s insurance handling it, not on the initial cargo insurance policy.
• Storage Over 72 Hours – Cargo stored for more than 72 hours may not be covered. This exclusion is because cargo insurance mainly protects goods during transit. The risks during extended storage are distinct from those during transportation.
• Loss Due to Delay – Cargo insurance is set up to handle physical damage or loss like fires, accidents, or theft. However, it doesn’t cover losses due to delayed products and revenue loss.
• Damage Due to Negligence – Any damage from crew or labor negligence is typically not covered. This exclusion exists because cargo insurance is meant for unexpected and accidental events. Crew or labor negligence is seen as avoidable, not something unforeseen.
• Insolvency of the Cargo Company – Cargo insurance usually doesn’t cover losses due to the cargo company’s bankruptcy.

6 Reasons Why You Must Get Cargo Insurance

The rapid growth of e-commerce has increased global shipping. This uptick in cargo volume has naturally heightened the need for cargo insurance since more goods in transit pose a greater risk of loss or damage.

In 2022, the global cargo insurance market hit $71.4 billion and is expected to climb to $106 billion by 2032. That’s a growth rate of 4.1% from 2023 to 2032.

Source: (alliedmarketresearch.com)

This increase is attributed to the surge in the e-commerce sector, which in turn is expanding international trade and logistics. The diversification of logistics operations in the e-commerce sector also brings new risks, necessitating more comprehensive cargo insurance policies.

Thus, safeguarding cargo from natural disasters, accidents, delays, and damages during transportation and last-mile delivery has become crucial. However, the question of “Is freight insurance worth it?” remains.

Let’s break it down with a little example:

Suppose you’re shipping $200,000 worth of goods, and things go sideways. No insurance and a 10% profit margin mean you need $2 million in sales to recover. But reality check – it’s not that simple. Seasons change, demand dips and your company takes a financial hit.

Now, enter cargo insurance. For a few hundred dollars (a fraction of the landed cost), fund a new purchase order. Opt for Retail Value coverage, pay a bit more, and get back on track, recovering the full retail sales price.

Still not convinced? Here are six reasons why you must get cargo coverage.

1.   Transportation Risks

Cargo insurance protects against physical losses or damages caused by external factors during shipping. For instance, containers can tumble off ships during rough storms. According to the World Shipping Council, an average of 1,566 containers were lost at sea annually from 2008 to 2022. In the most recent three years (2020-2022), the average losses increased to 2,301 containers annually.

A real-life example from Argus, an oil and pipeline construction company, illustrates the value of cargo insurance. In 2012, a truck carrying $809,000 worth of welding equipment for Argus caught fire during transport from Finland to Moscow.

The cargo insurance promptly covered the claim, paying for the replacement parts. Later, a cargo ship with two Argus containers caught fire in the Atlantic Ocean. The cargo policy covered the General Average claim, resulting in a full settlement of $150,000 plus an additional 10% for the demolition costs of the goods.

2.   Theft and Pilferage

Cargo theft is a big problem, with losses reaching $13.9 million in the third quarter of 2018. There were 188 reported incidents across the U.S. and Canada during that period.

Pilferage, involving the theft of part of the load, made up 15% of thefts in 2017. According to data from the Transported Asset Protection Association (TAPA) for the Americas, this is the highest on record.

Cargo insurance protects against loss from theft and pilferage.

3.   Natural Disasters

Bad weather, like extreme heat or storms, can cause shipping delays and financial losses. For example, in June 2021, a crazy heatwave in the Pacific Northwest damaged roads, rails, and bridges, disrupting freight movement.

Cargo insurance is like a safety net for situations like these. The business doesn’t have to handle the entire financial mess if a natural disaster wrecks a shipment.

4.   Regulatory and Compliance Risks

Changes in global and local rules, taxes, and trade policies can create problems following the law. Some countries even demand specific cargo insurance for shipped goods. If you don’t follow these rules, you could face legal trouble, lose money, or harm your business’s reputation.

However, cargo insurance helps businesses stick to international and local laws for moving goods, reducing the risk of a damaged reputation. If you’d rather not deal with compliance, rely on Unicargo’s expert team to navigate complex regulations.

We keep up with the latest FDA and PGA guidelines and work closely with local authorities. Our team can handle everything – from taxes to permits- making sure your imports are smoothly delivered without delays, fines, or other issues.

5.   Supply Chain Disruptions

Supply chain issues can result in business interruptions and financial setbacks. Take the case of Ever Given blocking the Suez Canal in March 2021—it had a major impact on global supply chains.

The Suez Canal, crucial for about 10% of all global trade, was blocked, holding up roughly $9.7 billion worth of products daily and causing delays in restocking retailer inventories. In such situations, cargo insurance is crucial, especially for businesses heavily dependent on complex supply chains.

You can also boost your business’s competitiveness with quicker time to market using Unicargo’s PO Management service. We streamline supply chain operations through efficient communication and exceptional management.

Our teams can communicate effectively with suppliers, monitor cargo-ready dates, and proactively handle production delays. We address issues promptly, flagging them when needed to minimize disruptions and uphold transparency. Our local teams, familiar with native cultures, bridge gaps for faster issue resolution and improved supply chain performance.

6.   Geopolitical Situation

Political conflicts can shut down vital trade routes or ports, causing disruptions and delays or even cancellations of shipments. The war in Ukraine, for example, raises the risk of damage or loss to cargo.

In early April 2022, many merchant ships were stranded in Ukrainian ports along the Black Sea and the Sea of Azov. Meanwhile, vessels in the broader region faced dangers like sea mines, rocket attacks, and the risk of being detained.

Additionally, conflicts can prompt shifts in international trade rules, like sanctions or embargoes. Fortunately, cargo insurance policies cover losses arising from acts of war and terrorism. This is important for businesses operating in regions with high geopolitical tensions.

The Bigger Picture: 4 Business Benefits of Cargo Insurance

We’ve nailed why it is important to have cargo insurance in general. Now, let’s zoom out and talk about the bigger business and operational game. What are the advantages of cargo insurance for your business? What perks does it bring to the table?

Let’s find out!

1.   Provides Financial Protection for Businesses

In international shipping, there are limits on how much carriers are responsible for if your cargo gets damaged. Like, in air freight, carriers are only on the hook for 250 francs or 19 SDR per kilo. Road freight caps it at 8.33 SDR per kilo under the CMR Convention, and sea transport limits liability to 835 SDR per package or 2.5 SDR per kilo.

Under the Convention concerning International Carriage by Rail (COTIF), rail transport has a limit of 17 SDR per kilo for lost or damaged cargo. If something goes wrong and you don’t have cargo insurance, you could be looking at big financial hits. Accidents with your truck could mean losing both the vehicle and the goods.

Also, if the damage is from inadequate packaging or the nature of the goods, the carrier won’t cover it. But with cargo insurance, businesses get a safety net. It keeps the cash flow going during unexpected disruptions, ensuring profits can still roll in if the coverage includes them.

2.   Mitigate Operational Disruptions

Cargo insurance is vital for keeping business operations running smoothly. It speeds up the settlement of claims, helping businesses swiftly recover losses. This quick process is essential for maintaining smooth operations, allowing companies to restock or replace damaged goods promptly.

Fast claim resolution prevents extended disruptions in the supply chain, ensuring businesses can meet customer demands without delays. For instance, cargo insurance can efficiently handle the situation if unexpected port strikes threaten a business.

It offers financial support to manage the extra expenses of redirecting shipments, minimizing downtime, and enabling a quicker return to normal operations.

3.   Ensure Compliance with International Trade Regulations

Cargo insurance, often mandated by international trade rules, is a must-have for businesses. For example, the Carriage of Goods by Sea Act (COGSA) regulates sea transport, stressing the need for cargo insurance by limiting carrier liability. The Montreal Convention does the same for air cargo.

Incoterms, which are international trade terms like EXW, FOB, or CIF, determine who should secure cargo insurance. Different countries have specific regulations for cargo insurance, especially for goods like hazardous materials.

For instance, the U.S. Department of Transportation (DOT) requires a minimum coverage of $750,000 for non-hazardous goods and $5,000,000 for the most hazardous materials. Following such rules is vital to avoid legal troubles and disruptions to business operations.

4.   Enhance Business Credibility and Reliability

Beyond financial protection, cargo insurance brings indirect benefits, enhancing a positive business reputation. It showcases a company’s dedication to protecting its goods and managing risks, instilling confidence in clients and partners.

By securing shipments with cargo insurance, businesses affirm their reliability and professionalism, fostering stronger relationships with customers. Showcasing financial stability and responsibility with cargo insurance also enhances ties with suppliers. This promotes increased collaboration and transparency for a more efficient and reliable supply chain.

5 Factors to Consider When Choosing Cargo Insurance

Building on the positive image created by cargo insurance, another critical aspect is considering factors when choosing the right coverage. You’ll need to consider the type & value of cargo, transportation mode, destination & route, and transit duration. Let’s explore these variables further.

1.   Type of Cargo Being Shipped

Cargo insurance is customized based on factors like the shipping type. Different items carry distinct risk profiles, necessitating personalized insurance solutions. For instance, electronic equipment may need coverage against electrical damage. Then, perishable goods may require protection against spoilage in temperature-controlled transport.

Therefore, tailoring insurance to the unique vulnerabilities of your cargo is crucial. Specialized insurance policies with higher limits and specific exclusions are also necessary for certain commodities like artwork, antiques, or precious metals.

2.   Transportation Mode

With each mode of transportation—sea, air, and land—comes distinct risks. Sea transport grapples with rough weather and piracy, air transport contends with turbulence and handling damage, and land transport faces risks like accidents, theft, and delays. To ensure effective coverage, customize your insurance to the unique risks associated with your chosen mode of transport.

3.   Value of the Cargo

The more valuable your shipment, the more comprehensive your insurance should be to ensure adequate compensation for any loss or damage. Under a cargo policy, goods are typically valued at the invoice cost, freight charges, and an additional percentage of those amounts (usually 10%).

Let’s say your cargo is worth $20,000, and shipping sets you back $3,000. Your insurance? It covers a total of $25,300.

Cargo value: $20,000

Shipping cost: $3,000

Total cost incurred: $20,000 + $3,000 = $23,000

Insurance coverage: $23,000 + 10% of total cost incurred = $25,300

For high-value cargo, consider opting for “all-risks” coverage, as it provides broader protection against various perils. Also, explore options like increased limits and excess cargo insurance.

Unicargo offers comprehensive cargo insurance covering loss, damage, or theft at a small percentage of your goods’ value. Our experts can assist you in choosing the right coverage, considering your cargo’s value, transport risks, and budget for the optimal solution.

4.   Destination and Route

The insurance rates can be influenced by the chosen route and the shipment’s destination. For instance, war risk insurance premiums increased for Red Sea voyages following three vessel attacks on December 3rd.

Some countries have stringent import regulations, mandating specific types of insurance. Moreover, certain routes, particularly those with higher piracy or war risks, may necessitate additional coverage.

So, research the insurance requirements of your destination country and adjust your coverage accordingly. Be mindful of potential risks on your chosen route and contemplate extra coverage for high-risk areas.

5.   Duration of Transit

Make sure your insurance period matches the expected duration of your shipment to avoid coverage gaps and ensure protection throughout the entire journey. Short-term cargo insurance policies offer coverage for a specific term, usually ranging from a few days to a few years.

On the contrary, long-term insurance policies provide coverage for an extended period, potentially spanning several decades or a lifetime. For infrequent shippers, shipment-by-shipment coverage suffices, while those shipping year-round find annual coverage more cost-effective.

How to Obtain Cargo Insurance?

After considering the factors when choosing cargo insurance, the next step is to obtain it. This involves understanding your insurance needs, selecting a reliable provider, and familiarizing yourself with essential documentation. Here’s a lowdown:

1.   Know Your Insurance Needs

Tailor your insurance to different cargo types based on their value, fragility, and susceptibility to damage. An annual policy is advantageous if you’re a frequent shipper (occasional shippers may opt for single-trip coverage).

Also, assess specific sea, air, and land transport risks, such as weather events, piracy, and political unrest along your chosen route. While cost matters, it shouldn’t be the sole consideration. The cheapest policy may lack the necessary coverage.

2.   Choose a Reliable Insurance Provider

Look for a trustworthy insurance provider. Evaluate their market reputation and track record in claims handling and customer service. Confirm their financial stability by checking independent agency ratings. Ensure they offer precise coverage for your cargo and have experience in your industry, such as Unicargo.

As a digital freight forwarder that provides top-notch insurance services to clients, we understand the associated risks with shipping cargo. By collaborating with top global insurance companies, we ensure efficient and effective claims resolution, delivering the best outcomes for our clients.

3.   Familiarize with Insurance Documentation

Carefully review covered risks, exclusions, liability limits, and claim procedures in your insurance policy. Seek clarification from your insurer on specific terms and clauses if needed.

Keep copies of all insurance documents, including the policy, endorsements, certificates, and correspondence. Understand the claim process, required documents, and the filing timeline. Stay informed and prepared for any potential claims.

4.   Select Suitable Coverage Type

Select the right coverage type, such as “all-risks,” named perils, or specific risk covers that suit your cargo. Determine suitable liability limits, indicating the maximum payout for a covered loss. Explore additional coverage options like war risk, strikes and riots, and extended warehouse storage coverage based on your specific requirements.

Best Practices for Dealing with Cargo Insurance Claims

When dealing with cargo insurance, follow best practices for the preparation and prevention of claims and for filing them. From understanding policy details to prompt reporting and effective documentation, these practices ensure your business can navigate the complexities of claims confidently and efficiently. Here’s how:

Preparation & Prevention

1. Know Your Policy – Understand coverage, exclusions, claim procedures, and deadlines.
2. Document Everything – Keep records of invoices, packing lists, bills of lading, and communications.
3. Package Properly – Ensure goods are packaged for specific transportation risks.
4. Choose Reliable Partners – Work with carriers prioritizing cargo safety and industry best practices.
5. Track Your Shipment – Use tracking tools to monitor shipment location and status.
6. Act Promptly – Timely reporting is crucial for claim validity.
7. Be Honest and Accurate – Provide truthful and accurate information.
8. Seek Professional Help – Consult with cargo insurance experts like Unicargo. We get that each business has its own shipping needs. Thus, we offer fully customized policies to match your budget and the protection you want.
9. Maintain Clear Communication – Keep the insurers informed and respond promptly to inquiries.

File a Claim

1. Notify Your Carrier – Report loss or damage immediately to your carrier upon discovery. Make sure to include the carrier’s Pro number, shipper number, vehicle number, origin date, and delivery date. Commodity description should also be noted, and for the value of freight, refer to the bill of lading.

Specify the type of loss, indicating whether the goods were damaged, the percentage of damaged freight, its valuation, or if the cargo was missing upon delivery. Additionally, provide details of the freight item by item type rather than as a collective whole.

2. Gather Evidence – Collect relevant documents, photos, police reports, videos, surveyor reports, and communication. When filing a freight claim, it’s essential to provide the shipper and receiver names and addresses and list all stop-off locations for loading or unloading. Include details on the liability of freight charges, such as whether it was collected cash on delivery, or prepaid. Reference the bill of lading for any limitations on liability. Supporting documentation is also necessary for a comprehensive freight claim.
3. Notify Your Insurer – To initiate your insurance claim, reach out to your insurance provider and complete the official claim form they’ll provide upon request. Alternatively, you can submit the claim online via their website or app. Ensure you furnish the exact details as in your carrier notice and any additional information your insurance provider requires.
4. Deliver Claim to Your Carrier – Freight claims need to reach the carrier within the contract-specified or legally defined timeframe, often nine months from the freight delivery date. The carrier must confirm the receipt date for timely claim processing, making delivery methods with confirmation crucial. Address the claim to the carrier’s claims manager, sending it to their home or corporate offices rather than a hub. Avoid delivering claims in person to a carrier or sending them with a driver.
5. Cooperate with the Investigation – Work closely with both your insurance provider and the carrier during the claim process. They might request additional evidence like receipts, invoices, or repair estimates. Adjusters may contact you for goods inspection and valuation determination. Promptly and honestly respond to any requests or inquiries from your insurance provider or carrier.
6. Negotiate the Settlement – Engage in negotiations with both your insurance provider and the carrier to determine the compensation for your loss or damage. The insurance provider will cover valid claims approved according to policy terms, while the carrier will be responsible for valid claims under their contract of carriage. If disputes arise on payment responsibilities, consider hiring a lawyer or mediator to assist in resolution.

3 Tips for Optimizing Cargo Insurance Coverage

Navigating the intricacies of cargo insurance involves more than securing coverage. It’s about optimizing it for evolving business needs.

Here are some tips to improve risk management, ensure alignment with regulatory demands, and reduce claim frequencies and severity.

1.   Regularly Assessing and Updating Coverage Needs

As your business grows and undergoes changes, its risks evolve accordingly. Expanding into new markets or introducing new products can shift the risk profile, emphasizing the importance of regularly evaluating and updating cargo insurance coverage.

Therefore, you’ll need to adjust to accommodate changes in cargo value, transportation routes, or regulatory demands. Periodic reviews, preferably conducted annually, ensure that insurance remains relevant and adequate. This proactive approach helps identify potential coverage gaps or unnecessary premiums, allowing policy adjustments as needed.

2.   Implementing Risk Management Strategies

Implementing risk mitigation practices like secure storage, proper packing, and safe transportation can lower the chances of cargo issues. These measures work hand-in-hand with cargo insurance, reducing the frequency and severity of potential claims. This, in turn, leads to lower insurance premiums and increased negotiating power with insurers.

3.   Building Strong Relationships with Logistics Partners

Fostering robust relationships with your logistics partner is crucial for effective risk management. Collaborative efforts enable improved communication, a shared awareness of risks, and coordinated strategies to mitigate them.

Additionally, strong partnerships with logistics providers enhance overall risk management and insurance strategies. These alliances offer valuable insights into potential risks and contribute to the development of customized insurance solutions.

FAQ: Cargo Insurance

How Much Is $100,000 in Cargo Insurance?

Cargo insurance costs can widely differ, influenced by factors like cargo type, transportation mode, and destination. For example, marine cargo insurance rates may vary from 0.2 to two percent of the goods’ total value.

So, for a policy covering $100,000, the annual cost could range from $200 to $2,000. In land transportation, a motor truck cargo insurance policy with a $100,000 limit might cost between $400 and $600 per year.

How Much Does Cargo Insurance Cost?

Cargo insurance costs vary based on goods type, transportation mode, coverage limits, and deductibles. A basic way to calculate insured value is to add the invoice value and freight cost plus 10% for additional expenses. On average, marine cargo can cost 0.5% of total cargo value; e.g., $15,000 cargo may cost around $751.

On the other hand, air cargo insurance is relatively expensive, averaging 50 cents per pound or up to $100,000 per shipment. Land transport insurance ranges from $400-$1,800 annually or $35-$150 monthly for standalone policies. Moreover, owner-operator truckers might pay $350-$620 per month for a $1M cargo insurance policy.

Is Cargo Insurance a Requirement?

Is freight insurance necessary? While not always obligatory by law, cargo insurance is highly recommended for all shippers dealing with valuable or delicate items. It is especially vital when venturing into unfamiliar routes or with a new carrier. Several international agreements also mandate a certain level of liability coverage for cargo transport.

Additionally, certain countries may demand proof of cargo insurance from importers before permitting goods entry across their borders. In specific industries, such as household goods transportation across US state lines, cargo insurance is legally mandated.

What Is the Standard Cargo Liability?

The standard cargo liability refers to the maximum amount of compensation that a carrier (such as a shipping company or freight carrier) is legally responsible for in case of loss, damage, or delay to the goods being transported. This liability is typically outlined in contracts, bills of lading, or other shipping documents.

Are Container Ships Insured?

Yes, container ships are insured, and it’s a mandatory requirement under various international conventions. These conventions stipulate that ship owners must have liability insurance to address potential claims related to cargo damage, passenger or crew injuries, and environmental pollution.

Conclusion

International shipping is unpredictable, with the risk of shipment damage or loss looming all the time. Therefore, whether you’re navigating the complexities of global trade or safeguarding your investments during growth, cutting corners on cargo insurance is a big no-no.

That’s a shortcut to jeopardizing your cash flow, stunting ROI, and dealing with filing claims with clueless insurers. With Unicargo, we team up with the best global insurance companies, providing top-notch results for our clients. No need to become a trade expert—leave that to us.

We have the know-how to handle claims hassle-free, ensuring a speedy payout. Got unique shipping needs? Our custom-tailored cargo insurance will fit your budget, protecting your precious cargo. No claim hassle either – our team handles it all until you get your compensation.

And if cargo insurance is a must, our Importer of Record service takes the legal load off your shoulders. We handle customs, permits, and compliance, leaving you worry-free. Let’s chat about securing your business – Contact Us today!

Planning your next shipment?  Get a Quote Now

The post Why Cargo Insurance is a Must and Why Is It Important? appeared first on Unicargo.

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Ready for a quick test of your Amazon product development and logistics know-how?

Your best friend, who lives in Australia and dabbles in selling through Amazon FBA, messages you about his brainstorm for his next product. His 4-year-old daughter had been gabbing in excitement about the upcoming Barbie movie, and, in a flash of inspiration, he knew what his next product would be: a ride-on toy for young children modeled after Barbie’s car. Your friend already called manufacturers in China and checked with freight forwarders about delivery rates to Amazon FBA centers. All the numbers and timelines checked out, and he’s sure this is going to be a huge success.

Well, maybe.

How can getting this product to an Amazon fulfillment center go wrong? Let us count the ways.

Problems That Could Stop a Product at the US Border

The US Customs and Border Protection doesn’t play games. In 2022, they seized over $62 million in imports that didn’t meet their safety regulations, and $2.9 billion in imports that violated intellectual property regulations.

Safety regulations

A wide range of imported products are subject to safety regulations in the USA, including consumer electronics, toys and children’s products, household appliances, sporting goods and many other product categories. In addition, products containing materials with potential hazards have their own safety regulations and restrictions.

The first thing you need to consider when product sourcing is: which PGA (partner government agency) will be regulating it, and what are their standards and regulations regarding imports? In this specific case, the primary PGA involved would be the CPSC (Consumer Product Safety Commission), which deals with issues of product safety, but if your product involves food, animals, plants, textiles or restricted substances, more agencies will enter the picture.

Your friend’s Barbie-car-inspired ride-on toy is intended to be used by children under 5, making it subject to a whole host of regulations and requirements for materials sourcing, testing and certification.

Relevant regulations include (but are definitely not limited to!):

• conformance to the ASTM F963 standard for toys

• use of materials that do not contain certain plastics (or certain concentrations of specific plastics)

• initial product testing by a CPSC-accepted laboratory who can issue a Children’s Product Certificate

• conducting periodic testing to ensure continued compliance

• affixing a tracking label to the product, including details such as manufacturer, date and location of production, batch number and other identifying characteristics

If anything goes wrong (like for one seller we knew who tested her children’s card game product and found that the Chinese manufacturer had used a toxic (!) coating), your whole pile of manufactured goods is useless.

Intellectual property regulations

If a product uses brand names, logos, designs, or distinctive features without proper authorization from the trademark owner, it may be infringing on IPR (intellectual property regulations). Goods with this problem will likely be seized at the border and possibly destroyed.

If your friend’s Barbie-inspired car is directly or obviously associated with Barbie (and that was the whole point, right?), then it will need proper authorization for use, or the shipment will be seized by customs.

Missing importer documentation

If you’re not an American citizen[REU1] , or operate as a U.S. company, you need to have an official, recognized representative for your imported goods. This entity or individual is known as an Importer of Record (IOR) and is legally accountable for accurate documentation, payment of duties and taxes and adherence to import requirements.

Your Australian friend will need a legal, reliable Importer of Record for his ride-on toys, or his shipment is likely to be rejected at the border for lack of complete and appropriate documentation.

Why do these things happen?

A major cause of these problems, as we’ve observed from long experience as freight forwarders for Amazon FBA (we’ve been shipping there since FBA launched!), is that sellers don’t have a holistic picture of their Amazon product development and supply chain process.

The typical seller views each step in the process – product design, materials sourcing, manufacturing, regulatory compliance, inventory management, shipping – as an independent, almost self-contained entity. Of course, the seller needs help for each step, so they enter transactional relationships with manufacturers, freight forwarders for Amazon, customs brokers, and similar professionals to perform the tasks related to their particular step.

But there is no holistic overview of the supply chain. No advance planning that considers how all the pieces connect to each other – and how to best connect them in order to achieve optimal results, avoid problems and increase profits.

That’s a shame… and it could lose you the game.

Don’t go at it alone

How can you give yourself the best opportunity for success as an Amazon FBA seller?

Get yourself a partner in holistic Amazon supply chain planning from the outset!

We do this for so many of our Amazon FBA sellers. A potential customer contacts us, expecting a traditional freight-forwarding transactional relationship: here’s what I’m shipping and where I’m shipping it to; give me a price and get to work. But then we take a good, hard look at their production and supply chain – and start making suggestions that can streamline their product sourcing, manufacturing, and logistics, minimize risk and increase their overall profit. This Amazon product development consulting is one of the most satisfying parts of our business!

Streamlining Regulatory Compliance

When you start with a comprehensive understanding of the regulatory requirements for the product niche you’re considering, even before you take any concrete production steps, you will often save yourself untold heartache and waste of resources.

A partner who has a holistic picture of the regulatory landscape can positively influence your:

• Product materials sourcing

• Certification process

• Packaging and labeling

• Customs coding[REU2]

• Compliance with PGA-specific requirements

This proactive approach mitigates the risk of rejections, delays, or penalties during customs clearance.

Optimizing Supply Chain for Profits

If you make a chain from taking a bunch of disconnected, pre-built elements and linking them together only where they absolutely need to touch, you are going to get an ugly, clunky result.

The same goes for your Amazon product development logistics. However, when your Amazon product sourcing process is strategically aligned with your supply chain management and freight forwarding, logistic magic can happen. A logistics partner who possesses and can grant you a birds’ eye-view of the what, when, and how of your entire supply chain can enable you to:

• avoid stockouts

• optimize shipping costs

• reduce excess inventory – for materials and for the finished product, both in its country of origin and its destination

All of those elements can have a direct impact on profit. If, for example, your entrepreneur friend was able to design his ride-on toy from the outset for efficient shipping (taking dimensions, mass and volumetric weight into account), that could significantly increase his profit margin.

If you want to succeed…plan, plan ahead.

It would be a shame to have to go the “if at first you don’t succeed – try, try again” route if you don’t absolutely need to.

Invest a little time at the outset of your Amazon product sourcing journey. Develop a relationship with a partner who has expertise in Amazon product development consulting. Put together a plan that aligns all aspects of your product development logistics, from sourcing to supply chain to freight forwarding.

Now you’re ready. You have an integrated plan; you have an expert partner; you’re all set for a smooth, streamlined path to market.

Dominate Amazon FBA – with the right logistics partner.

The post From Concept to Customer – The Overlooked Factor in Amazon FBA Product Development appeared first on Unicargo.

When will Trump’s new China import taxes be applied?

The increased tariffs applied by the Trump administration on Chinese imports are being introduced in stages.

• List 1 tariffs came into effect on July 6^th 2018. These tariffs affect a total of 818 different types of goods and product lines with an additional tax of 25%.
• List 2 tariffs will come into effect on the 23^rd August 2018, affecting a further 279 different import classifications, again at a 25% tax rate.

What happens next?

A third proposed list is currently in development by the USTR (United States Trade Representative) too. This will see the introduction of a third proposed annex of products that will be subjected to a further 10% import tax increase with a value of over $200bn over the coming months – List 3.

List 3 has now been scheduled for hearings and is expected to go live in September at the earliest. We’ll keep you updated as the situation develops.

How can I find out if my goods will be affected by the changes, and what can I do about it?

We’ve created a comprehensive list of products and materials affected by Trump’s import tax increases to get you started.

If you find that your commodities will be subjected to Trump’s increased import taxes, you might be able to work around the tariffs to avoid an unnecessary charge. There are a few ways that you might be able to do this, including:

• Filing for an exclusion for your goods or materials.
• Modifying your product designs to produce goods that don’t fall within the new tariff lists.
• Revising your existing product classifications.
• Sourcing your goods or materials from a country other than China.
• Checking your eligibility for duty drawbacks if you export goods from the USA as well as importing goods from China.

Talk to one of our China import specialists if you need advice on your options in tackling the new import charges, or if you have any questions.

Read more about the escalation in the US-China trade war – Amazon sellers are preparing for an increase in their supply chain costs

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The first round of tariffs

The first round took effect on July 6, 2018, and included a 25% increase in the existing customs on 818 products and raw materials used mainly by the technology industries (only 1% of the products included in this round were consumer goods). For example, customs on cylinders for machinery used in the textile industry were 2.6%. Upon coming into force, with the new tarrif addition, the current customs on them is 27.6% (original customs + 25%).
Due to the fact that there were almost no consumer products in this round, it was not widely covered in the media and had a minimal impact on small and medium-sized companies importing their products from China.

The second round of tariffs

The second round took effect on August 23 and, similar to the first round, also included a 25% increase in the existing customs on 284 products. However, in this round, a few more consumer products were introduced, mainly related to magnets – home and kitchen magnetic products, adhesive magnets and many other types of magnets used in products intended for the end consumer.

The third round of tariffs

As mentioned, the third round, which took effect on September 24, was much more drastic than its predecessors with 5,745 products worth just under $200 billion (compared to $50 billion worth of products in the previous two rounds). Beyond the much larger volume of this round in terms of the number of products, it includes many consumer goods popular among Amazon sellers, such as bags, wallets, pouches, kitchenware, tools, vacuum cleaners, computer parts, baby products, wooden furniture, metal furniture and the list goes on. Currently, following these three rounds, the tariff increase covers about 50% of all goods imported from China, and the chances of your products being included in the list will be significantly higher after the current round.
Unlike the previous rounds, the third round will include, at its first stage, an addition of 10% to the regular customs and at the beginning of 2019, after the holiday season, the addition will be updated to 25%.

The following example illustrates the impact of this round on importers in general and Amazon sellers in particular:
An Amazon seller engaged in import of bags, diaper bags, wallets, pouches or various cases would have previously paid customs of 17.6% of the goods’ value. As of last Monday, following the last round, the customs tariff is 27.6% of the goods’ value, while on January 1, 2019, it will be raised to 42.6% of the goods’ value.

How do I know if my products are included in one or several rounds?

We have developed an HS Code Tariff Rate Lookup tool which allows you to check whether your product is included in one of the rounds, and if so, you will be able to see the original customs, as well as the new addition. You can run a search by HS Code or by the name of the product or one of its components. Needless to say, this tool is used for a preliminary review and it cannot replace a consultation with an expert.

What can I do if my product is included in one of the rounds?

Many news websites in the US report that major retailers are already preparing for prices to rise immediately. Business owners now have two options – to adapt to the new costs and deal with profit erosion by streamlining and reducing expenses or raising prices while risking a drop in sales volume.
There are other, more creative ways of dealing with the new reality. If one or more, of your products, is in the list, there are several actions that can be taken to avoid the constraints:

• Request product exclusion.
• Change the product’s design that will allow it to be associated with a category that is not included in the product list.
• Review an option to reclassify the product.
• Review an option to produce and/or import the product in/from other countries (not China).
• Check whether you are entitled to tax benefits, in case you export from the United States, in addition to importing from China to the United States.

Since these changes may cause business operations to collapse, we recommend to review each case separately and consult with experts in the field of international shipping in general and US Customs in particular. As always, we would be happy to advise, free of charge, and together we will find the best way to deal with the new taxation. You are welcome to contact us at info@unicargo.com.

Click here to continue reading about the US-China Tariff war

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