The threat of tariffs from China are causing inventories in the US to spike. Shippers importing from China have been pulling holiday cargo ahead since June to avoid potential tariffs. The latest threat of a 25% tariff scheduled to be implemented January 1, 2019 has both shippers and warehouse operators concerned.
Distribution facilities that specialize in handling import cargo are already busting at the seams. Finding space to warehouse their product in the US could become as big a challenge as finding space on a ship sailing from China. It is expected that shippers will do everything possible to ship their cargo prior to the January 1, 2019 tariff implementation date. Many smaller shippers will be at the mercy of the vendors they use in China as to whether their cargo can be made available for shipping prior to January 1st.
Traditionally there is a lull in shipments from China during November and December as most holiday goods have already shipped. The lull is usually followed by a large buildup of cargo that ships during late January and early February prior to the factories closing for Chinese New Year. With the threat of the 25% tariff on January 1st, the large buildup and shipping may take place in December not late January or early February.
The cycle of shipping early to avoid higher tariffs will eventually end. If warehouse capacity continues to shrink, shippers can expect prices that warehouse operators charge to spike significantly. When that happens, shippers will need to examine if they are actually saving money by avoiding paying the tariff. If inventory costs escalate to the levels some experts are predicting, it may make more sense to abandon the practice of shipping early and simply pay the tariff.
All stakeholders involved in importing cargo from China are concerned over what the next three months could entail. Three weeks ago, most industry experts were predicting the Asia to US market would return to some sense of normalcy by the second week of October. There are now signs that space and congestion issues could impact supply chains through December 31st.
The International Housewares Shippers Association (IHSA) is a not-for-profit association formed to benefit companies belonging to the International Housewares Association (IHA). Through the combined leverage of members, IHSA negotiates freight contracts and partners with other logistics providers to lower supply chain costs.
IHSA’s main function is to negotiate the lowest possible transportation rates and provide the highest quality service for all participating members. Additionally, IHSA members receive valuable market intelligence and advice through regular newsletters and briefings.
IHA member companies looking to reduce their ocean freight costs or have questions about an ocean freight issue are encouraged to contact IHSA to learn about the program. Contact IHSA at +1-513-489-4743 and learn more on our website.