Tariff Threat Pushes Importers to Bring in Cargo Early

There is nothing like the prospect of tariffs on Chinese goods to nudge importers to bring in their merchandise a little early to avoid a hefty increase in prices.

Cargo-container imports this summer at the nation’s ports are setting all-time highs with retailers and importers concerned that the Trump administration could impose tariffs ranging from 10 percent to 25 percent on $267 billion in goods at any time.

In early July, the Trump administration imposed 25 percent tariffs on $34 billion of Chinese products, and the review period for more tariffs on $16 billion of Chinese products ended July 1.

“The current boom in shipping can primarily be explained by importers’ response to the U.S. trade war with China,” said Ben Hackett of Hackett Associates, who prepares the monthly Global Port Tracker report for the National Retail Federation about cargo traffic at the nation’s top retail ports.

The most recent report, released on Sept. 10, showed that cargo imports in July were up 5.6 percent to 1.9 million 20-foot containers from the same month last year.

While August figures are not completely tallied, they are expected to be up 4.8 percent year-over-year to 1.92 million containers.

August will be the third month in a row for container imports setting a new monthly record.

Part of the reason for increased imports is that consumers are back shopping again now that the U.S. unemployment rate is at a low 3.9 percent, wages are going up slightly, the economy is predicted to expand 2 percent to 3 percent this year and a recently passed income tax cut is putting more money in shoppers’ pockets.

But tariffs could dampen that consumer spending. “More tariffs could come any day, and retailers have been bringing in record amounts of merchandise ahead of that in order to mitigate the impact on their customers,” said NRF Vice President for Supply Chain and Customs Policy Jonathan Gold. “Retail sales are growing stronger than expected this year thanks to tax cuts and job creation, but tariffs are the wild card, which threaten to throw away a significant portion of those benefits.”

The apparel industry has taken a stand against tariffs. Most recently, the U.S. Fashion Industry Association in Washington, D.C., joined forces with more than 80 organizations to voice its concern about the damaging effects of tariffs.

“The fashion industry is pleased to join with a wide range of industries and organizations across the country to fight the proposed tariffs, which will amount to an additional tax on consumers and limit consumer choices,” said USFIA President Julie Hughes. “The proposed 25 percent duties on consumer products will not achieve the stated goal of eliminating China’s troublesome intellectual property and technology transfer practices. Furthermore, the tariffs will harm American consumers at all income levels—from the single parent struggling to make ends meet as they purchase back-to-school necessities for their kids to the consumer of high-end fashion manufactured in the United States and every American family in between—by imposing a substantial regressive tax on basic household purchases of clothing, footwear, back-to-school items and home goods.”

While importers are pushing to bring in goods, this flurry of increased cargo traffic has not hit the Port of Los Angeles, one of the largest in the United States. For the first eight months, cargo imports were nearly flat with last year, totaling 3.15 million containers versus 3.17 million containers last year.

When calculating imports, exports and empty containers, cargo-container traffic for the eight months is down 2.6 percent. Still, cargo volumes have been extremely robust this year.

“We are off a couple of percentage points this year compared to 2017, but that is after record-breaking years in 2016 and 2017,” said Phillip Sanfield, director of media relations at the Port of Los Angeles. “We were seeing cargo owners pushing their orders in June and July.”

At the neighboring Port of Long Beach, cargo-container import volumes for the first eight months this year were up 7.6 percent over last year, totaling 2.68 million containers. When calculating inbound, outbound and empty cargo containers, port volume was up 9.4 percent.

With the threat of a tariff-trade war, importers are getting nervous. “I am seeing very high demand for space from Asia to the United States, on the ocean and in the air,” said Robert Krieger, president of Krieger Worldwide, a customs brokerage and freight forwarder in Los Angeles.

He said an apparel company bringing in basic fashions should import as much as it can afford at this time. To defer duty payments, he recommends putting merchandise in a bonded warehouse or a foreign-trade zone in the Los Angeles area. “That’s what people use to do many years ago when there were quotas,” he said. “When you think tariffs are going to go up soon, bring your goods in right away and lock out your competition.”