Cross-Border Chronicle | October 1st, 2024 Newsletter
October 1, 2024
Industry News
U.S. Customs De Minimis Changes Announced
To curb misuse, enforce U.S. trade policy, combat unfair competition, and ensure safety of consumers, the Biden administration on September 12, 2024 issued a final rule and announced proposed changes to the Section 321 De Minimis Program.
Currently de minimis regulations, authorized under Section 321 of the Tariff Act of 1930, allows for the duty, tariff, and tax-free importation into the United States of products with an aggregate fair market value of less than $800, per person, per day.
If these regulatory actions pass, there will be major changes and impacts to industry.
So, what could change?
- Lowering the Threshold: While not in scope of the recent proposed regulatory actions, the current de minimis limit of $800 could be lowered, meaning more shipments imported into the US will now be subject to duties, taxes, and increased scrutiny.
- Customs Scrutiny: More rigorous customs checks will likely lead to delays and require compliance with additional regulations, making the shipping process more complex. As of right now, there is no additional funding proposed to support these new regulations.
- Forced Labor Verification: If you’re importing goods from certain regions, you will need to provide proof that your products were not made using forced labor. Failure to comply within a short window could result in goods being seized.
- Tariffs and Duties: Brands may soon face increased costs as they will not only need to pay standard duties but could also incur tariffs ranging from 25% to 70%, especially for textile and apparel imports from China.
Why this matters
Since we don’t know exactly when these changes are coming, it’s important to stay on top of it since it could potentially impact you during peak season. The Biden Administration has urged Congress to pass legislation that comprehensively reforms the Section 321 de minimis program by the end of 2024.
For ecommerce brands shipping cross-border, these changes could mean increased costs, stricter compliance requirements, and potentially slower clearance times. Not to mention, paying an additional 10% duty on top of 25-70% tariffs could erode profit margins and disrupt your supply chain strategy. The proposed reforms would likely affect how brands source products, manage supply chains, and plan for international growth.
What we’re doing
Whatever happens, FlavorCloud can already easily provide compliance for any new import regulations, like a 10-digit HS code. FlavorCloud has also published guidance to assist our merchants and partners to comply with related global Forced Labor Regulations.
While we don’t yet know when these reforms will be finalized, our POV is that any new regulation will not take effect until after the US election in November.
We believe whoever wins the election will probably enact some new import regulations so shippers should be prepared for stricter regulations and potentially higher shipping costs in the near future.
We’re closely monitoring the situation and will share more as we know more.
CARM Release 3 deadline is approaching
As part of ongoing efforts to modernize Canada’s trade processes, the Canada Border Services Agency (CBSA) is rolling out Release 3 of the CARM (Customs Assessment and Revenue Management) project with a compliance deadline set for October 21, 2024. This has been a 3+ year effort to role this new platform out.
What is CARM Release 3? CARM Release 3 transforms CARM into the official system of record for imposing or levying duties and taxes and introduces:
- Changes to the Release Prior to Payment (RPP) Program
- The need to obtain and post a financial security instrument (customs bonds) which act as surety/security bonds for imports.
- Electronic CAD (commercial accounting documents), which is the new way to account for imported goods
- Standardized billing cycles for various import programs
- Electronic communication and management of compliance actions
- Ability to electronically register for Business Numbers and enroll in CBSA trade and commercial programs
What’s changing?
- CARM Release 3 Requirements: B2B businesses will be required to handle all tax filings, customs declarations, and related payments via CARM’s site or app. This includes setting up a financial bond that the system can draw from to pay duties and taxes.
- B2B First, B2C to Follow: The first phase impacts B2B transactions only, but the CBSA is expected to include B2C transactions later. If you deal in bulk shipments, your business could be affected by these changes sooner rather than later.
Why this matters
Setting up a bond and ensuring compliance with CARM’s platform will take time, and it’s crucial to act sooner rather than later to avoid disruptions, especially with BFCM approaching in less than two months.
If your business imports or exports across Canadian borders, managing tax and customs declarations via the new CARM system will become a standard part of operations.
What we’re doing
FlavorCloud is already set up to facilitate this process under the new system for B2B orders, and we are prepared to support B2C orders when they become impacted as well.
While the changes are happening slowly and will be introduced piece by piece, the October 21 deadline for B2B compliance is approaching. B2C businesses should expect to be included in the next phase, so it’s wise to stay prepared.
October Port Strike Updates
Members of The International Longshoremen’s Association (ILA), one of the largest maritime unions in the U.S., walked out on Tuesday October 1, 2024, causing closures of many U.S. ports and disruptions to both domestic and international supply chains.
What to expect
- Port Closures: A complete halt in loading and unloading at East and Gulf Coast ports will impact over half of U.S. container volume.
- Delays: Cargo already en route to affected ports will face significant delays, with ships stranded at sea or rerouted to alternative ports.
- Rerouting Costs: Ocean carriers may impose higher fees for rerouting cargo to unaffected ports, like those on the West Coast.
- Fee Increases: Expect increased costs for freight, storage, and container handling, including surcharges for demurrage, detention, and chassis.
- Supply Chain Disruption: Importers, exporters, and retailers will face bottlenecks in the run-up to peak season, with ripple effects across international supply chains.
What we’re doing
As the US and Canada port strikes are in in flight, FlavorCloud can help merchants with our guaranteed B2B air freight value. We handle all transportation and compliance and guarantee and pay all duties, taxes, and fees.
What to expect for cross-border shipping during peak in 2024
As peak season approaches, supply chain leaders around the world are bracing for what’s expected to be one of the most challenging seasons in recent years. According to recent surveys, 77% of executives expect this year’s retail peak to be tougher than in 2023.
Trends to watch for this peak season
- 98% of executives expect inflation to impact peak season, which could further drive up costs for cross-border shipping.
- Businesses face ongoing concerns about inflation, labor shortages, and logistical constraints. For those involved in cross-border trade, these challenges are particularly pronounced as international supply chains continue to face disruptions.
- Many companies are relying on automation to alleviate labor shortages, while others are turning to temporary staffing.
How we can help you prepare
- Secure alternative shipping routes and prepare for potential delays due to customs processes or port congestion.
- We’re actively monitoring inflation and consumer demand trends across key global markets, allowing us to adjust pricing strategies and provide tailored recommendations to keep your business competitive.
- Our WMS and OMS integrations ensure seamless data management across multiple countries and channels, optimizing your global operations for peak season.
Product Updates
What’s New?
Branded Tracking Page Enhancements: In case you missed it, our new tracking page experience is live! The new look features more context for shoppers who are tracking orders, encouraging consumers to self-serve and reducing support tickets. The update also gives merchants the ability to further customize their branding and deliver a seamless shopper experience.
Conversion Rate Data: You asked for higher quality conversion data, and we’ve released it! FlavorCloud conversion rate data is now available in the app, making it easier than ever to measure the impact of conversion optimization rules and checkout experiments over time. In need of guidance on what experiments to run? Reach out to our team of experts any time.
To learn more about how we define conversion and see your brand’s performance, click here.
B2B Orders for Shopify: We improved the way we recognize B2B orders from Shopify. Now, whether you’re leveraging Shopify’s B2B checkout or using the draft order flow to create B2B orders with FlavorCloud, our system will automatically recognize the shipment as B2B and set it accordingly in the app.
Automated Export System (AES) Filing Flow Improvements: We’ve enhanced the way FlavorCloud handles shipment requests for orders that trigger an AES filing requirement by adding clearer API and in-app messaging and real-time email updates to alert you when a shipment is ready.
As a reminder, FlavorCloud handles all AES filings on your behalf and with this updated flow, we’ve streamlined the process to ensure your team has full transparency into the process.
Learn more about AES filings here.
Coming Soon:
- Soon, we’ll be adding additional tracking statuses and a way for your shoppers to contact support directly from the FlavorCloud tracking experience! To prepare for these updates, be sure to add your brand’s support email to the branded tracking settings in the app.
- We’re working on adding Order Value as a new conversion optimization rule condition! Stay tuned for updates.
- Keep your eyes peeled for some enhanced API documentation rolling out soon!
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