Case Study #3: Determining Product Classification and Duty Ratio
In this case-study, we'll share how our knowledge of compliance and duties can help determine your product's journey to success. Read the article and learn from this client's almost costly mistake.
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Proboxx helps customer save on their bottom line when it comes to logistics.
Overview:
A Proboxx client requested a quote for 250 cartons to get a rough estimate on his upcoming shipment which was due to begin production in 5 days and be ready in about a month to ship from China.
The reason this request was raised initially was that client wants to understand his overall logistics cost including freight and duty ratios that he will need to pay during clearance, so he can calculate these costs into his overall COGS.
Challenge Faced:
The main issue Proboxx faced with this client was the need to verify the product classification to help determine if this product would be classified as Anti-Dumping.
It would potentially face a super high duty ratio which will simply “kill” the product profitability.
So we wanted to determine if it was possible to classify the product as non Anti-dumping.
For the freight cost China to US, we provided the client with a rough estimate for sending to FBA centers in the West & East coast of the USA.
Solution:
First, let's dive first into the term Anti-Dumping.
An anti-dumping duty is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value.
Dumping is a process where a company exports a product at a price that is significantly lower than the price it normally charges in its home (or its domestic) market.
In order to protect their respective economy, many countries impose duties on products they believe are being dumped in their national market because these products have the potential to undercut local businesses and the local economy.
Understanding Anti-Dumping Duties
In the U.S., the International Trade Commission (ITC), an independent government agency is tasked with imposing anti-dumping duties.
Their actions are based on recommendations they receive from the U.S. Department of Commerce and investigations by the ITC and or the Department of Commerce.
In many cases, the duties imposed on these goods exceed the value of the goods.
In our specific case, the product is a Notebook.
The applicable subheading for item ‘Notebooks’, will be 4820.10.2060, HTSUS.
The rate of duty will be free but the product is listed under List 3 - 25% additional duty + Anti-dumping - 258.21% with an overall whopping duty of 283.21% duty ratio.
Cost Reductions:
Proboxx did some compliance research and provided the client with a full report on the Notebook.
What seems to be a very profitable niche, becomes impossible, mainly due to the duty ratio applied on the product which simply cuts all the potential profit and causes the client to look for a different niche and an alternative product.
If Proboxx had not suggested a product compliance check prior to the start of production, the client would have had a catastrophic result, creating huge losses.
Now the client has the opportunity to start with a new product, that meets his parameters of profitability, and is within compliance.
The total saving in this case is not just thousands of dollars saved on paying high duty ratio upon clearance, it saves the client tens of thousands of dollars on production & shipping.
In this case, it is not just the money which is huge, it is also about time waste, disappearing and perhaps killing the whole Amazon journey for the client.
Total saving of hundreds of thousands of dollars $$$$.
Wow! 🙂
Our Client Feedback on this Case Study:
Always there for you, always provides top notch service and prices.
Conclusion:
Always always chat with your freight forwarder prior going into mass production for a new product.
Always pay a small fee for compliance service to verify product regulations, & product classification to determine product capability and product profitability.
Sometimes, to the untrained eye, a product seems very generic and easy to produce.
But hidden fees can apply and can cause crazy overheads in product COGS.
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