2016 wasn’t exactly the friendliest of years for the shipping industry, with the significant swings in spot rates, and an overall decline of the industry. Because of the turmoil that was 2016, this year’s Import/Export Compliance Benchmark study conducted by American Shipper is certainly worth a read. As we’re approaching the halfway mark for 2017, the sailing hasn’t gotten much smoother.
“Importers and exporters have been buffeted by mooted shifts in U.S. trade policy in the first half of 2017. The possibility of sweeping changes to U.S. free trade agreements and trade relationships with key nations has kept everyone on their toes. And it’s clear these potential changes, even if they never reach fruition, are concerning to the majority of companies engaged in cross-border trade,” the report says.
However, it’s not the drop in demand or the fluctuating rates that have importers, exporters, retailers, and manufacturers nervous for the future. According to the the American Shipper’s report, the top three biggest concerns are:
- The threat of withdrawal from NAFTA (North American Free Trade Agreement)
- The BAT (Border Adjustment Tax)
- The global rise of trade Protectionism
Threats by the Numbers
Smaller surveys have labeled protectionism as relatively low on the threat scale, however, according to the benchmark report, the level of unease for shippers is on the rise. Almost 50% of respondents, both exporters, and importers, are concerned that protectionism is going to be a problem for the future.
The threat of the NAFTA withdrawal, on the other hand, is proving to be more of a concern for the industry. 82 percent of the shippers polled believe that pulling out of NAFTA will be detrimental to the industry. Given that the success of global trade hinges on nation’s providing greater access to their markets, any move that shunts cross-border trades will come as a blow to shippers who work on a multinational level.
Amidst some rapid policy changes, there’s also the consideration that trade still hasn’t fully recovered from the mess that was 2016. While there is some growth to be had, it’s nominal at best. According to the report, nearly two-thirds of import manufacturers and 60 percent of import retailers say that they only saw a maximum growth of 10 percent. The other side of the fence is just as bleak for exporters as 60 percent of the respondents reported a growth of 10 percent or less.
Technology is becoming something of an essential asset for shippers, especially as we’re approaching the age of digitization. Despite automated systems being around for nearly two decades, the industry is still in the infancy stage of adopting new technology, especially when it comes to global trade management systems.
“We characterize this as a 60-40 market, but 40 percent of respondents say they still do not have a global trade management system or automated trade functions. With all the external trade policy dynamics in play, that number will have to come down.”
Of the respondents interviewed for both importers and exporters, manual or spreadsheet-based trade management systems are being used by 39 and 31 percent respectively. This means that about 24 percent of respondents outsource their trade management through either a 3PL or another outsourced management service.
While the report does provide some interesting statistics across the board, the end goal is to see just how prepared the shipping industry is when it comes to compliance. Considering just how unstable the geopolitical climate is currently, it wouldn’t be unexpected to see some significant policy changes crop up shortly. Given that these policies often come with some hefty penalties for non-compliance, it will be up to the shippers to ensure that they are ready for any and all changes that might come their way.
The survey concludes with some useful strategies for mitigating and navigating the possible changes. The main strategy is simple, prepare for the worst case scenario. By being proactive to the possible changes that could come in the near future, your company will have the advantage of being more flexible and able to adapt quickly and readily.