Freight forwarder Flexport has launched a new service to help its clients identify cost saving opportunities and explore tariff mitigation strategies amid unprecedented global complexity.

Led by Tom Gould, who joined Flexport in August after nearly six years as senior director of customs and international trade for trade law firm Sandler, Travis and Rosenberg, Flexport Trade Advisory provides advice to companies on dealing with any aspect of their customs trade compliance, such as classification, determining customs value, and different strategies that will allow companies to minimise the amount of duty that they have to pay.

The company says its offering is unique because it combines the knowledge of a team of experts with SKU data – the string of letters and numbers representing each product in a seller’s inventory – pulled from the Flexport platform in order to examine clients’ supply chains and come up with recommendations.

“One of the things that we do differently is that we work at the SKU level,” Gould tells GTR. “Most brokers will take a commercial invoice that they get from their clients, summarise all of the items on that commercial invoice by HTS classification and several other attributes, and then plug that data into their system and file the document with customs. If you have an invoice with 10 different dresses on it, they will be summarised into one line that goes to customs.

“What we are able to do is file that information individually with customs at the SKU level. This means we can get the responses back from customs and help our clients to calculate the landed cost of their products by SKU as opposed to by HTS. No one else is really doing that to the extent that we are.”

In practice, this means that Flexport can help companies figure out ways of making their products compliant with tariff rules, by making a few minor changes to individual lines.

“If you are an apparel company, knowing the rules and when the country of origin will change really gives you a strategic advantage,” explains Gould. “The general rule for apparel is the country where the garment is sewn. So, you could potentially take fabric from China and move it into, say, Vietnam, cut it into pieces and sew it in Vietnam, and then it becomes a Vietnamese apparel item that is not subject to the extra China tariffs. But if you are a really savvy company, you are going to realise that the rules talk about sewing, and when you have a product, you might take the fabric from China, cut it into pieces in China, start sewing those pieces in China, and then take those partially completed components to Vietnam where you sew them together into the final garment.

“The question then is, will that allow you to avoid the tariffs? Those are the types of more complex questions that are coming to us because companies want to push the limit as far as they can without breaking the rules.”

Although apparel is one of the more obvious sectors for tariff mitigation activities, Gould says the service is designed for “any company who pays duties”, adding that he is seeing interest from companies that have historically not focused on advisory types of services, such as producers of toys or electronics, as the impacts of the US-China trade war continue to affect growing numbers of industries.

Many exporters have been caught off-guard by issues ranging from unforeseen duties to customs audits and penalties as US Customs and Border Protection increases enforcement efforts across all products and industries. From 2018 to 2019, Flexport found that, on average, the percentage of customs duties relative to freight and commercial invoice value paid by its clients on US-bound import shipments from China increased by 84%.

Because Flexport, as a freight forwarder, already has access to customers’ shipping data, it says it is ideally placed to be able to act as a customs advisor. “With the data that we have available, because we are handling the client transactions, and because we have the knowledge of what the rules are, we can better advise our clients on all aspects of moving their goods internationally from the origin to the destination,” says Gould, who adds that the company expects to roll out the service to the EU and Asia in the near future, following its launch in the US.

This isn’t Flexport’s first foray away from its core business. Last year, the company launched a tariff relief product in the form of a credit facility that customers can use to fund additional inventory or new manufacturing facilities to offset working capital constraints exacerbated by the tariffs, becoming the latest non-bank player in the supply chain to offer services that exporters would traditionally seek through their financial institutions.

For Gould, the company’s new trade advisory offering demonstrates the value that non-bank players can bring to the table: “Trade has become much more complex,” he says. “It is not the type of information or guidance that you can get by going to your bank or your lawyer or your accountant. It is a very specialised area, and there are not that many of us that know the ins and outs of the customs realm in order to be able to provide that type of advice to clients. We think that we provide a very unique type of advice, the type that you can’t really get anywhere else.”