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WD-40 has managed to find itself on top amongst the tariff turbulence through decentralisation and localised sourcing. Foreign Trade Zones might be the life jacket that your company needs.

 

WD-40 moving smoothly 

WD-40 has decentralised their sourcing and manufacturing to be closer to their end users and diversified their supply chains to minimise tariff impacts. This has resulted in avoiding extra tariff costs and has come with some positive side effects. In China, they have avoided tariffs by manufacturing locally and, as a result, have become recognised as more of a local brand. In Dubai, they made new partnerships with manufacturers. Which, alongside avoiding tariffs, has also reduced product delivery time down to five to seven days from the previous one-month transit time. This has led to local partners being able to reduce on-hand inventory levels as they have switched to more frequent, smaller deliveries. 

 

The rise of the foreign trade zone

Interest in foreign trade zones (FTZ) is 4 times higher since January as a way to get around the tariffs. The FTZ allows for storage, processing, exporting, and assembly of goods without paying tariffs. Only once the product enters the domestic market do the tariffs hit. On top of that, import tariffs only hit the final assembled product, not the multiple parts imported to create it. Other benefits include being able to hold goods in a bonded state to wait out tariff uncertainties.

 

How to FTZ

Picking your type of FTZ is simple. Either pick a general-purpose zone or a subzone. General-purpose zones are for smaller operations needing to store or repackage goods, whereas a subzone is for manufacturing and assembly and is better for larger-scale productions. 

 

FTZ Top Tips

• Remember to pick one close to the ports to save on transport costs 

• Make sure you are putting the right products in. You want to focus on goods that have high tariff volatility

• Assemble products on site, and any that aren’t sold can be exported without paying tariffs

• Due to the strict tariff regulations, inventory tracking becomes easier

• Stay on top of tariff announcements to get goods in and out at the most profitable times

 

Now you know the best ways to avoid tariffs by decentralising your manufacturing and diversifying your supply chain. With the support of a logistics partner and the use of FTZs, you are ready to import and export from America. If you need help doing this, then come to the Retail Supply Chain and Logistics Expo to find all the companies to help you turn your tariff nightmare into an American dream.