COVID-19 Causing Trading Companies to 'Reassess Everything,' Experts Say
The top executive for customs policy at UPS said the consequence of the COVID-19 pandemic will be that companies “reassess everything” about supply chains. Norm Schenk, executive vice president for customs policy, was on a panel that included the director of corporate customs for a major logistics provider, the head of customs for a major automaker, and the executive director of the Georgia Ports Authority. The panelists, hosted by the U.S. Chamber of Commerce on May 19, agreed that even after the crisis is over, trading will not return to how it was.
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Griff Lynch, executive director of the Georgia Ports Authority, said many of its customers are rethinking their supply chains. “Inventory is key now,” he said. “We’ve moved from a just-in-time world to a just-in-case world.” He also said that while companies won't exit China as a trade destination, they'll add sources outside of China.
Mark Hirzel, who directs exports for American Honda, said that this duplication “is inherently going to be less efficient than it was.” He said those additional costs are unavoidable, and companies will have to work “to mitigate as best we can. We can’t afford to have dual supply chains for all of our products.”
Hirzel, who said Honda exported $1.9 billion worth of goods to 91 countries from its 12 American factories, said in the more immediate future, restarting the international supply chains is going to be tricky, that it's not like switching a light back on. “You can’t just turn them on and expect everything to move as smoothly as it did before,” he said. In Southern California, Honda already worked to deal with the problem that the U.S. had not sent any containers back to Asia in March, so companies there were going to be short of ways to send goods. He said that on April 3 and April 21, ships that could hold 23,600 shipping containers arrived in Los Angeles. “We’ve got everything repositioned now,” he said. But he expects imbalances to reappear.
Ben Bidwell, head of corporate customs for C.H. Robinson, agreed with Lynch that companies will be adding redundancy to their supply chains, and agreed with Schenk that customs facilitation, like e-manifests, would help make that less painful.
“I do think [the U.S.-Mexico-Canada Agreement] is going to be a big part of that [China] plus one or plus two strategy,” he said, and because all three countries have good trade facilitation, it will be an easy option.
Bidwell said he doesn't think the trade war will go away for the foreseeable future. He said that many companies that could benefit from Section 301 exclusions that have been granted aren't aware, or are having difficulty putting in the paperwork to CBP to prove their products qualify, because they have furloughed or laid off staff. If they could access those refunds, it would be “more important than ever,” he said.