Understanding Tariffs for Freight Carriers 

When governments change their trade policies, it can complicate business compliance. Trade tariffs are barriers that impact your efficiency and shipping costs. They can also influence how you price products. As such, you’ll need to understand tariffs to protect your bottom line and stay competitive.

In this article, we will explore tariffs and their impact on freight carriers. We’ll also discuss how you can adapt and thrive in this changing industry.

What is a tariff in the freight industry?

A freight tariff lists the rates, charges, and rules for moving goods. Carriers use them to calculate and bill customers for transportation costs. The type of cargo will signify a different freight tariff. They can often be determined by rate per weight or volume.

Shipping tariffs are an essential part of the freight industry. They offer transparency and standardization, helping carriers keep pricing consistent and competitive. Tariffs are also important to meet compliance and align with international trade laws and agreements.

Shipping tariffs influence operational costs, pricing strategies, and global market competitiveness. Understanding them can help you make better decisions about routing and forming profitable partnerships.

Types of freight tariffs

The main types of shipping tariffs include:

• Import tariffs: Import tariffs are taxes on goods brought into a country. They are calculated as a percentage of the product’s value or as a specific amount per unit. They affect the costs to ship goods and can increase the end price for consumers.
• Export tariffs: Export tariffs are taxes on goods sent out of a country. They control the outflow of certain products, ensuring there’s enough domestic supply. Governments might use them to regulate trade, protect domestic industries, or generate revenue. Export tariffs impact pricing strategies and, as such, international competitiveness.
• Special trade tariffs: These are taxes on imported goods that address specific concerns. They could be used to manage price shocks or protect local producers.

What are tariff codes?

Tariff codes, or harmonized system (HS) codes, are numbers used to group traded products. They help countries remain consistent when sorting goods for customs. This includes products that are subject to tariffs, quotas, or other regulations. Tariff codes usually consist of six digits. Still, some countries might add more for specific categorization.

For example, the tariff code “0901.11″ represents coffee beans, not decaffeinated, where:

• The “09” represents the chapter, which is “coffee, tea, maté, and spices.”
• The ”0901″ represents the heading, “Coffee, not roasted, not decaffeinated.”
• The “0901.11″ is the subheading specifying ”roasted coffee beans, not decaffeinated.”

How to identify the correct tariff code

Knowing how to identify tariff codes is important. Proper classification can help you avoid delays and pay the correct freight tariff for shipping. Use these tips to determine a tariff code: 

• Research the product: Gather detailed information about the product. Note its composition, use, and manufacturing process.
• Use the HS Code database: Use a customs website, like the World Customs Organization. You can find the correct code by searching the product’s characteristics.
• Seek expert help: If unsure, you can get help from a customs broker or trade specialist. Professionals can guide you through the classifications.
• Double-check documentation: Make sure all documentation aligns with the identified tariff code. This will help you avoid discrepancies during customs clearance.

The impact of tariffs on freight costs

Tariffs impact freight costs in many ways. When they go up, the costs of operations also rise. Higher tariffs can also impact compliance and efficiency in shipments. The supply chain and international shipping demand will also feel the effects.

Higher freight rates

When tariffs go up, it increases the costs associated with shipping goods. The U.S. recently imposed higher tariffs on Canada, Mexico, and China. The trucking industry may raise shipping costs to cover the expenses. Consumers will then likely pay higher prices for goods, as businesses pass on these costs.

In the long run, increased shipping costs could create a feedback loop. Higher prices may cause consumers to spend less, while businesses see a decline in sales. In essence, changing tariffs can reduce shipping volumes and slow the economy.

Increased expenses

As a freight carrier, you’ll need to adjust pricing to meet the expenses of new tariffs. Any changes with new tariffs can impact shipping costs and your competitiveness:

• Higher fuel costs: Tariffs can also increase fuel prices, especially if the tariffs impact oil imports. Higher fuel costs can further raise shipping expenses for trucking companies.
• Increased competition: As carriers adjust to new tariffs, there may be more competition. Businesses will likely seek new logistics providers to mitigate costs. This could impact pricing strategies across the freight industry.
• Potential job impacts: If shipping costs rise, companies may downsize their logistics. This could affect employment levels within the trucking industry.

Compliance-related costs

Any changes in tariffs will also affect compliance regulations. You could face hefty fines and penalties if your business doesn’t comply. You can avoid problems by accurately reporting freight charges. Pay tariffs on time and ensure you have all the proper paperwork to avoid delays and penalties. 

When tariffs change, you’ll often need more documentation to meet compliance, like:

• Detailed invoices
• Proof of payment of tariffs
• Declarations about the goods you’re transporting

Stay up to date on trade regulations that could affect compliance. Review your compliance processes regularly. Also, make sure your team is familiar with new requirements. A proactive approach can help you avoid fines and promote a smoother workflow.

You must also understand the specific tariffs that apply to your goods. Non-compliance can lead to more than penalties and fines. Delays from audits or inspections can be disruptive, causing even more financial losses.

Efficiency issues and expenses

Tariffs can also impact your efficiency. Ensuring compliance can lead to delays as you gather more paperwork. Inspections might also be necessary to ensure you’re complying with new tariff regulations.

Delays can be frustrating for carriers. They can interrupt the flow of goods and disrupt supply chains. If a shipment gets held up at customs because of missing information, it can increase costs of:

• Storage fees
• Labor expenses
• Penalties for late deliveries

You might need to adjust routes to avoid high-tariff areas. This could lead to longer transit times and increased costs. Delays can strain your relationships with customers who rely on timely deliveries. 

Supply chain disruptions

Delays from meeting compliance can ripple throughout the supply chain. Businesses that use just-in-time inventory systems can find it tricky to meet demands. This could lead to stockouts, lost sales, and unsatisfied customers. Unhappy customers can impact the company’s reputation and profits.

Supply chain disruptions can also cause businesses to look for new transportation methods. Some companies might choose to source their products from countries with lower tariffs. They may also seek domestic suppliers to avoid international tariffs altogether. We see this in Canada’s reaction to higher tariffs. The government called for citizens to shop locally instead of paying higher prices for U.S. goods.

International shipping demand

Changes in tariff rates can also impact the demand for international shipping services. When tariffs go up, businesses may reconsider their reliance on overseas suppliers. This can reduce shipping demand as companies look to avoid added expenses.

If tariffs go down, businesses will be more likely to engage in international trade. Carriers will need to stay agile in the face of these changes. Doing so can help them protect their bottom line.

Freight shipping taxation and tariffs

It’s essential to know the differences between taxes and tariffs. While they both represent the costs of trade, tariffs are only taxes on imports and exports. Meanwhile, taxes are a broader range of financial charges that governments impose.

You may face common taxation challenges in freight shipping, such as:

• Navigating tax regulations across jurisdictions
• Ensuring compliance with local tax laws
• Reporting all taxable income related to shipping

Proper documentation will help you avoid costly mistakes. Fill out your invoice and declaration forms correctly. They should reflect the correct tariff codes and values for each item.

Without proper documentation, you could face delays in customs, fines, or even confiscation. Your team should review these papers with a fine-toothed comb. Doing so will help reduce errors and meet compliance.

Adapting to tariff changes 

As tariffs fluctuate and trade policies evolve, you’ll need a good adaptation strategy. A solid plan will help you stay competitive and profitable. Key strategies to navigate complex tariff changes include:

Stay updated on trade regulations.

The first step to adaptation is education. Stay informed on the latest trade regulations. These will come from government agencies, trade organizations, and customs authorities. Subscribing to a newsletter or attending industry conferences about regulation changes can help.

Additionally, it’s essential to understand the nuances of regulations. For example, some tariffs might only apply to specific product categories or countries. Whatever the specification, knowing the nuances will help you source or transport goods.

Trade compliance tools can help you track tariff rates and how they affect your goods. With a proactive approach, you can avoid costly penalties and ensure smooth operations.

Revisit pricing models.

As tariffs increase shipping costs, you might need to adjust your rates. Do so in a way that helps you stay both profitable and competitive. Be transparent with your clients about changes to maintain these strong relationships.

Work with professionals like brokers or compliance experts during tariff changes. They can help you update your pricing models and navigate complex regulations. This way, you can meet compliance with changing tariff regulations. Their expertise will also make documentation easier. You can lower your chances of noncompliance and reduce delays. 

Diversify your supply chains.

If higher tariffs are an issue, diversify your supply chains. Source your products from countries with lower tariffs or explore domestic suppliers. Doing so can help you reduce the financial impact of international tariffs. You can strengthen your resilience when you no longer rely on specific markets.

Leverage technology.

In today’s digital age, you’ll find all kinds of technologies to stay ahead in the freight industry. For instance, carriers can use software that performs compliance checks for them. These tools might also track shipments and analyze tariff impacts. Advanced tools can help you become more efficient and reduce human error.

Optimizing routes amid regulations

As a freight carrier, you’ll need strategic shipping routes to navigate trade barriers.

Route optimization technology is a great way to find cost-effective shipping paths. Using these technologies can help you adapt faster to changing tariffs and regulations. Consider these key technologies:

• Geographic information systems (GIS): GIS tools let you visualize geographic data. They assess routes based on distance, traffic patterns, and potential obstacles. With this information, you can choose routes that avoid high-tariff areas. You can also avoid regions with regulatory complications.
• Routing software: Routing software will analyze fuel costs and delivery windows. It can also assess your vehicle capacities. These capabilities can help you plan better routes and cut transportation costs. You can also ensure timely deliveries, which are vital for customer satisfaction.
• Online platforms: Digital platforms offer real-time data and insights. For example, you can access market conditions, new trade regulations, and tariff impacts. This information lets you plan routes, reduce delays, and cut costs.  

Using technology for efficiency

In the always-changing world of trade tariffs, staying agile and informed is key for freight carriers. That’s where Truckstop comes in. Our solutions can help you plan your routes and lower shipping costs. It can even help shippers and suppliers communicate so everyone is on the same page.

The Truckstop Load Board can help reduce empty miles, maximize capacity, and improve profits. Use it to find routes and loads considering the latest tariff changes. Leverage these features to increase your revenue and stay competitive. 

Truckstop Go™ is an extension of your Truckstop Load Board subscription. It can keep you competitive amidst tariff changes. Features include:

• Access daily rate information, which is crucial for negotiating the best deals even when tariffs affect pricing. 
• Effortlessly save and compare loads to make strategic decisions quickly and choose the most profitable hauls. 
• Secure loads instantly with Truckstop Book It Now.
• Get real-time insights with live load views so you never miss out on an opportunity. 

With Truckstop, you’re not just adapting to tariffs—you’re staying ahead of them.

Navigate shipping tariffs and compliance with Truckstop

Staying updated on tariffs can help you protect your bottom line and remain competitive. Leverage advanced technologies like Truckstop’s digital platform. Our solutions can help you stay ahead of complex regulations. The platform can enhance route planning, reduce shipping costs, and improve communication. Our solutions can help you navigate tariff changes and set your business up for success.

Request a demo today to see the difference Truckstop can make in your freight operations.