Larger Importers Likely to Pivot More Easily to New Fulfillment Models Post-de Minimis

The end of de minimis is going to be "seismic," as companies transition from the duty-free model to one that uses customs brokers that can oversee the collection and management of data related to entry filing and paying duties, Iacopella said during the Port of Los Angeles' monthly media briefing on Sept. 17.

The companies that are likely to have an easier time transitioning are larger companies that "actually have the capital and resources to make the shift," Iacopella said.

While e-commerce and smaller importers always will have a place in the market, the model to get goods to market is changing, he continued. The end of the de minimis exemption could force companies to return to an "old-fashioned" style of entry that involved retailers and importers consolidating entries and receiving goods in bulk before dispersing them.

There may be a fulfillment model emphasizing consolidation for smaller importers, according to Iacopella, "but even the big guys are wrestling with the consolidation question. Because now I still have direct-to-consumer boxes. ... I'm putting them together like the old days. I'm putting them together, bringing them over in bulk. Maybe, as a broker, I'm not filing 180 de minimis entries, [but] I'm filing five customs entries."

Iacopella has been encouraging customers to migrate to filing Entry Type 01s. Successful companies are those that will be able to transition to this type of entry filing while minimizing shipping delays to consumers, he said.

"If you can move to that 01 dutiable environment with more data, and you still have speed to market, you can still get into the market very quickly," Iacopella said. "You're going to win. Those are the folks, in my view, that are going to win." Those that lack the ability to get good data, including data required by the partner government agencies, may have a harder time keeping up, he said.

Consumers aren't going to want to wait three weeks to get what they've been used to getting in a couple of days, and so companies will need to navigate that challenge while also migrating to "a more complex model that has revenue involved and Customs enforcement involved," Iacopella said.

Meanwhile, the lack of clarity on the direction of where U.S. tariff and trade policy is headed is prompting companies to stay put until there is a better read on what the policy will be, according to Iacopella.

"There's a bit of a reluctance to make an expensive, huge fundamental change without knowing what the longer strategy is. [Companies] want to know what the rate's going to be and which countries" will have which rates, Iacopella said.

"If I go to Vietnam, I need to know if I can use Chinese inputs. I want to know that before if I go to India. I want to know what the long-term plan for India is. So, I think that in the absence of a longer strategic plan or road of where this is going to go, you're going to have companies staying in China" and being strategic about where they diversify their supply chain, he continued.

Compounding the need for a long-term trade policy vision are short-term uncertainties, such as whether the White House will redefine the term transshipment, Iacopella said.

To respond to these uncertainties, companies have used methods such as duty drawback, and they may be leveraging technology and AI to gain greater insights into their supply chains, including whether those supply chains are susceptible to forced labor or how those supply chains fulfill environmental, social and governance objectives, he said.

Another issue on the horizon is the port fees on China-built and -operated vessels that start on Oct. 14 (see 2504180018).

Ocean carriers and others have been formulating responses to these fees, but "I think the jury's still out as an intermediary and a broker. ... I'm going to punt and say, we're going to really be at the mercy of the [ocean] carrier optimization," Iacopella said.

Gene Seroka, Port of Los Angeles executive director who was interviewing Iacopella, said, "We're going to watch this very closely because it's new to all of us, but early back-of-the-envelope estimates look something to the effect of $125 per container to maybe over $300 here at the Port of LA." The cost per box may be lower than other entry points because of the average volume of every ship that comes in to Los Angeles, Seroka continued. Smaller ships may have a higher cost for a container box, he said.

As companies brace for the impact of the port fees on made-in-China vessels as well as the shifting fulfillment models, both customs brokers and CBP have had their hands full, according to Seroka and Iacopella.

"The rank-and-file CBP agents are working around the clock trying to keep up with the policy changes, making sure that they're up-to-date on the 12-digit Harmonized [Tariff Schedule] codes and all the categorization that takes place," Seroka said.

Said Iacopella: "Whatever the policy is, whatever the tariffs are, whatever countries are affected from the [filing] and the management of these tariffs, the private sector could use a little more ramp-up time from when these are announced to when they go into effect, I think a longer runway would facilitate both importers and brokers in getting [duties] paid, and it's pushing everybody also into automated solutions that are working as well."