Latest news with #bondedwarehouse
CBS News
09-05-2025
- Business
- CBS News
Fremont bonded warehouse to expand amid tariff-driven business surge
Business is booming for Bay Area company after tariff hikes. Here's why. Business is booming for Bay Area company after tariff hikes. Here's why. Business is booming for Bay Area company after tariff hikes. Here's why. Business is booming for a Bay Area company after the Trump Administration hiked tariffs across the board last month and escalated the trade war with China. One part of the supply chain that typically goes unnoticed has suddenly become extremely valuable in a very different economic climate. Francisco Garcia is the founder of Lynx Logistics, a high-tech security warehouse in Fremont. This fenced-off section, a U.S. Customs and Border Protection Bonded Warehouse, where goods can be stored without paying tariffs until they're taken out, is a hot commodity. "The demand is so high, we just keep expanding," said Garcia. As containers from around the world make their way to ports along the West Coast and are eventually trucked to warehouses, Garcia is in a position to expand its already existing bonded warehouse. "By this time next week, this will be filled to the rim," said Garcia. Forklift operators are quickly moving inventory to make more space for the expansion. Lynx says it has been approved by U.S. customs to triple its bonded space to 15,000 square feet. "We're installing new racks. We're going to quadruple-stack U.S. Customs bonded pallets," said Garcia. Importers typically use bonded warehouses to bring in goods from one country before shipping them to another country, without paying tariffs. But the current trade environment is changing the way these spaces are now being used. Shane Salazar is CEO of Lynx Logistics "This is allowing companies to stretch their cash in terms of not paying for the entire shipment at entry to U.S. Customs and pay as they touch it down to take a carton or a pallet," said Salazar. Industrial property broker Danny Reaume of JLL, a commercial real estate and investment management company, says inquiries for bonded spaces went from 1-to-2 calls in a typical 30-day period, to well over 100 after Trump's so-called Liberation Day tariff announcement. "Everybody across the supply chain is trying to get their inventory here, into the United States, into the West Coast market, and shield them from these tariffs, in the anticipation that in the next 30 to 90 days, this will get figured out," said Reaume. Until that happens, Garcia and his team are hard at work. "It's busy times on the phone and email. It's very little sleep lately," said Garcia. It's an unanticipated business opportunity for an expanding company like his. Bonded facilities have to meet specific security requirements of U.S. Customs and Border Protection. Costs to operate are higher, including paying customs bond premiums. Reaume says the market for non-bonded warehouse space is extremely quiet as shipments to U.S. ports have dramatically decreased. But companies that need inventory close by are pouncing at any bonded space that's available.
CNN
06-05-2025
- Business
- CNN
Businesses have found strange but legal ways to avoid Trump's tariffs
New York CNN — A few months ago, the words 'bonded warehouse' and 'harmonized system codes' might not have been on the minds of many American business owners. Now they're in a massive spotlight. After President Donald Trump slapped a whopping 145% minimum tariff on most goods coming from China, 25% tariffs on cars, auto parts, aluminum and steel and a 10% tariff on almost every country's imports, US businesses are desperate for ways to lower their import costs. Two popular — and legal — strategies involve those bonded warehouses to defer tariffs and harmonized system codes to qualify for lower rates. There are over 5,000 different product classification codes that governments across the globe use when assessing tariffs. Consumers don't care whether the imported coat they're wearing was officially classified as a windbreaker or a raincoat. But for businesses, that distinction can be the difference between lower and higher tariff rates – and potentially turning a profit or not. And to qualify for the lower rate, all a manufacturer would have to do is tinker with the product's materials, otherwise known as tariff engineering. For instance, Converse's signature All Stars sneakers have a sole that contains felt as opposed to the fully rubber one traditionally seen in sneakers. That may have been a purposeful decision, since foreign-produced shoes with felt bottoms could be considered 'house slippers' for the purpose of tariff codes. And house slippers have qualified for significantly lower tariff rates compared to other kinds of footwear in the past. (Nike, the parent company of Converse, didn't respond to CNN's request for comment. CNN could not determine the latest tariff rates for sneakers versus house slippers given their respective classification codes.) Columbia Sportswear has not been shy about its use of tariff engineering. 'I have a whole team of people that work … with the designers and developers and merchandisers and with customs, actually, and to ensure that during the design process that we're considering the impact of tariffs,' Jeff Tooze, the vice president of global customs and trade at Columbia Sportswear told Marketplace in 2019. Among its uses of tariff engineering: adding small zippered pockets below shirt waistlines to qualify for lower tariff rates, he said. Even in the current environment, with Trump's efforts to target tariffs at China and specific sectors, there are still plenty of opportunities for businesses to tariff engineer products, said Erik Smithweiss, a partner at the law firm GDLSK, who specializes in trade compliance. While there's little way out of the initial 20% tariff Trump levied on China earlier this year, there are some opportunities to avoid the additional 125% that came into effect last month. That's because Trump has, in some cases, quietly exempted some products from those tariffs. 'We are working with companies who say, 'Gee, I really want to be on this list, look at my tariff codes,'' said Smithweiss. 'If we think that there is something that can be modified on a product that will change it into one of these exempt codes, we'll work with them on whether that is a reasonable position to take.' But just slapping a new code on a product isn't enough; the product itself has to be different in some way. US Customs and Border Protection agents can examine goods closely, including, for instance, sending fabrics out to labs to see if they meet applicable requirements, Smithweiss told CNN. If it doesn't, the importer can be subject to a penalty on top of the higher tariff. The bonded warehouse route takes the opposite approach. Rather than mess with a good's contents or move production elsewhere, businesses can import products from across the world without paying any tariffs when they enter the US — as long as they remain locked up in a special customs-regulated warehouse. Businesses can keep goods in these warehouses for up to five years without paying a tariff. They only pay the current tariff rate when they take goods out of storage. It's a bet that tariff rates will go down in the short or medium term. Jennifer Hartry, president of Howard Hartry, a customs broker that rents out bonded warehouses, told CNN's Julia Vargas Jones that 95% of the inquiries she's received are for goods coming from China. Hartry said her family-owned business based by the Port of Los Angeles experienced a stark slowdown in recent years, but, since Trump introduced a slew of aggressive new tariffs, business has been booming. There's no limit to the monetary value of the goods stored in bonded warehouses — the only constraint is how much a business can fit in the space they're renting. For example, Hartry said the value of her tenants' goods ranges from $37,000 to half a million dollars. Those goods include lithium batteries, metal rods and electronics such as TVs and treadmills. Hartry said it's not lost on her how much of a toll tariffs are taking on businesses. At the same time, she told CNN's Vargas, 'it's saving our business, which we're grateful for.
CNN
06-05-2025
- Business
- CNN
Businesses have found strange but legal ways to avoid Trump's tariffs
A few months ago, the words 'bonded warehouse' and 'harmonized system codes' might not have been on the minds of many American business owners. Now they're in a massive spotlight. After President Donald Trump slapped a whopping 145% minimum tariff on most goods coming from China, 25% tariffs on cars, auto parts, aluminum and steel and a 10% tariff on almost every country's imports, US businesses are desperate for ways to lower their import costs. Two popular — and legal — strategies involve those bonded warehouses to defer tariffs and harmonized system codes to qualify for lower rates. There are over 5,000 different product classification codes that governments across the globe use when assessing tariffs. Consumers don't care whether the imported coat they're wearing was officially classified as a windbreaker or a raincoat. But for businesses, that distinction can be the difference between lower and higher tariff rates – and potentially turning a profit or not. And to qualify for the lower rate, all a manufacturer would have to do is tinker with the product's materials, otherwise known as tariff engineering. For instance, Converse's signature All Stars sneakers have a sole that contains felt as opposed to the fully rubber one traditionally seen in sneakers. That may have been a purposeful decision, since foreign-produced shoes with felt bottoms could be considered 'house slippers' for the purpose of tariff codes. And house slippers have qualified for significantly lower tariff rates compared to other kinds of footwear in the past. (Nike, the parent company of Converse, didn't respond to CNN's request for comment. CNN could not determine the latest tariff rates for sneakers versus house slippers given their respective classification codes.) Columbia Sportswear has not been shy about its use of tariff engineering. 'I have a whole team of people that work … with the designers and developers and merchandisers and with customs, actually, and to ensure that during the design process that we're considering the impact of tariffs,' Jeff Tooze, the vice president of global customs and trade at Columbia Sportswear told Marketplace in 2019. Among its uses of tariff engineering: adding small zippered pockets below shirt waistlines to qualify for lower tariff rates, he said. Even in the current environment, with Trump's efforts to target tariffs at China and specific sectors, there are still plenty of opportunities for businesses to tariff engineer products, said Erik Smithweiss, a partner at the law firm GDLSK, who specializes in trade compliance. While there's little way out of the initial 20% tariff Trump levied on China earlier this year, there are some opportunities to avoid the additional 125% that came into effect last month. That's because Trump has, in some cases, quietly exempted some products from those tariffs. 'We are working with companies who say, 'Gee, I really want to be on this list, look at my tariff codes,'' said Smithweiss. 'If we think that there is something that can be modified on a product that will change it into one of these exempt codes, we'll work with them on whether that is a reasonable position to take.' But just slapping a new code on a product isn't enough; the product itself has to be different in some way. US Customs and Border Protection agents can examine goods closely, including, for instance, sending fabrics out to labs to see if they meet applicable requirements, Smithweiss told CNN. If it doesn't, the importer can be subject to a penalty on top of the higher tariff. The bonded warehouse route takes the opposite approach. Rather than mess with a good's contents or move production elsewhere, businesses can import products from across the world without paying any tariffs when they enter the US — as long as they remain locked up in a special customs-regulated warehouse. Businesses can keep goods in these warehouses for up to five years without paying a tariff. They only pay the current tariff rate when they take goods out of storage. It's a bet that tariff rates will go down in the short or medium term. Jennifer Hartry, president of Howard Hartry, a customs broker that rents out bonded warehouses, told CNN's Julia Vargas Jones that 95% of the inquiries she's received are for goods coming from China. Hartry said her family-owned business based by the Port of Los Angeles experienced a stark slowdown in recent years, but, since Trump introduced a slew of aggressive new tariffs, business has been booming. There's no limit to the monetary value of the goods stored in bonded warehouses — the only constraint is how much a business can fit in the space they're renting. For example, Hartry said the value of her tenants' goods ranges from $37,000 to half a million dollars. Those goods include lithium batteries, metal rods and electronics such as TVs and treadmills. Hartry said it's not lost on her how much of a toll tariffs are taking on businesses. At the same time, she told CNN's Vargas, 'it's saving our business, which we're grateful for.
