The White House’s trade war is forcing a growing number of U.S. businesses into a painful choice between paying skyrocketing tariffs or waiting for tariff rates to drop—and hoping their supplies don’t run out in the meantime. Some firms, though, are choosing a third option: buying goods and then storing them in special offshore warehouses.
Customs bonded warehouses are in high demand, said Cindy Allen, a customs broker and CEO of Trade Force Multiplier LLC. “That’s what I call the hope and prayer strategy,” she explained. “You bring goods, you don’t pay the duty, you hope that it’s gonna go down—you hedge your bets.”
Bonded warehouses are secure storage facilities where imported goods can be held without paying duties or taxes until the goods are officially released into the market or exported.
“I’ve heard companies say, ‘When I ordered this, the duty rate was 2.5% and now it’s 145%; I can’t afford that,’” she said, adding she has detected a sense of desperation among companies willing to take a risk in paying for storage rather than swallowing exorbitant duty fees.
That solution has proved effective for firms that employed it but, as the tariff war drags on, those stockpiles will dry up and force businesses to make harder choices.
In the coming weeks, bonded warehouses are poised to have a more significant role in U.S. commerce, Hamish Woodrow, head of strategic analytics at Motive, a truck fleet management software provider, told Fortune. “We expect demand for bonded warehouses to grow as companies look to nearshore goods import and store products without incurring tariffs—anticipating potential shifts in trade policy in the near future,” he said.
The beginning of April looked promising as global trade was experiencing a significant surge with a 46% year-over-year increase in activity at the Port of Laredo—the busiest land port in the U.S., Woodrow said. Motive expects southern border imports and Canadian imports to remain strong through Q2 with unseasonably high throughput, he added.
However, when you compare that to ocean ports, “we have seen a slowdown in traffic already at ports on the west coast, most notably L.A., down significantly since January (-19%),” he said. Adding, “We expect Q2 to be a rough quarter for ocean-bound imports as companies deploy a wait-and-see approach for foreign goods.”
Los Angeles, home to the nation’s busiest port, is feeling the drop-off from Asian shipping. And amid a drop in container shipping, long-haul truckers are poised to feel the impact.
In her many years of experience, Allen thinks the impact of the current tariffs is unprecedented. “I’ve been in this business since 1987, and this is, quite frankly, a resetting of the higher international trade structure like we have never seen before,” she said.
