Escape the US-China Trade War by Shipping from Hong Kong

The US-China trade war doesn't show any signs of slowing down, especially as the bilateral relationship sours in the wake of the COVID-19 pandemic. But, savvy eCommerce retailers can avoid getting caught up in the repercussions by shipping from Hong Kong.

A Little Background
Initially, the US claimed that imposing an additional tariff on over 1,333 products - mainly from China's tech sector - was a move to maintain its position as a global technological innovator. These duties were to be imposed on "Made in China 2025" goods. The first goods to have these taxes levied on them were solar panels and washing machines.

This was allegedly supposed to prevent China from pursuing technological advancements ahead of the US and seeing massive economic growth; both would have represented a massive threat to the US's position as the world's major superpower.

However, having failed to achieve their motives, the Trump administration seems to be reacting in fear of the Chinese manufacturing industry. They have extended the heightened tariffs to numerous other products from China. By May 2019, the US was imposing a 25% tariff on over $200 billion of Chinese goods.

What followed was a dog-fight of threats of increasing tariffs, political posturing, and finally, in 2019, a movement towards a trade deal. The net effect on the economies of both countries, though, was dismal. By December 2019, the American manufacturing sector was in its deepest slump in more than 10 years; China's economic growth for 2019 fell to a 30-year low.

Of course, the COVID-19 pandemic has brought an additional layer of complexity to trade between the US and China. Supply chains were thoroughly disrupted, leading to low freight availability and skyrocketing costs.

Through it all, the special administrative region of Hong Kong has been an integral link between the two countries. The US affords Hong Kong a special trade status (though this may be revoked soon); while this doesn't affect the tariffs American importers have to pay on Chinese-manufactured goods, the city has been and continues to be an important trade hub between the two countries. Many American businesses are shipping from Hong Kong to simplify the process.

Overall though, for American businesses importing products from China into the US, the whole situation has been difficult to navigate. So, how can a small business deal with this?

How to Escape the US-China Trade War

With an increase in costs of imports, supply chain disruptions, and the unpredictability of investment flows, it may be time to see what changes can be made in the way you import and fulfill orders. That's why you might want to consider shipping from Hong Kong.

At the moment, you may be shipping your products in bulk from your manufacturer in China to a warehouse in the US. With the trade war in place, there is now a 25% increase in tariffs for China imports, making this option substantially more expensive now.

Another option would be to fulfill directly from mainland China to the US. However, this presents 2 issues:

• If you're looking to cut costs by using a postal service, the Chinese postal system isn't known for it's quality. They tend to offer a lower standard of tracking than you’d expect from a service like USPS.
• Shipments delivered to the US from mainland China undergo strict inspections from both Chinese and American customs, making delays a norm and leaving customers unhappy with longer delivery times.

So, how can this fulfillment problem be solved?

There IS a city that's perfectly located for international shipping AND close to the manufacturing hubs in China...

...and you guessed it.

Hong Kong is the answer: a port city known for the freedom, support, and open horizons it provides to young businesses, allowing them to flourish on a global scale.

4 Benefits of Fulfilling from Hong Kong

Shipping from Hong Kong comes with a whole host of benefits, and these advantages apply whether you're importing to the US or other countries around the world.

1. Shorter delivery times

Hong Kong is geographically well-positioned to access an array of cities around the world. The city is a transport hub, so it's well connected with over 100 airlines servicing the city with direct flights to more than 220 destinations (and over 50 cities in China). Shipping from Hong Kong is a great choice because you can quickly get your Chinese-manufactured goods wherever they need to go, shortening your delivery times.

Additionally, if you're manufacturing your products in warehousing in China (or elsewhere in Asia), they'll be able to quickly reach your warehouse in Hong Kong, which reduces the overall time it takes for products go from your factory to your customer. If you were fulfilling from the US, your products would have to go all the way from Asia to the US, and then on again to the end customer (who might be located in Asia, anyway).

2. Pleasant customer service

Hong Kong is a very systematic place. Courier services regularly inform, update, and keep their partners and customers in the loop in order to deliver satisfactory service. Their systematic approach to distribution makes packages swiftly breeze through customs!

3. Easier customs process

Shipments going from China to the US undergo a lot of scrutiny as they pass through both Chinese and American customs checkpoints. This can cause shipping delays as authorities take their time to process these shipments. Additionally, the uncertainty of the trade war means that goods destined for the US might be held up in China.

4. Easy business operations

The world / APAC headquarters for plenty of global companies are in Hong Kong. In fact, it has overtaken London to rank as the world’s second best shipping centre. The city is known to facilitate trading and is increasingly becoming one of the most economically influential cities in the world.

Additionally, shipping from Hong Kong can help your business overcome fulfillment issues such as low-quality Chinese courier services, high-risk customs, and delivery delays.

How Shipping From Hong Kong Can Lower Your Fulfillment Costs

Being a free port, Hong Kong is advantageous for businesses since there are no applicable import and sales taxes. Moreover, the best thing to happen is The Hong Kong Policy Act! According to this Act, the US cannot impose any tariffs on your products / shipments unless their value is over $800.

Let's take a look at the costs of international shipping from Hong Kong and the US to other major cities. For the purposes of this exercise, we'll assume we're shipping a 5lb box measuring 10in x 5in x 5in through Easyship.

For ease of comparison, we've also selected the cheapest service for each route. As you can see, shipping from Hong Kong to the US or other countries is always cheaper than mailing items from the US. That's because Hong Kong fulfillment services tend to be cheaper overall.

There are a few other fulfillment costs to think about when considering shipping from Hong Kong.

• Labour is cheaper in Asia than the US, which means the cost of picking and packing orders is less. If you can have your orders packed at your factory in the Pearl River Delta before shipping from Hong Kong, you'll save even more.
• Warehouse handling fees in the US tend to be higher in the US; Hong Kong warehouses charge less.
• Most warehouses charge receiving fees to process items entering storage; these fees are cheaper in Hong Kong and Asia than in the US.

The only exception to cost-saving when it comes to Hong Kong fulfillment services is warehouse storage. Because space is at a premium in Hong Kong, warehouse storage costs are more expensive than the US; but, warehousing across the border, for example, in Shenzhen, is still cheaper.

For example, the typical storage cost in Hong Kong is $1/cubic meter/day; in the US, it's $0.55. However, these fees usually don't kick in unless your goods will be held by the warehouse for more than a week. So, if you think your items will move through the warehouse quickly, you might be able to avoid these fees.

Shipping from Hong Kong: Easyship Case Study

How is Hong Kong is an ideal destination for eCommerce businesses who:

• want to go international
• are in the process of going international
• aren’t happy with their current shipping process.

To help you understand how Hong Kong may just be the right destination for you to ship from, consider this example.

Linda lives in Sacramento, California and runs a small business selling handmade, scented wax candles online. She's been growing her business by selling in bulk to retailers in bigger American cities like New York, and is ready to take her brand global.

She's interested in selling her candles to the southeast Asian market, but high shipping costs are holding her back. She's interested in establishing a base in Asia, but isn't quite sure where to begin.

With no import or sales taxes, she thinks Hong Kong looks like a viable option. She also comes across Easyship and is interested in the variety of courier options offered, as well as the fact that she can keep inventory in Easyship's Hong Kong warehouse to easily fulfill orders to customers around the world.

Currently, she's using an express courier service that allows her to ship across the US in 2-3 days, with retail costs varying between $80-130 for a box of candles weighing 1 lb.

Using Easyship’s shipping rate calculator, she checked how much it would cost to send the same box of candles from Hong Kong to New York and discovered that it was enormously cheaper. Instead of paying $80-$130 for shipping, she would be able to pay just $30 with the same 2-3 day delivery timeframe.

But that's not all! Linda was even more amazed to realize that there were no additional taxes for shipping her crafted candles from Hong Kong. $30 USD was the final shipping cost!

Another benefit? By using Hong Kong as her distribution base and Easyship as her shipping provider, Linda was also able to access direct injection benefits. This allows her to group her individual orders with other shipments going to the same destination to access cheaper rates and enjoy duty-free thresholds in the US, EU and other countries!

Linda finally decided to base herself in Hong Kong for distribution. She loves this city and is looking forward to capture the home decor market with her beautiful, scented candles in Asia.

Looking for an eCommerce Fulfillment Service in Hong Kong?

When there's an opportunity for profits and an easy way to go global, why not?

Choosing Hong Kong as your primary destination to ship from can help ease the pain of the US-China trade war. Thanks to this city being a free port, your business will be allowed to go global and scale in a flexible and profitable way.

When you take Hong Kong's global connectivity and no taxes, combined with Easyship’s dynamic shipping rate solution, your company can excel in its global distribution strategy.

Ready to ship from Hong Kong? Contact our logistics experts to get a customized solution for your business!