Using non-tariff trade barriers.
It was recently reported that a dairy company in Australia had identified a market in Shanghai for imported fresh milk; the milk would be air-freighted every day from Melbourne to Shanghai and delivered to selected retail outlets where their customers would be willing to pay the expensive price per litre for a product they considered was quality.
The only problem with this business plan was that import regulations in China state that imported ‘fresh’ milk must remain in Customs controlled quarantine for fourteen days, which means that on release, the product is no longer fresh.
This is an example of a non-tariff trade barrier. Tariffs are payments paid to a government by importers of goods; they are typically documented and use the harmonised tariff system (HTS) as the international standard for classifying traded items. Non-tariff barriers are regulations enacted by a government and interpreted by Customs departments at inbound sea and airports.
Both tariff and non-tariffs are designed to protect domestic industry. Tariffs can be calculated and paid as the goods enter the country, but non-tariff regulations provide problems for logisticians, due to the local interpretation and decision making that is possible. While delays at country borders are a problem for many consumer goods in meeting delivery schedules, it becomes critical when moving fresh agricultural and horticultural items, because any delay can result in the total shipment being written-off.
Reducing non-tariff barriers.
In the Asia region, the South Asian Free Trade Area (SAFTA) and the Asean Economic Community (AEC) agreements aim to reduce tariffs and cross border delays. However, as governments reduce or eliminate tariffs, they can introduce non-tariff barriers and these are more difficult to remove due to domestic industry support. In opposition will be that part of the population with an increasing income that allows them to buy and enjoy imported products – especially quality agricultural and horticultural items.
The role of logisticians is to identify the non-tariff barriers applying to specific items, the risk of them being enforced at different entry points and under what circumstances. This information comes together in the plan to mitigate the risk surrounding the item.
