Name: Tariffs Unpacked with FlavorCloud
Uploaded: 2025-06-24T16:01:11.471Z
Duration: 31 min 36 s
Description: Tariffs Unpacked with FlavorCloud

Transcript for "Tariffs Unpacked with FlavorCloud": Okay. Hello, everybody. Welcome back to our maybe seven thirteenth episode of this so far this year with a lot of the changes happening at a macro level. Really excited for, for our session today. As a lot of you know, we have Rathna Sharad, the founder and CEO of FlavorCloud, and I'm gonna dive into her background in a second. But first, just like we always do, if you guys wanna throw in the chat where you're calling in from, you need to get some practice, typing into the chat. Questions are welcome. We've got a lot prepared here, but Rathna is has so much knowledge in cross border in general, and so I think it's definitely worth everybody's time to to maximize that. So I will type mine in. I am in Newport Beach, California. There we go. We have Rachel also in Orange County. We've got Lindsay calling in from Milwaukee. I'm sure we've got some people calling in from around the world as well. We've got Rothnik, dialing in from Seattle. There we go, Derek, out of the gates from Perth, Australia. I see. Gabrielle in Canada. Perfect. So please keep throwing those in there. Always love to see where people are dialing dialing in from. So, as mentioned earlier, Ratna is the founder and CEO of FlavorCloud. She's got actually over thirty years experience building global compliance, trade platforms, which, surprised me through that time. But, yes, she has so much knowledge in this space. She's been such a great partner for for us at Shipbob. So, FlavorCloud, which she'll dive into a little bit more later, but, you know, it's a cross border shipping, and logistics platform. It really removes the international shipping friction for direct to consumer brands, and they've been a a huge partner with us at Shipbob for for many years. They were our first, DVP partner, and we have so many stories of ways that they've helped our customers, you know, really start to test out these global markets and then go in region and really expand their footprint. One of our goals at at Shipbob is to unlock, not just the channels that you ship, or sell into, but also the geographies. And and FlavorCloud has been just such an important partner to unlock that, you know, for the customers that we're to to both work together with. So, Rathna, welcome. Casey, thank you for having me. It's super exciting to be on your podcast here, or webinar. So my background, a little bit about me and flavor cloud. As Casey mentioned, I've been a product leader building technology, in the global trade and compliance space as well as cross border logistics for thirty years or so, twenty plus in ecommerce enablement, with marketplaces, monetization, background. And, I fell into logistics, by accident, industry to be in, that led to creation of FlavorCloud. We're about, seven years old, seven and a half. We've been partners with Shipbob for almost five years out of that, as the white label DDP solution. What FlavorCloud does is make, international, shipping customs compliance easy. So, essentially, it's your easy button to go global, and it's, anywhere to anyone. So we partner, for example, with Shipbob in, multiple, countries around the world. It's about POC enablement, as well as b two b. So let's get into, some of the things that I wanted to talk about. Specifically, we're talking, trade, tariff, implications, and I wanna focus on the last month because a lot has happened, you know, over the last few months. We're gonna really talk about the most recent changes. Wanted to point out a resource here. This is, on flavorcloud,uh,.com. There's a real time tariff updates hub. It allows you to, see what's the most recent tariff, change. We actually it's not so much about news, but actually when something hits the federal register, that's when you will see these changes, become live here. And we also have a tariff calculator. So that will let you know what's, real time, and accurate. Next slide. So a little bit about I talked about, you know, what's what's new. Let's start with some of the things, that are more most recent and impactful. So May 1, the 03/21, or de minimis as it's known went away for China and, Hong Kong. That was one of the most, significant implications. What that means is US had this pretty high de minimis or still does for all other countries of $800, but goods that are manufactured, rather known as country of origin, China and Hong Kong, no longer qualify for that. And that means you're starting to see duties and taxes assessed on imports coming in, for Chinese goods. The second thing to call out here is, the liberation day. So, there were changes that were called out with liberation day. So essentially repealing all of the tariffs, but there's this day on it. So that just means that nothing really changed. It's status quo as of now. On June 12, there was, a China deal announcement. Oftentimes, I got questions on what changed. Really nothing changed based off of that. So you have, the, essentially, the IEPRA 20% still applies. That's the emergency tariff on imports into The US. The 10% reciprocity tariff also applies. And then you've got your base duty, and, the additional tariffs that also apply for a cumulative of, 55%. And then let's go to June 16. That's where The UK deal, economic, prosperity deal was done. Really no significant changes there. It's still the 10% on import from UK that's still on. I wanna call out something that's coming in July. So if you remember, I think April 9, there was a ninety day stay, that was, that went into effect for all those, tariffs that we saw that were country specific tariffs. And these were enormous numbers that were turned around. So there was a stay on that for ninety days. So one of the things we are watching for is what happens, in early July, in terms of the end of this day, what is the action that the administration takes. And finally, the big beautiful bill. There is a bunch of different conversations around. The de minimis was something that was considered even before the current administration. So this is not new. This is not just very specific to the Trump administration. It's more about tax revenue for the government. So what happens to de minimis for other countries is is, it's currently scheduled to go away, phased, in, if you will, by 2027. So that's kind of where we stay, and we'll be watching really closely for when that actually gets implemented. I think that's actually going to get implemented sooner. Next slide. I should just go back real quick. I wanna dig into a little bit. So, you know, I've heard from, you know, others in the space, just on de minimis and how that's a constant talking point, you know, in, DC or, you know, within the government and maybe pulling that forward. I've heard rumors again, very much rumors. I have not heard any of it firsthand that there's been talks of something happening, you know, more closer towards the end of q three or early q four for rest of world. I know a lot of brands are trying to still leverage de minimis if they, let's say, you know, manufacture over in India or, Vietnam or elsewhere. What what's your take on just de minimis and how, you know, that might unfold, let's say, before July 2027? I at least all indications from what's happening, with CBP and the systems and the changes that we're seeing kind of indicate that that's the direction that's going in. Just in terms of long term strategies though, I would say that, future proofing is a good strategy for brands. Kind of relying on the de minimis is not a good strategy because it is going away, and it's better to be, prepared for that. And, you know, I know we have a lot more to cover, but if let's just say, I guess, why would the government not, you know, bring an end to the de minimis exception, or why would they maybe bring it back if it was taken away? Yeah. I think it's more the case four. Right? So like I said, this was in is something that was, you know, considered even before this administration. The number one reason for it is tax revenue. There it's an enormous amount of tax revenue, and, you know, and that's being left on the table. Most most countries around the world have already done that. If you look at, you know, UK, with Brexit in 2021 and then IOS in, 2022 and beyond, you've had, this is happening around the world. US de minimis is one of the highest. We went from what used to be $200, a couple decades ago to now, you know, 800. And so that needs to be done for that's one of the the first reasons. The second is the cheap goods that are coming in, that are taking advantage of this, loophole, if you will. And, and third is, you know, really about border security. One of the things that that happened along with the de minimis is, a very rigorous process with declarations. You need to have declarations that are coming in in a formal clearance process that's happening, that allows the government to see what is coming in. So whether it's fentanyl or other types of commodities, security is one of those things. And finally, the reason is protectionism of some sort where, you know, domestic business is, you know, unfair advantage to, outside businesses. So these are the reasons why there is a good case for it. Love it. Thank you. Mhmm. Next slide. So, this is super interesting data. So first of all, this data comes from proprietary FlavorCloud, a state of the cross border report that came out, just recently, if you haven't seen that. This is one of the data points in there. We've across, you know, hundreds of millions in GMV and looking at 500 plus merchants. We've we've kind of, looked at, overall consumer as well as FlavorCloud network data. The the country of origin, China to US, as you can see, the conversion impact, at checkout is what this graph is showing. And you can see there's a massive drop, from China to The US. What's also interesting is seeing, trend lines, for other, whether it's country, of origin US going to Canada. You can see the green line. That basically, showed some dips, and then, somewhat of a recovery. Not quite where it was before because there's the 25% tariff in effect. We can go to the next slide. So this is a verticals view. Now again, I think this is a very fascinating view. One of the things, is, if you look at the yellow line, beauty and cosmetics, we saw a dip. This was, this is data up to May that that's how far we've been able to measure and include in the report. So we saw a recovery happen very significantly in the beauty and cosmetics, which is very interesting. But health and wellness did see a downward trend. So there's, a significant dip there. What is interesting is household goods, saw an increase. And that is also very interesting, with the green line to note. I think we can, include a, a link to this report so that folks have, the data as well. There are further questions. For health and wellness, like, why do you think that I mean, that stands out the most. Why do you think that dropped considerably compared to the others? Yeah. I think, it had to do with the tariffs. So it really is the implication of the tariffs. So, again, the tariffs are different based on commodities, where they're manufactured. So we actually, our data I don't know if we have a slide on that. Can you go to the next slide? We don't have a slide on that, but I do wanna talk a little bit more about health and beauty here. About in our data, we see about 40%, country of origin as China. So there was a significant implication in pricing. Now health and wellness tends to be US origin and US origin going into countries like, Canada, which is a big market, was impacted. And so that's why you see differences. So country of manufacturing is a critical component and so are tariffs that are specific to a vertical. K. Next slide. So this is a really interesting slide that I wanna spend some time on. So we noticed that health and beauty saw, decrease in conversions, for example. So then, one of the things, strategies that we've been working with merchants on, including our mutual merchants is, local market pricing. What what does that mean? It's it's localized, pricing at the SKU level, essentially, that allows for a fully landed cost, which is all of your duties, taxes, tariffs, and customs related fees. Now instead of, breaking that out as a separate, you know, if you see the picture in the bottom, it shows shipping of, £10 and then taxes and duties of 19. But all we've done is is change the product price from £98 to a 127, and that saw a 13 x higher conversion. So massive, you know, opportunity for brands to really think about, you know, how do you mitigate the implications of tariffs. So again, this is something that we we are recommending for, using our localized market pricing engine. And, I recommend brands to take a look at. Next slide. Okay. So I wanna end on, you know, just overall strategies for resilience, and we can kinda delve into some of these, Casey, if you have specific ones you wanna talk about. But ultimately, what we're seeing is, a diversification of sourcing, not just, moving from one to the other. So really thinking about, long term, can you have more than one source and thinking about, you know, how do you build a competitive, strategy around pricing, with multiple partners? We see India, Vietnam, Indonesia, also Colombia, a bunch of different alternative sourcing countries. Second is and we've done this, with, Shipbob partnership. We've seen this, as well, with a, a global footprint, if you will. You can look at, localized strategies, which means, you know, you could, have a UK, or a Netherlands fulfillment, for EMEA. You could also have local fulfillment in Canada or Australia, for example. We're seeing that, a much more regionalized play, if you will. Third, tariff engineering. Now this is a very interesting one. This is one that we work with merchants on. It is very specific to the products that you're selling and really understanding at the SKU level, you know, which SKUs are most impacted by tariffs and what are some alternate strategies that you might employ. So for example, you know, women's, blouse or top may have a different tariff, a higher tariff than if you could have something like a tunic, that had, you know, a pocket below the waist, for example. So there are many different, you know, aspects of, you know, tariff engineering, but it's a very tailored approach. Adapting pricing to preserve conversion. This is what we talked about, the localized market pricing, example. And the fifth one is really understanding the cost benefit, the full stack cost. So you're oftentimes importing, you know, and there's, the tariff implications of that. What are your sourcing locations? Looking at the tariff implications there, and really looking at expansion, you know, global. Obviously, going, leveraging international expansion is really easy, but really having a full view of the whole, supply chain, if you will, is critical. And finally, you know, DDP is one of those easy and really relevant, upgrades to make, because ultimately, you don't want customers paying for your customers, essentially, consumers paying for additional tariffs. And especially when there is so much volatility, it is just a much better experience when rolled into a DDP experience, alongside localized market pricing that has, really, greater benefit, to conversions. Hello. I just have a couple of follow-up questions here. So I think one of the the the benefits, if you will, of of what the COVID impact had on brands is that it really forced them to understand parts of their supply chain better, and just running their business in general. Coming out of COVID, of course, when I think competition ramped up and consumer demand weighed a little bit, brands were forced to, forced to understand their p and l and the bottom line much better, which is I think with the brands we have around today are even stronger. I think the Mhmm. Say, one of the benefits maybe of the, you know, all of the tariff changes this year, again, it's forcing these brands to understand, you know, like you said, at a SKU level that the products Yeah. At an even better level, and I think get even stronger hygiene from, like, a financial perspective. So with, like, tariff engineering, you you didn't give an example of, you know, two different products that seem similar, but you might be able to, you know, pay slightly less duties, depending on how you structure it. Any other example there, like, on the the tariff engineering side that that you think the brand should really focus on? Yeah. There there are, depending on, the, actual commodity, it's quite different. So, for example, rubber soles on shoes tend to have higher tariffs than if you did, like, felt, or even leather. So there are, just components that you can change on a product that will allow you to, you know, have a different tariff. Okay. And then yeah. This is this is probably a good slide too for my my next question, which is, I remember when I was, this was a while ago, but my wife and I and our and our oldest at the time, we were we're living over in in Germany, and so we'd sometimes buy stuff from The US and would come over. And I remember the first time, you know, that the guy delivering me had knocked on the door, and and then he told my wife, he's like, oh, and you also owe whatever, another €40 for duties and taxes, and she was had no idea what he was talking about because we don't really deal with that too often here in The US. Now consumers are starting to see these extra bills with, you know, the the duties and, and tariffs and and sometimes, even, like, brokerage fees as well. Mhmm. In this example of, you know, showing a higher price point, which I think people just, by default, assume, okay, lower conversion rate. Mhmm. But from, like, a educating the consumer, especially US is people are getting hit with us or maybe even globally. Like, have you seen anything interesting that that brands have done to help from an education standpoint? Yeah. So the this goes alongside education. So in this example, it it actually, you know, you're including shipping as well. Now you you don't need to include shipping. It really is, you know, a strategy. You can AB test with us, and see how that works. But intuitively, especially in European countries and, The UK, they actually expect, a fully inclusive, you know, product price. And that is something that consumers are starting to expect. So we've actually seen that that, is why you're seeing the increase in conversions because they do not want to see any bills after the fact, no surprises, and it it actually, you know, oftentimes what we don't talk about is the type of fees. Like, for example, there's additional fees that are brokerage fees or storage fees or other things that the carriers might apply related to customs. And that oftentimes shows up. It's either erosion of margin on the brand side or it's a bad experience, as in your example for the consumer. So having this mitigates both of those and consumer expectation has already evolved in this direction. Thanks for that. And then, you touched on this a little bit earlier, but, like, the verticals that are growing even despite the the tariff impact. I I like what you called out earlier where you're talking about future proofing the business where, again, with the impending changes de minimis. Yeah. Again, these if even if you're maximizing de minimis today, which which you probably should because it could be a massive cost savings, you know, it's really getting the infrastructure in place for the future. But, when you think of, like, the verticals impacted and and what might transpire this year, are there any, like, arbitrage opportunities that that you see again, whether it's specific categories or just kinda ways to do business that that these brands are kind of, you know, getting a competitive edge, in front of others? I think sourcing is one of those things that really gives them the pricing advantage, at least right now until the, de minimis changes go into effect. So I think that's why I think short term, yes, there are certain alternatives. Although sourcing is something that you cannot, like, change, unless you've already had some of these things in motion. It really takes a few months, maybe even six months to implement. But it's a good long term strategy because, as you mentioned, COVID, tariffs now, there will be something else, in the future. What is what is constant is flux. Right? There there's gonna be something new, and guess what? With, you know, ecommerce still growing and every government wanting, you know, tax revenue, from ecommerce, especially cross border, they're gonna, you know, continue to make inroads. So for example, EU has a duty de minimis of a €150. It has a tax de minimis of zero. Now they're looking to reduce that duty de minimis on their end as well. And, and the reason for that is the Sheehan's and the Timo's of the world bringing cheap goods into the EU as well. So you're gonna see porosity of the borders, really decrease, and and we're gonna see this around the world. So so, the constant for brands is to expect to be able to be nimble, and be able to react to these changes without having, massive implications to the business. So that's the the preparedness, I think, they need to be ready for. Yeah. I don't think a lot of founders started their journey expecting to be tariff and, tax experts and cross border experts. But, like you said, there's the the one thing that we know will happen is there will be more large change. We just don't know what it might look like. Yeah. We talk a lot about ecommerce and and direct to get super. We know that the, you know, b to b and and retail side of of commerce is, is massive. And so what what's going on with cross border b two b from what you guys have seen? Yeah. So that's a really exciting, opportunity. Over the last two years, I think, post COVID, actually, we started seeing, a very nimble air network. You know, our brands would come to us and say, hey. We wanna do this, you know, b to b drop to, you know, The UK or Australia or, wherever for a wholesale opportunity. And now what we're seeing with the tariff changes, we saw that again an acceleration. So there's frequent, smaller drops of inventory allows the brand to be more agile, and even sometimes based on actual sales. And so these types of b to b, so we started enabling a freight b to b cross border. That's very much like, b to c and actually allows for a DDP experience. It's it's fundamentally different because we are IOR, which is importer of record on every single transaction. So this scrutiny and the liabilities and the way taxes and brokerage automation works is very different. But ultimately, this allows for nimbleness. So so you talked about, you know, understanding your supply chain, understanding the cost benefit across all of it. B to b is a significant component of enabling that change is the way to think about it. Nice. Well, maybe we'll have to have a follow-up episode solely on that because I definitely have a lot of questions. Well, Rathna, this is great. Thank you so much for coming on. I know I learned a bunch as always. I'm sure everybody else in the audience did as well. I guess, where where can people find you in FlavorCloud and, yeah, anything specific with FlavorCloud you wanna plug? Rathna@flavorcloud.com. And, you know, you can, find our, state across border report. I would encourage the the people to take a look at that. Awesome. Well, thank you so much. Excited to do more of this. Thank you everybody for joining, and have a good Tuesday. Thanks, everybody. Thank you. Thank you, Casey.