Insights
The fashion and luxury retail industries are finding their feet again following the disruptions of the early 2020s. Much of this growth is being driven by large, multinational groups and brands that play a vital role in elevating the retail experience. Smaller fashion and related brands are still facing significant challenges, combined with multiple takeovers and bankruptcies. Controlling costs and reducing risks in the luxury retail marketplace are vital to medium- and long-term growth, continuity, and profit margins.
One area that’s central to managing the fashion supply chain is customs brokerage. As brands take advantage of international sourcing and manufacturing, a customs service ensures the smooth flow of goods between countries while minimizing risks and costs.
While some fashion brands may focus on more obvious areas of supply chain stress, like international shipping, customs brokerage has a substantial toolkit to assist luxury retailers of all sizes. We’ll explore some of the key challenges luxury supply chains face and how customs brokerage services can make a difference.
Getting products into the luxury retail marketplace more quickly
Trends and seasonality impact fashion more than almost any other industry. It’s extremely important to get products from manufacturers and into domestic marketplaces as quickly as possible. This challenge is compounded by the need for multiple sizes, styles, and colorways across the entire product range.
Every day that a luxury retail shipment is held up in customs, money is lost. A customs broker can mitigate risks and make the entire process much faster and easier using several approaches:
- Pre-entry preparation for luxury retail items: A customs broker will review and validate all of your product entry information. They can identify any mistakes, seek missing information, and carry out early filing with the customs agency. This minimizes delays when your fashion goods arrive at a port.
- Fast clearance through customs and into the domestic retail marketplace: Pre-clearance removes many of the delays from the import process, and an on-the-ground customs clearance broker resolves any local or immediate issues for product processing. When the goods are released, they will notify you and can arrange for onward transportation and logistics.
- Post-clearance processing for fashion products: Following the importation of your goods, a customs broker can deal with any supplementary requirements such as corrections, audits, or customs agency requests.
Importing luxury products temporarily for samples and trade shows
Fashion shows, samples, and trade events are a major part of marketing for luxury retail brands. Normally, when you import products, you need to pay tariffs, duties, and other fees on the value of any imported products.
A customs broker can help you avoid these fees by offering a “temporary import under bond.” This arrangement allows you to bring your luxury products into the US on a temporary basis and avoid many of the fees associated with regular importing. You will need to show proof of re-exporting or destroying the goods, but this can be a helpful strategy for keeping costs down.
Minimizing fashion duties paid using tariff engineering
Duty payments cut directly into your profit margins. Fortunately, there’s a way to reduce your costs on luxury retail goods: tariff engineering. Expert trade consultants can work with you and suggest changes to your materials and manufacturing that can reclassify your goods into lower tariff bands.
Even small changes to your manufacturing processes can change how your fashion goods are assessed under the Harmonized Tariff Code (HTC). This directly translates into improved profit margins—even changes that offer fractions of a percent in lower tariffs can save you significant costs across your luxury retail range.
Reducing or eliminating luxury retail tariffs with free trade agreements
Another critical consideration for reducing your duties paid is taking advantage of trade agreements. Fashion goods imports from certain countries will benefit from reduced tariffs or avoid duties altogether. A customs broker can help you model what those savings may be and develop a strategy that maximizes your profits based on international trade flows.
Getting money back on imported fashion products when they are re-exported, manufactured, or destroyed
While temporary import under bond is helpful for bringing in luxury goods you will export or destroy, what about products you’ve imported through the regular customs process? That’s where “Duty Drawback” comes in. Duty drawback allows you to reclaim up to 99% of the original import duties on the item when it’s exported out of the US, destroyed, or manufactured into a lower-tariff product.
This can be especially helpful in the fashion world, where products are often destroyed when they go out of season. A customs broker will file duty drawbacks on your behalf, collect refunds from customs agencies, and credit them back to you.
Rethinking your fashion supply chain network risks and contingencies
The pandemic badly impacted many of the countries where fashion brands traditionally manufacture their products. Since then, geopolitical tensions and wars have caused further disruption. It’s important for luxury retailers to build more contingency into their international supply chain. Large logistics firms often provide consulting on supply chain network optimization.
They can model new, contingent, and resilient supply chains that can withstand disruption. These optimization teams will work with customs brokers to take into account the costs associated with shifting luxury goods manufacturing between countries. This provides you with multiple options for your fashion supply chain, balancing cost savings with a network that provides continuity as the world changes.
Connecting with other logistics services to provide complete support for luxury retailers
A disjointed value chain introduces extra risks and costs to your luxury retail operations. Some customs brokerages are part of larger third-party logistics businesses. These brokers can offer a seamless, end-to-end service for all of your fashion logistics needs:
- Collection, storage, and domestic transport of luxury products within the country of origin.
- International transport of luxury goods using freight forwarding services.
- Clearance of luxury products through customs in the destination country.
- Receipt of luxury products and domestic transport to warehouses.
- Order fulfillment for luxury retailers and end consumers.
- Distribution of luxury products to their final destination.
Centralizing all of your fashion logistics services in one place ensures better handovers, reduced costs through economies of scale, and clear, all-in-one account management.
Tracking luxury products using a control tower
With high retail prices, it’s vital to ensure the security of your fashion products at every stage of their journey. A mature customs broker will provide a “Customs Control Tower” that can track where your products are at all times. This transparency and visibility can reassure you about how quickly your luxury items are going to enter the domestic marketplace. This can help you align with marketing and promotions to enhance brand awareness and drive consumer behaviors.
Staying up to date with regulatory changes and sustainability
National and international customs and product regulations can change fast. A customs broker will keep you informed of any planned and upcoming rules that may impact luxury retail customs costs or clearances. Sustainability is becoming increasingly important to luxury retail brands, and customs brokers can help you understand your commitments. These might include regulations on import or export of certain product types or between certain countries or upcoming changes dealing with emissions and environmental protection.
Trust GEODIS to provide integrated customs brokerage for your fashion supply chain
Here at GEODIS, we’re experts in the fast-moving world of luxury retail and fashion. We understand the pressures you’re under, the risks you face, and the need to reduce costs and maximize profit margins. Our experienced customs brokers provide a complete range of services for luxury retail, from customs clearance and temporary imports to tariff engineering and duty drawback. Even better, we’re part of the global GEODIS network, spanning more than 170 countries—so we’re there wherever you are.
Get in touch today to learn how we can help you.
