DTC Podcast - Bonus Episode Summary: Navigating the Tariff Regime with Passport's Alex Yancher

Host/Author: DTC Newsletter and Podcast
Guest: Alex Yancher, Passport Global
Release Date: May 28, 2025
Title: Bonus: Navigating the Tariff Regime with Passport's Alex Yancher: Duty Drawbacks, International Logistics, and the Arbitrage Opportunity Abroad

Introduction

In this bonus episode of the DTC Podcast, host Eric Dick welcomes Alex Yancher from Passport Global to discuss the evolving landscape of international e-commerce, particularly focusing on the recent changes in tariff regimes and their profound impact on Direct-to-Consumer (DTC) brands. The conversation delves into duty drawback programs, international logistics, and the emerging arbitrage opportunities abroad, providing invaluable insights for brands aiming to scale globally amidst shifting trade policies.

1. The Impact of Recent Tariff Changes

[00:51] Eric: Eric opens the discussion by highlighting the significant shifts in international e-commerce, prompting brands to reevaluate their global expansion and fulfillment strategies due to recent tariff changes.

[01:14] Alex: Alex explains the traditional model where brands imported goods primarily into the US, their largest market, and then exported to other regions. However, under the Trump administration's trade policies, this model has been disrupted. The imposition of high tariffs, often exceeding 30%, has prompted brands to consider importing products directly into other international markets to bypass the US tariff regime.

Key Points:

• Traditional US-centric import model is being challenged.
• High tariffs (30%-50%) are making US import less attractive.
• Brands are exploring importing directly into successful international markets to avoid US tariffs.
• Diversification of revenue streams beyond the US is becoming essential.

Notable Quote:

"The US is becoming a high tariff regime that's already a foregone conclusion, with some pretty high minimums." – Alex Yancher [05:12]

2. Understanding Duty Drawback Programs

[05:12] Eric: Eric introduces the concept of duty drawback programs, seeking Alex's expertise on setting them up for brands with existing international presence.

[05:36] Alex: Alex breaks down duty drawback programs, emphasizing the necessity of inventory matching. Brands must accurately track specific SKUs from import to export to qualify for tariff refunds. He highlights the complexity of these programs, especially in managing returns, which can complicate the inventory matching process. Alex notes that while duty drawbacks historically catered to raw materials, DTC brands are now navigating these processes with multifaceted product lines.

Key Points:

• Duty drawback programs allow refunds on tariffs paid when importing goods for export.
• Requires precise inventory management to match SKUs from import to export.
• Returns from international customers can disrupt duty drawback eligibility.
• Passport Global assists brands in navigating these complexities to maximize tariff refunds.

Notable Quote:

"If 20% of your traffic is coming from abroad, but only like 6% of your sales are coming from abroad, you have a disconnect there, and we can help close that gap." – Alex Yancher [39:22]

3. Strategies Brands are Using to Navigate Tariffs

[07:56] Eric: Eric probes into how brands are reacting to the tariff changes, questioning whether they are adopting proactive measures or adopting a wait-and-see approach.

[08:20] Alex: Alex describes a "tale of two cities," where some brands anticipated the tariff changes early (especially those vocal about trade policies) and began relocating inventory away from China. He underscores the bipartisan nature of current US tariff policies, making it a stable yet challenging environment for brands. Alex emphasizes that many brands are now seeking to diversify their downstream demand to mitigate the impact of high US tariffs.

Key Points:

• Brands are either proactive or reactive in adjusting to tariff changes.
• Bipartisan support for tariff policies ensures their longevity.
• Relocating inventory to non-US markets with lower tariffs is a common strategy.
• Diversification of markets to capture a larger global demand base.

Notable Quote:

"The US is only 330 million plus people while the rest of the world is 8 billion. We're just a fraction of the demand base around the world." – Alex Yancher [04:22]

4. The De Minimis Exception and Its Implications

[19:17] Eric: Eric shifts the focus to the de minimis exception, inquiring about its current status and impact on international shipping.

[19:17] Alex: Alex explains that the de minimis threshold, which determines the value below which goods are exempt from tariffs, has seen significant changes. While it remains at 800 for most countries, it has dropped to zero for China. This change affects e-commerce brands relying on dropshipping and micro-entrepreneurs, as it increases the cost and complexity of shipping low-value items internationally. Additionally, Alex discusses the concept of "postal leniency," where only a fraction of shipments are assessed for duties, leading to inconsistencies and challenges in managing international orders.

Key Points:

• De minimis threshold reduced to zero for China, impacting low-value shipments.
• Remaining at 800 for other countries creates a complex shipping environment.
• Postal leniency leads to inconsistent duty assessments, complicating financial planning for brands.
• Anticipation of further legislative changes puts uncertainty on long-term planning.

Notable Quote:

"Postal leniency worked well initially, but with increased scrutiny, it's becoming less reliable for brands." – Alex Yancher [34:37]

5. Case Studies and Examples

[24:25] Alex: Alex cites Dolls Kill as an example of a brand successfully navigating the new tariff regime by distinguishing tariffs as a separate line item and innovating their shipping strategies to maintain profitability and customer satisfaction.

Key Points:

• Dolls Kill: Demonstrates effective segregation of tariff costs to maintain transparency and customer trust.
• Strong brands with loyal followings can better absorb and manage additional costs.
• Innovation in shipping and pricing strategies is crucial for success in the new tariff landscape.

Notable Quote:

"Strong brands like Dolls Kill, with a huge following both domestically and internationally, are able to navigate these changes effectively." – Alex Yancher [24:25]

6. Recommendations for Brands Considering International Expansion

[25:38] Alex: Alex provides actionable advice for brands looking to expand internationally without a current presence. He emphasizes the importance of analyzing traffic sources via Google Analytics, localizing the user experience, and optimizing conversion rates. Brands should assess whether their international traffic is converting effectively and identify areas for improvement, such as currency display, language localization, and culturally relevant terminology.

Key Points:

• Traffic Analysis: Use Google Analytics to identify the proportion of international traffic versus sales.
• Localization: Adapt website elements (currency symbols, language nuances) to match local customer expectations.
• Conversion Rate Optimization: Ensure that international visitors have a seamless purchasing experience.
• Arbitrage Opportunities: Leverage lower costs per click in international markets to enhance return on ad spend (ROAS).

Notable Quote:

"If 20% of your traffic is coming from abroad, but only like 6% of your sales are coming from abroad, you have a disconnect there, and we can help close that gap." – Alex Yancher [39:22]

7. Future Outlook on Tariffs and International Trade

[10:43] Alex: Alex provides his perspective on the future trajectory of US tariffs, predicting that tariffs will remain significantly higher to meet revenue generation goals. He anticipates that countries will face tariffs averaging between 10-20%, with major exporters like China potentially facing tariffs as high as 40-50%. This sustained high tariff environment is likely to continue, affecting global trade dynamics and forcing brands to adapt continuously.

Key Points:

• Tariffs are expected to remain high as a revenue-generating tool for the US government.
• Average tariffs across countries could stabilize between 10-20%, with major economies like China facing even higher rates.
• Long-term high tariffs will necessitate ongoing adjustments in global supply chains and marketing strategies.

Notable Quote:

"I think this is at this point, to a certain extent, a bipartisan position. The de minimis going away is bipartisan." – Alex Yancher [08:47]

8. Managing International Duties and Taxes

[31:18] Eric: Eric shares a personal anecdote about incurring duty charges on an international purchase, prompting a discussion on the best practices for handling duties and taxes to optimize customer experience.

[32:10] Alex: Alex explains the pitfalls of Delivered Duty Unpaid (DDU) and Delivered Duty Paid (DDP) shipping methods. He advocates for DDP as the more customer-friendly option, despite its higher upfront cost, as it avoids unexpected charges upon delivery that can deter repeat purchases and damage customer trust.

Key Points:

• DDU (Delivered Duty Unpaid): Can lead to unexpected fees upon delivery, harming customer satisfaction and repeat business.
• DDP (Delivered Duty Paid): Incorporates duties and taxes into the purchase price, providing transparency and enhancing the customer experience.
• Postal Leniency: Previously allowed for some DDU shipments to avoid duties, but increasing enforcement is reducing its effectiveness.
• Consumer Trust: Clear and upfront pricing regarding duties fosters better customer relationships and reduces the likelihood of chargebacks or returns.

Notable Quote:

"DDP is better for repeat purchase rates and the customer experience, despite potentially higher initial costs." – Alex Yancher [34:23]

9. Notable Quotes

Throughout the episode, several key quotes encapsulate the core discussions:

• Alex on Traffic Discrepancies:
  "If 20% of your traffic is coming from abroad, but only like 6% of your sales are coming from abroad, you have a disconnect there, and we can help close that gap." — [39:22]

• Alex on Tariff Policies:
  "The US is becoming a high tariff regime that's already a foregone conclusion, with some pretty high minimums." — [05:12]

• Alex on De Minimis Changes:
  "Postal leniency worked well initially, but with increased scrutiny, it's becoming less reliable for brands." — [34:37]

• Alex on Future Tariffs:
  "I think this is at this point, to a certain extent, a bipartisan position. The de minimis going away is bipartisan." — [08:47]

Conclusion

This episode of the DTC Podcast offers a comprehensive exploration of the current challenges and opportunities presented by the evolving tariff regime. Alex Yancher's expertise provides DTC brands with actionable strategies to navigate duty drawbacks, optimize international logistics, and leverage arbitrage opportunities in foreign markets. As global trade policies continue to shift, understanding and adapting to these changes is crucial for brands aiming to scale internationally and maintain competitive advantage.

For Further Information:

• Contact Alex Yancher: alex@passportglobal.com
• Follow Alex on LinkedIn: LinkedIn Profile
• Visit Passport Global: passportglobal.com

Subscribe to the DTC Newsletter: Stay updated with weekly discussions, highlights, and tactical insights at directtoconsumer.co.