Tariffs & The Trade War

1. Tariffs & The Trade War The “Impact” on Pet Product Imports and Exports and Resolution Strategies Thomas Cook, Blue Tiger International 2019

2. Agenda: We have 60 minutes Interactive … Ask & Discuss Who am I? International Business & Pet Products Tariffs and Landed Cost Modeling The Trade War Defined Impact on Pet Products Mitigation Summary Mitigation Example Mitigation Case Study Summary and Review Thomas Cook, Blue Tiger International 2019

3. Who am i? Thomas Cook Managing Director Blue Tiger International _______________________________________________ Consulting, Supply Chain, Import/Export and Logistics Seasoned Veteran of APPA … back to 1997 Pet Vertical Expert … Import & Export APPA’s Approved Consultant Thomas Cook, Blue Tiger International 2019

4. Managing Risk & Spend in our Global Supply Chains Senior Management Leadership Responsibilities: Reduce Risk & Spend Create Sustainability Growth Margin Gain Increase Value of our Company Thomas Cook, Blue Tiger International 2019

5. Best Opportunity for that success … Grow the international “footprint” Import & Export Must navigate & mitigate duties, tariffs and taxes Thomas Cook, Blue Tiger International 2019

6. Landed Cost Modeling The Formula: Add up all the costs … the total is the “Landed Cost” … that is the critical number … as it identifies the actual total costs of goods purchased or sold “The Accumulation of Total Costs to Sell or Procure and Ship a Product from Origin to a Final Destination” Acquisition Cost Export Charges Inland Freight International Freight Inbound Charges Customs Clearance Tariffs, Duties & Taxes Inland Freight Insurance Warehousing Distribution Thomas Cook, Blue Tiger International 2019

7. Tariffs, Duties & Taxes Duty Rate Origin How are duties calculated? HTS Classification Thomas Cook, Blue Tiger International 2019

8. The Tariff War: The “initiatives”, via Executive Order … taken by the Trump Administration To influence and control the costs of goods purchased from foreign sources Thomas Cook, Blue Tiger International 2019

9. 232 & 301 Tariffs 301: Pushed Forward in Three Lists from April to November Over $50 Billion in Products from China List 3 in October … 10%, then 15% add’I on Jan 1 … Moratorium for 90 Days 232: Steel & Aluminum … Numerous Countries 301 An array of products … China Thomas Cook, Blue Tiger International 2019

10. Politically and Economically Motivated 232: Infrastructure … National Security U.S. Labor in Steel & Aluminum (Unions) 301: Imbalance of Trade Intellectual Property Rights (IPR) Unfair Trade Practice Cyber Security Concerns Thomas Cook, Blue Tiger International 2019

11. Specific to the “Pet Product” Vertical Lists 1 & 2 … very little impact List 3 … Huge Impact List 4 … Major Impact Thomas Cook, Blue Tiger International 2019

12. January 2019: Current Status G20 Conference … Xi Jinping and Trump …Restarted Negotiations & a 90-Day Moratorium Canadian Arrest of Huawei The general state of political conflict between China and USA Trumps Domestic Issues ++ with a new House of Representatives Most professionals … a 2019 resolve with some residual impact Thomas Cook, Blue Tiger International 2019

13. The Bad and the good “news” There will be a “Residual Impact” There are Resolutions and Mitigations Thomas Cook, Blue Tiger International 2019

14. The Resolutions: In December 2017 … we introduced 12 Steps companies can utilize to manage the impact of the 301 Tariffs These resolutions go back over 25 years … have always had application …The 301 Tariff has just “heightened” these issues In 2018 … we increased these Mitigating Steps to over 20 … and we are continually tweaking as our learning curve and practical applications move forward In over 20 Industry verticals, including Pet Products ,,, we have made outreach and have now assisted over 140 companies including at least ten companies in the Pet Product Vertical Thomas Cook, Blue Tiger International 2019

15. The mitigating steps: - Supply Chain: Risk and Insurance Assessment- Training Needs in the Global Supply Chain- Information and Resource Development- Divisional Alignment- Supply Chain Process Enhancements- Robust Landed Cost Modeling- Documentation, Packing, Marking and Labeling Considerations- Choice of INCO Terms- CTPAT Awareness, Compliance and Adherence - Business Development Opportunities Developing a Risk and Cost Mindset- Transportation Consolidation- Sourcing Management- HTS Codes and Tariff Engineering - Demand Planning- Contract Management and Vendor Participation - Vendor Risk Management- Procurement Management- Technology Options- Infrastructure on Internal Communications- Free Trade Agreements- Drawback - Bonded Warehousing - Foreign Trade Zones Thomas Cook, Blue Tiger International 2019

16. “Key” Mitigating Steps: Thomas Cook, Blue Tiger International 2019

17. Case Study: LI Based pet Product importer Thomas Cook, Blue Tiger International 2019

18. Free Trade Agreements What are they? Ex: NAFTA, CAFTA, KFTA, IFTA, AUFTA … plus dozens more How do they work? How can Global Supply Chains benefit? Alternative sourcing, manufacturing and assembly Thomas Cook, Blue Tiger International 2019

19. U.S. Free Trade Agreements Thomas Cook, Blue Tiger International 2019

20. Free Trade Agreements • How do they work? • U.S. enters in a trade agreement • The agreement has trade guidelines … timing, products, exclusions, parameters of agreement • When goods enter the country … the clearance process controls “preference” program • Goods enter duty free or at a reduced rate of duty Thomas Cook, Blue Tiger International 2019

21. Free Trade Agreements Considerations • Where do we currently source from? • Can we leverage “purchasing” by choosing a country that we have a FTA with? • Landed Cost modeling evidences our options • Along with a host of other criteria … cost, QC, product performance, lead time, etc. Thomas Cook, Blue Tiger International 2019

22. Benefits Outline: • Acquisition Cost … On par • QC … on par • Lead Time … 3 weeks versus 9 weeks • Freight … 40’ Trailer/Container … $700 vs. $2,000 • Duties and Taxes … 0 vs 4%++ • Vendor Management … a lot less Free Trade Agreements Mexico vs. China “Maquiladora” Thomas Cook, Blue Tiger International 2019

23. Drawback • What is it? • How does it work? • How can your business model and company benefit? • How do we assess the opportunity? • Next step? Thomas Cook, Blue Tiger International 2019

24. This includes goods that are imported by the importer, exported by the exporter as well as well as goods that are imported and exported through third parties. • CBP Program which allows a company to claim a refund from CBP of up to 99% of duties paid on goods imported … that are exported from the U.S. or destroyed. Thomas Cook, Blue Tiger International 2019

25. Search U.S. Customs and Border Protection • Drawback Process • Evidentiary process in accountability down to a “sku” level • Tracking what has come into the U.S. and what is going out (import and export) Thomas Cook, Blue Tiger International 2019

26. DRAWBACK:Case Study: NJ Based Pet Product Importer fr0m china Thomas Cook, Blue Tiger International 2019

27. Drawback • Additional Considerations: • On products where duties have been paid (i.e. NAFTA exclusion) • Ability to go back three years (one time) • Must be filed through ACE Platform (February 2019) Thomas Cook, Blue Tiger International 2019

28. Tariff EngineeringThe legitimate process of evaluating what HTS codes are being utilized and are there options available to present new ones that lower “landed costs” Supreme Court Ruling: In regard to HTS Classification … "So long as no deception is practiced, so long as the goods are truly invoiced and freely and honestly exposed to the officers of customs for their examination, no fraud is committed, no penalty is incurred." Thomas Cook, Blue Tiger International 2019

29. Tariff Engineering Case Study: LA Based Animal Feed Company: Finished Product Versus Raw Materials, Packing & Materials Handling +++ Use of FTZ Imports Finished Products … Averaging 4-6% Duty … Now 29-31% Thomas Cook, Blue Tiger International 2019

30. Additional Options: Thomas Cook, Blue Tiger International 2019

31. Summary of Steps: They all provide significant benefits Multiple steps may be required Key is mitigation, not elimination Thomas Cook, Blue Tiger International 2019

32. Blue Tiger International We have created a specific strategy (4 Steps) and action plan to Mitigate the 301 Tariffs: Thomas Cook, Blue Tiger International 2019

33. “Special Offer” For the attendees of Pilc Blue Tiger International will complete a free 3 - 4 Hour Assessment of Your Global Supply Chain to determine if there is any Opportunity to Reduce Risk and Spend in your Global Supply Chain, including 301 Mitigation Thomas Cook, Blue Tiger International 2019

34. Our Strategy: Has over 100 success stories in the last 16 months and over 500 in the last 15 years Works in numerous verticals, including Pet Products Timeline of 60-180 Days from assessment to implementation The key is doing the assessment and financial model … Creates the “ROI” Thomas Cook, Blue Tiger International 2019

35. Our Strategy: “Best Practice” The “Assessment” Process becomes an opportunity which also evaluates a number of areas in your organization … that should be reviewed and challenged on a periodic basis … as a “Best Practice” Freight Costs, Trade Compliance, Options for Reducing Risk & Cost, Less Dependence on China … etc. Thomas Cook, Blue Tiger International 2019

36. The Evaluation process Requires Resource Development Some External Support Involves numerous “Silos” in the Organization Collaborative Process Has lasting benefits way beyond this 301 Tariff Crisis Thomas Cook, Blue Tiger International 2019

37. In overall summary: International Business (Importing & Exporting) has substantial opportunity for all companies involved in Pet Products But with that opportunity … comes risk … manage the risk … increase the opportunities We need to become less dependent on China as a sourcing country A substantial risk are duties, tariffs and taxes … the 301 Tariffs have significantly increased the Risks, particularly for importers We now should fully understand that there are numerous and robust options to mitigate these risks … drawback, FTA’s, FTZ’s, Freight Assessment, Tariff Engineering, Alternative Sourcing, etc. Thomas Cook, Blue Tiger International 2019

38. Thank you! “when you get a dog … your home will never be the same or be perfectly clean again And you may never pee alone again … but you will have more love … than you ever could have imagined” Founder … Soldieronathome.org … assisting our wounded combat Veterans! Thomas A. Cook Managing Director Blue Tiger International & National Institute for World Trade 19 Benjamin Avenue Suite 101 East Moriches, N.Y. 11940 Cell: 516-359-6232 Bluetigerintl.com Niwt.org “Tom” Thomas Cook, Blue Tiger International 2019