Navigating Packaging Tariffs: A Guide for Beauty and CPG Brands
In today's complex global market, beauty and CPG brands face significant challenges when it comes to packaging costs, particularly due to tariffs. Whether you're selling through Target, Ulta, Sephora, or direct-to-consumer channels, understanding and navigating these tariffs is crucial for maintaining profitable operations.
Understanding Tariff Codes
At the heart of the tariff system are the Harmonized Tariff Schedule (HTS) and Harmonized System (HS) codes. These classification systems use a series of digits to identify and categorize different types of products, each with their own tariff rates.
Let's break down how these codes work:
First two digits (e.g., 39): Indicate the basic material category (such as plastics)
Next two digits: Specify the product category (like packaging articles)
Following digits: Further refine the product type
Final four digits: Provide US-specific classification
For example, plastic bottles and containers typically fall under code 3923.30.0090. Each classification comes with its own tariff rate, which significantly impacts your bottom line.
The Real Impact on Brands
Currently, packaging items from China face a 25% tariff, with potential increases to 35% on the horizon. To put this in perspective:
For a brand spending $100,000 on packaging
A 25% tariff adds $25,000 in unexpected costs
This translates to roughly 25¢ per unit in additional costs
These increased costs often force brands to raise consumer prices, impacting competitiveness and market position.
Three Strategic Recommendations
1. Diversify Your Sourcing
Consider expanding your packaging sourcing beyond China to include:
United States
Latin America
Southeast Asia
Other global regions
For critical SKUs, we recommend establishing secondary suppliers to ensure supply chain resilience. (Note: At PPC Packaging, we offer complimentary sourcing services to help brands find optimal solutions.)
2. Simplify and Consolidate
Streamline your packaging portfolio to:
Make supplier changes easier to manage
Reduce complexity in sourcing
Enable faster adaptation to market changes
Simplify secondary supplier relationships
3. Plan for Increasing Tariffs
Take a conservative approach to financial planning:
Budget for potential tariff increases
Price products with tariff escalation in mind
Maintain financial buffers for unexpected changes
Regular review and adjustment of pricing strategies
Moving Forward
The current tariff landscape requires brands to be more strategic and agile than ever. While the challenges are significant, they're not insurmountable with proper planning and expertise. Whether you're looking to diversify your supply chain, consolidate your packaging, or simply need guidance navigating these complex waters, working with experienced packaging partners can help ensure your brand's continued success.
Remember, the goal isn't just to react to current tariffs, but to build a resilient supply chain that can adapt to future changes while maintaining product quality and brand integrity.
Need help optimizing your packaging supply chain or finding secondary sourcing options? Our team of experts is ready to assist. Contact us to learn more about how we can help navigate these challenges together.