Refunds for U.S. Illegal Tariffs Take Effect, Bringing Two-Way Changes to Cross-border Logistics of Rotary Drilling Rigs

The US Customs will issue the first batch of illegal tariff refunds on May 12th, involving an amount of approximately $166 billion and covering over 330000 importers. This refund is due to the US Supreme Court ruling that the government's use of the International Emergency Economic Powers Act to impose tariffs is illegal. As a core category of Sino US electromechanical trade, cross-border logistics of large equipment such as rotary drilling rigs and pile drivers are undergoing a systematic reshaping of demand, freight rates, links, and patterns under the dual effects of cost reduction and cash flow repair.

Refund flow differentiation, leading device companies enjoy direct dividends

This refund is strictly limited to applicants who are registered importers with the US Customs, and the benefits for domestic rotary drilling rig companies are clearly differentiated. Two types of enterprises can directly participate in refunds: one is enterprises that establish subsidiaries in the United States and declare and pay taxes in their name, which can directly submit applications as registration subjects; The second is that the trade contract stipulates DDP tax payment terms, and the exporter who is responsible for customs declaration and tax payment by the Chinese side can apply for a refund with the tax payment certificate and the contract agreement. However, most companies that adopt conventional terms such as FOB and have tariffs borne by American importers are unable to recover the profit margins they were forced to transfer due to their lack of direct application qualifications. Leading companies in the industry are seizing dividends by leveraging their overseas layout and compliance advantages, while small and medium-sized exporters are basically excluded, and the trend of profit differentiation in the industry is intensifying.

Importers' cash flow repair, large-scale equipment orders on the US line rebound

The significant improvement in the cash flow of US importers through the return of billions of refunds has directly driven a rebound in the willingness to replenish large equipment such as rotary drilling rigs and pile drivers. Under the previous suppression of high tariffs, US importers faced financial constraints and cautious procurement, resulting in a sustained slump in equipment orders. With the refund received, the financial pressure on importers has eased, and the price cutting behavior of purchasing from China has converged, resulting in a gradual recovery of orders. According to industry data, as of April 26th, 75000 companies have submitted refund applications, with engineering equipment importers accounting for over 12%. It is expected that by the end of the second quarter, orders for large-scale equipment in the US will increase by 20% -25% month on month. The recovery of demand has driven the growth of equipment shipments, and the demand for cross-border logistics space has been released simultaneously. The long sluggish US shipping market has ushered in a recovery opportunity.

Tariff cost reduction, equipment quotation competitiveness and logistics bargaining power double increase

After the cancellation of illegal tariffs, the comprehensive tax rate for Chinese engineering equipment exported to the United States has fallen, and the price competitiveness of products such as rotary drilling rigs and pile drivers has significantly increased. The previous 25% illegal tariff significantly increased the cost of equipment arriving at the port, weakened the price advantage of domestic equipment, and forced some orders to shift to suppliers from other countries. Now that the pressure of tariff costs has been lifted, the cost-effectiveness advantage of domestic rotary drilling rigs has become prominent, and the quotation confidence is stronger, resulting in an increase in order conversion rate. The cost advantage is transmitted to the logistics end, and the bargaining power of enterprises is enhanced, allowing for more flexible negotiations on sea freight, special equipment surcharges, etc., reducing overall logistics costs. At the same time, the improvement of price competitiveness drives the expansion of order scale, providing stable cargo flow for logistics enterprises and promoting the formation of a virtuous cycle of "demand growth cost optimization order expansion" in the large-scale logistics market.

The volume of goods on the US route has rebounded, and the tight supply and demand of large cargo transportation has pushed up freight rates

The order recovery driven by refunds, coupled with the approaching traditional peak season on the US route, has led to a shift in the supply and demand pattern of cross-border transportation for large equipment such as rotary drilling rigs. Previously, high tariffs led to a contraction in equipment shipments, an increase in the idle rate of special transport vehicles such as heavy lift ships and semi submersible ships, and sustained low freight rates. With the concentrated release of orders, the demand for transportation of large equipment has surged, and the construction cycle of special ships is as long as 2-3 years, making it difficult to make up for the shortage of transportation capacity in the short term. The imbalance between supply and demand has driven up the freight rates for large items on the US route. It is expected that the sea freight costs for special equipment on the Asia Europe and China US routes will increase by 10% -15% month on month from May to June. The difficulty of booking cabin space has increased, and some companies are facing the dilemma of "difficult to find a ship". The rebound in logistics costs has forced companies to optimize their transportation plans and lock in long-term capacity contracts to avoid the risk of freight rate fluctuations.

Restructuring of trade terms, optimization of logistics links and compliance processes

The implementation of tariff refunds has pushed for the restructuring of cross-border trade terms for rotary drilling rigs, forcing companies to adjust their logistics links and compliance processes. In order to enjoy the refund dividend, more and more companies are turning to DDP tax payment terms or establishing compliant import entities in the United States, and the trade model is shifting from traditional FOB to diversified models such as DDP and CIF. Changes in trade terms lead to adjustments in the animal flow chain. Enterprises need to coordinate the entire process of customs declaration, tax payment, and tax refund, strengthen cooperation with overseas customs clearance agencies and logistics agents, and optimize cross-border logistics routes. At the same time, the US Customs has strengthened the review of refund applications, requiring companies to provide complete customs declaration documents, tax payment vouchers, and trade contracts, promoting standardized and compliant management of enterprises, improving the process of retaining and archiving logistics documents, and reducing the risks of customs clearance and tax refunds.

Reshaping the industry landscape, leading enterprises accelerate their global layout

The dividend differentiation and logistics reform brought about by tariff refunds are accelerating the reshaping of the competitive landscape of the rotary drilling rig industry and promoting the acceleration of the globalization layout of leading enterprises. Leading enterprises with overseas subsidiaries and advantages in compliant trade terms can not only enjoy refund dividends to increase profits, but also seize market share through price competitiveness, further expanding their leading advantage. However, due to the inability to directly benefit from refunds, small and medium-sized exporters lack cost and price competitiveness, and their market share continues to be squeezed, forcing some companies to withdraw from the US market. At the same time as the concentration of the industry increases, leading enterprises are increasing their investment in overseas localization production, establishing assembly bases in Southeast Asia, the Middle East and other regions, reducing dependence on the US single market, optimizing the global supply chain layout, and enhancing risk resistance capabilities.