How DigiKey tackles tariffs
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Distributor DigiKey in the US has invested millions in a highly automated facility in Thief River Falls, Minnesota, that is the central hub for its global business.
The imposition of tariffs on boards from around the world shipping into the US, and the impending tariffs on semiconductors, potentially mean that charges would be applied as products enter the country and then again as they ship to customers around the world.
But the company is taking several measures to mitigate the impact of the tariffs imposed earlier this week, from allowing customer to sort by tariffed and non-tariffed products to drop-shipping and a ‘foreign trade zone.’
“DigiKey is actively engaging with our suppliers and industry tariff experts to attempt to mitigate and/or reduce the impact of tariffs on our customers. The situation is very fluid, and we continue to monitor and adapt,” Dave Doherty, president of DigiKey tells eeNews Europe.
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“DigiKey is addressing the impact of tariffs at the eCommerce level, focusing on transparency and choice. We expect customers to make choices and want to be a good partner with them in that decision-making process. We have added a sorting filter to our website that allows customers to search for tariffed and non-tariffed products. We caution users not to sort solely on that filter as tariffs have varying impacts based on the country and the amount of processing that takes place in that region.
The company says it has made significant investments that tackle the issues. Its marketplace can provide international customers the ability to have products drop-shipped from suppliers without passing through the US warehouse, avoiding the import into the US and subsequent export to the customer.
The company has also established the largest foreign trade zone (FTZ) (based on the number of shipments that pass through it) in the United States to ensure its supply chain was dynamic for any challenges that may come up. Products shipped into the FTZ are not legally considered to have been imported until they leave the FTZ and ship domestically. A product that is subsequently shipped internationally legally never enters the US and so no tariff is incurred.
“DigiKey’s strategy is to only pass through the portion of the tariff costs that are physically incurred,” said Doherty. “Tariff rates may vary by supplier or part depending on what costs DigiKey incurs directly as either the Importer of Record or what a supplier may choose to pass through to DigiKey.”
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