Toyota Tsusho launches direct shipping for auto parts suppliers

Toyota Tsusho has introduced direct shipping lanes from Japan to Canada and Mexico, aiming to shield smaller auto parts suppliers from paying tariffs twice when routing goods through the US.

Nikkei Asia reported that the service targets a longstanding difficulty facing Japanese auto parts makers without a presence in Mexico or Canada, despite the two countries accounting for a substantial portion of North American vehicle manufacturing.

The trading house said close to 40% of the roughly two million vehicles Toyota Motor builds in North America each year come from plants in Canada and Mexico, where automakers often produce for the US market to take advantage of lower labour costs.

Under the arrangement, Toyota Tsusho consolidates cargo from several suppliers into joint consignments dispatched roughly twice weekly.

Shipments are sent straight to the firm’s facilities in Mexico and Canada, with Toyota Tsusho managing customs clearance before goods move on to customers.

Lacking local operations, smaller suppliers have generally shipped via the US, partly to navigate customs procedures such as routine product checks.

This pattern has been strengthened by the industry’s reliance on just-in-time inventory practices, under which suppliers hold stock in the US and transport it overland to meet factory demand quickly.

That overland approach results in tariffs being charged twice: once when goods enter the US from Japan, and again when they cross onward into Canada or Mexico.

Toyota Tsusho, cited in the report, said the new route lowers shipping costs out of Nagoya by 24% for Canada-bound cargo and 61% for shipments to Mexico, and can bring tariff rates down to single digits or eliminate them entirely.

The initiative comes as Toyota forecasts that US tariffs will cut Y1.38tn ($8.49bn) from consolidated profits, with higher fuel-related costs alone contributing Y400bn to that impact.

Extra duties on Japanese goods entering the US currently sit at 10%, while Canadian and Mexican products not covered by the US-Mexico-Canada agreement exemptions face steep tariffs of their own.

Toyota Tsusho intends to extend the service to parts suppliers linked to other automakers beyond the Toyota group.

“Toyota Tsusho launches direct shipping for auto parts suppliers” was originally created and published by Just Auto, a GlobalData owned brand.