Interview with Passport Global CEO Alex Yancher on the latest in supply chain technology

Interview with Alex Yancher, CEO of Passport Global, a company specializing in cross-border e-commerce and logistics solutions.

 

Top Points from the Discussion

• Tariff Permanence and Purpose: Tariffs are predicted to be "here for the long run" (multiple generations/administrations) as they serve as a crucial revenue-generating source for the U.S. government, expected to collect between $300 to $400 billion a year more than previously.

• Tariff Rates: Tariffs are expected to remain high, typically in the 20% ballpark for most countries. The U.S. administration has also used tariffs as a "public policy weapon," such as imposing a 50% total tariff on products from India in response to their purchasing of Russian oil.

• Cost Absorption: The financial impact of tariffs is typically distributed roughly in thirds:

    1. A third is borne by the foreign seller and manufacturer (who are pressured by U.S. buyers to lower prices).

    2. A third is covered by the brand and/or retailer raising prices (either directly or by removing entitlements like free shipping/returns).

    3. A third is absorbed through contracted gross margins.

• AI as a Deflationary Force: While the cost of goods sold is rising due to tariffs, the AI boom is deflationary. Automation can make other parts of an e-commerce brand's cost structure—including marketing, finance, and operations—25% to 75% cheaper.

• Passport's AI Integration: Passport mandates the recording and transcription of all internal and external calls using AI bots to improve organizational presence and provide analytics and coaching. They also use large language models (LLMs/Chat GPT) for international product classification and compliance, a task previously prone to human error.

• International Market Necessity: D2C brands cannot truly ignore international markets because their traffic sources (Google, Instagram, TikTok) are already international, meaning people worldwide are engaging with the brand from "day one".

• Passport's Dual Solution: Passport focuses on two main service groupings: providing a comprehensive cross-border solution (physical shipping, duty/tax calculation, regulatory compliance, localization) and helping brands set up local operations in major countries (e.g., Canada, UK, EU, serving as Importer/Merchant of Record). Passport is noted as unique for serving brands with both the cross-border ("crawl/walk") and local fulfillment ("run") methodologies.

 

Overview

Alex Yancher is the CEO of Passport Global, a company operating in the supply chain, cross-border logistics and tariffs space - currently a hot topic for all retail companies and brands.

Alex's career background includes working as an investment banker at Morgan Stanley and then joining Facebook.

Prior to Passport, he co-founded Lynx, a personal shopping service that helped people abroad purchase products from the U.S.. His experience at Lynx led to the insight that cross-border e-commerce requires far more than just logistics, necessitating a modern solution for duty and tax calculation and regulatory compliance.

Passport Global is currently in its eighth year of operation, employs over 200 people, and generates over $100 million in revenue.

 

Passport's services are grouped into two primary areas:

1. Cross-Border Solution: Working with brands (or their 3PLs) who use self-fulfillment. Services include physical shipping (via three U.S. warehouses in LAX, OAD Chicago, and New York), duty and tax calculation, Shopify store localization, regulatory compliance, and managing returns and duty drawback. Passport directly competes with companies like DHL on the shipping side.

2. Local Operations Setup: Helping brands establish local fulfillment operations in major countries such as Canada, UK, Australia, EU, and Mexico. For this methodology, Passport serves as the brand's Importer of Record and Merchant of Record. This in-country enablement work was expanded through the acquisition of a key market player, Brand Access, about a year prior to the interview.

For brands with revenue of $20 million and up, Yancher suggests they should consider moving toward local fulfillment because it significantly accelerates growth and transforms the value proposition and cost structure.

 

Impact of Tariffs and De Minimis Changes

Tariff Landscape: The modern era of high tariffs began in the first Trump administration, though the initial increases were slight and did not immediately cause significant inflation, which economists had warned about. The severe and absolute size of tariffs increased dramatically after subsequent political developments. Tariffs are now permanent and are seen by the administration as a core piece of the economic puzzle focused on revenue generation.

Price and Consumer Impact: The full effect of these elevated tariffs on consumer prices is not yet clear due to pre-bought inventory, but the "cleanest, clearest indicator" is predicted for Q1 of 2026. The impact is expected to be a macro-level increase of 1% to 2%.

 

The three main ways tariffs costs are absorbed are:

1. Foreign Seller/Manufacturer (one-third): American buyers pressure foreign entities to lower their prices to absorb the cost.

2. Brand/Retailer (one-third): Brands raise prices, sometimes using a "peanut butter" strategy to spread the increase across their entire product portfolio (including products made in the U.S. that did not incur the new tariff cost). Price increases can also manifest as removing customer entitlements (e.g., charging for shipping or reducing return amenities).

3. Margin Contraction (one-third): Brands directly absorb the cost, leading to contracted margins, as seen in Lululemon’s earnings report, which cited a 1.5% to 2% hit on gross margin related to trade issues.

De Minimis Rule: The elimination of the de minimis rule (which previously allowed goods under $800 to enter the U.S. tariff-free) significantly impacts companies that used nearshoring logistics, placing inventory in Canada or Mexico and trucking orders across the border. Big brands such as Lululemon, Alo Yoga, and Bombas utilized this strategy, as did Amazon sellers and low-cost Chinese goods retailers like Timu and Shein. These companies must now revert to the three options for handling tariff costs: lower supplier prices, eat the margin, or raise consumer prices.

 

Technology and AI in E-commerce

The current AI boom is deflationary. While tariffs increase the Cost of Goods Sold, AI can drive down other operational costs by automating functions across marketing, finance, and operations, making them 25% to 75% cheaper. This automation acts as a "forcing function" for brands to seek cost savings elsewhere.

Passport Global is undergoing a "full organizational transformation with AI". Specific applications include:

• Organizational Coaching and Analytics: Mandatory recording of all internal and external calls with AI bots to provide transcription and run analytics. This allows people to be "fully present in a conversation" and provides sales coaching (e.g., grading exception handling or concluding with next steps).

• Product Classification and Onboarding: Using basic LLMs/Chat GPT to classify products for international shipping (identifying country of origin, material, and product description). This technology has "surpassed everything that had existed before" in terms of accuracy for customs compliance.

• Adoption Philosophy: Passport has adopted the approach, inspired by Shopify CEO Toby Lute, that the "default expectation" is to look to solve problems with AI first before hiring a new person.

• Automated QA Testing: The non-technical onboarding team requested an AI solution to test every single permutation of long-tail international transactions (e.g., testing Singapore, New Zealand, or Zimbabwe, or expensive carts over $1,000). This allows the company to "catch wherever things break" before they become problems in live production, a task that is unrealistic for humans.

For product managers, the immediate demand for managing AI transformation means more product managers are currently needed. However, once AI systems are in place, a single product manager will gain more leverage and scale, potentially overseeing six features or two products instead of three features or one product.

 

Advice for D2C Brands Selecting a Partner

For large brands (>$20 million in revenue), Yancher suggests three key areas to scrutinize when selecting an international service provider like Passport:

1. Local Fulfillment Strategy: Determine if the partner can support both the cross-border phase ("crawl/walk") and the eventual shift to local fulfillment ("run"), as this capability transforms cost structure.

2. Product-Specific Experience: Confirm the partner has experience handling the brand's specific product category (e.g., neutraceuticals, ingestible products, or cosmetics), as regulated categories have specific compliance requirements. Lack of experience can lead to product recalls or items stuck at customs, which harms a brand's reputation.

3. Fiscal and System Compliance: Ensure the partner has experience with fiscal compliance (VAT registrations, duty and tax compliance) and check if they integrate with the brand’s existing 3PL or label printing systems to ensure a seamless implementation.

 

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