Avoiding or Reducing Increases When Duty Calls

U.S. importers and shippers can mitigate the future impact of additional tariffs on imported goods, including steel and aluminum. Here are some ways to control costs, according to Daily Hernandez of Lilly & Associates.

Exclusion requests. The Department of Commerce, the Office of the U.S. Trade Representative, and China, in particular, have implemented a process to help certain companies avoid extra tariffs. Companies can explain how and why the goods they are shipping are critical to the U.S. economy and cannot come from anywhere other than Asia. If they can do that, particularly for aluminum and steel products, then the Department of Commerce might approve the request and eliminate these extra costs. It is certainly worth applying to see what happens.

Tariff engineering. Importers can legally take advantage of classifications for imported products that have a lower fee. For example, shippers who normally import turbine generators into the United States have to face a 25-percent tariff. But they can change the products and say they are components that fall under a different category, not turbine generators. Merely moving the items they are shipping into a different category might result in lower charges.

This strategy doesn’t have to apply to everything that a company is importing; it can be one or two components. If the products themselves are comprised of multiple components, each one will face a 25-percent increase in fees, and getting one or two into a different category will save a lot of money.

Operational engineering. If your company is not able to change the imported product, you might be able to change the country of origin. For example, if some parts for a motor are assembled somewhere else, you can shift the operations from somewhere in Asia to a different location where the fees you face for imports are not nearly as high.

Valuation. Using the first sale valuation, importers typically pay duty only on the price that a trading company will pay the manufacturer. Importers do not pay a duty on the higher rate that the importer has to pay the trading company. In this case, if additional fees are applied, the value will be lower and using the first sale valuation will cost companies a lot less.

Bonded facilities. Companies that manufacture goods and imports for export trade might find a bonded facility to be the best way to protect themselves against extra cost. Items that are admitted into what is called the foreign trade zone "non-privileged foreign status" get to keep the tariff classification they had initially, so they are not subject to additional fees when they enter into the United States. You might be able to take the products you have as a shipper and store them in a bonded warehouse for five years. At that point, they can enter the United States after the extra tariffs are no longer in effect or you can export them directly from the warehouse to avoid those additional costs.

Duty drawback. Drawback typically provides for a 99-percent refund of all the extra fees on goods imported into the United States. President Trump currently doesn’t necessarily have the authority to eliminate the drawback under this new import law, so shippers might be able to save money using the duty drawback option.

Section 321 De Minimis. Right now, regulations allow for a duty exemption for any goods that are valued at less than $800 in fair retail value within the country of shipment if a single person imports them on just one day. To take advantage of this, you would have to ship no more than $800 in fair retail value worth of products per day. It might be worth it to divide the products you are shipping so that they fall under this category. Make sure that everything you have is compliant so that there are no potential seizures or cargo holds.