Context: American businesses are seeking ways to mitigate the financial impact of tariffs imposed during Trump's presidency.
Tariff Details:
145% minimum tariff on goods from China
25% tariffs on cars, auto parts, aluminum, and steel
10% tariff on most imports
Key Strategies to Avoid Tariffs
Bonded Warehouses
Definition: Special customs-regulated warehouses where imports can be stored without immediate tariff payments.
Businesses pay tariffs only when goods are removed for use or sale.
Goods can stay for up to five years, betting on a reduction in tariff rates.
Demand: High demand due to tariffs; 95% inquiries for goods from China.
Tariff Engineering
Concept: Adjusting the design or classification of products to fall under lower tariff categories.
Methods:
Use of specific materials to change product classification.
Example: Converse All Stars using felt soles to classify as house slippers.
Columbia Sportswear uses additional design features like small zippered pockets to qualify for lower rates.
Challenges:
Products must be genuinely altered, as US Customs and Border Protection can investigate.
Misclassification can lead to penalties.
Legal Implications
Harmonized System Codes: Over 5,000 global product classification codes determine tariff rates.
Opportunities for Exemption: Some products are exempt from additional tariffs, offering further tariff engineering opportunities.
Industry Impact
Business Boom: Companies like Howard Hartry, a customs broker, have seen increased business due to the demand for bonded warehouse space.
Business Strategy: Many companies are investing resources into tariff engineering, working with legal firms to navigate classifications and exemptions.
Conclusion
American businesses are employing creative, legal methods to minimize tariff-related costs.
Strategies like bonded warehouses and tariff engineering are essential in the current economic climate under Trump's tariff policies.