The impact tariffs have on businesses dealing with international commerce is big. With constant fluctuation in trade regulations and the tariffs themselves, implementing tariff mitigation strategies is key for a company to thrive globally while staying competitive and efficient.
Let’s take a look at five proven tariff mitigation strategies to help your business minimize its impact.
The tariff challenge
Tariffs directly affect the cost and pricing of import and export, and with the ever-changing trade agreements, geopolitical situations, and economic landscapes, tariff mitigation strategies are a must to safeguard both your business operations and profits:
1. Customs programs and partnerships
Taking advantage of available government programs and partnerships that can bring different benefits when it comes to reducing tariffs. Some of these are:
Foreign-Trade Zones (FTZs)
As designated areas inside the United States, where you can assemble, manufacture, or store your goods without having to immediately pay for customs duties and tax, Foreign-Trade Zones are an essential tool for managing the tariff impact.
Using the FTZs allows you to:
- Defer and reduce tariffs
- Give you control over budget-based decisions
- Improve your cash flow
- Give you access to other potential savings.
Trusted trader programs
Being part of partner programs such as the Customs Trade Partnership Against Terrorism (CTPAT) can also be a good strategy, as it:
- Enhances the security of your supply chain
- Reduces the number of inspections your shipments are subject to
- Expediting customs processing.
- Reduces fees from penalties, delays, and holds.
Because this kind of program increases the relationship and trust between Customs and Border Protection (CBP) and your company, your cross-border operations are faster, smoother, and more efficient, spending less resources.
At EP Logistics, we guide you and help you apply for participating programs to ensure not only that your items move safely between borders, but also that your company takes advantage of the most benefits available to reduce tariffs.
2. Strategic supply chain optimization
Analyzing your current operations and evaluating the need for possible supply chain restructuring is one of the most powerful tariff mitigation strategies because it will:
- Help identify possible areas of improvement.
- Find potential resources that haven’t been considered.
- Provide alternatives to better handle tariff changes.
Supply chain diversification
Having different suppliers across different countries instead of depending solely on one allows you to shift according to the current tariff situation, taking advantage of regions with lower tariffs, for example.
Even better if these countries are also part of a trade agreement or program that reduces tariffs or offers benefits for import and export.
Country of origin engineering
Changing the country of origin, where your production process takes place, can lead to more favorable tariff classifications.
This is where working with a trusted partner that provides international customs brokerage services like EP Logistics is advised, as a wide understanding and application of the rules of origin, and agreements like USMCA (United States-Mexico-Canada Agreement) is key.
3. Tariff classification and valuation strategies
Another beneficial practice is to ensure the valuation and classification of your goods are accurate. A proper customs valuation is one of the best tariff mitigation strategies because it avoids paying unnecessary duties or overpaying:
Tariff classification reviews
To ensure you’re paying for the correct number of duties, program a periodic revision of the Harmonized Tariff Schedule (HTS) to check the codes your products have to be assigned to.
At EP Logistics, as a trusted 3PL provider, we handle tariff classification for you, ensuring:
- Your goods are properly classified.
- Your shipments stay compliant with customs requirements.
- Avoid misclassification penalties and holds.
- You pay the correct number of duties.
First sale rule and valuation reduction
The first sale rule allows you, as an importer, to declare the transaction value of your goods based on the first sale that was made in a multi-tiered supply chain. This means the declared value can potentially be reduced, and therefore, so are the duties you have to pay.
4. Utilizing trade agreements and programs
Participating in trade agreements and programs that can contribute to duty relief and refunds is the next of the tariff mitigation strategies.
Free trade agreement (FTA) utilization
Belonging to a Free Trade Agreement (FT) like the USMCA (United States-Mexico-Canada Agreement) gives you access to duty-free or reduced-duty benefits whenever your products meet the agreement’s rules of origin belonging to a member country (Mexico, Canada, or the United States).
Duty drawback programs
Duty drawback is another way to manage tariffs. Programs allowing it help your business reclaim duties paid on imported goods that were exported or destroyed afterward, recovering some profit.
It is important to have reliable real-time tracking technologies implemented to take advantage of this type of program and make the most out of it.
5. Risk management and advocacy
As with other areas in a business, proactive risk management is necessary to handle tariff changes, as well as good communication and negotiation with parties involved to:
- Maximize savings
- Minimize the fluctuation impact
- Avoid unpleasant hidden fees
- Maintain the efficiency of your supply chain
Contract negotiation and review
Make sure that clauses addressing tariff changes are included in the contracts with suppliers to minimize unexpected changes and stabilize the impact of tariff fluctuations. Look for partners that offer flexibility.
Advocacy and exclusion requests
Some industry associations help you submit exclusion requests to obtain exemptions from certain tariffs when applicable.
Implementing your tariff mitigation strategies with EP Logistics
At EP Logistics, with over 20 years of experience in international commerce and customs processing, our well-known logistics services to help you optimize your cross-border trade between Mexico and the U.S.
From cost-effective road and ocean freight solutions, expert customs brokers, strategically located warehousing, and smart technologies to optimize your supply chain, we cover all your international logistics needs under one roof.
Our expert logistics solutions for effective tariff mitigation include the analysis of your supply chain, and trade compliance support that helps you implement reliable tariff mitigation strategies to:
- Take advantage of international program benefits
- Reduces costs and duties whenever possible
- Optimize cross-border logistics
- Avoid common customs mistakes
- Ensure a cost-effective and efficient move of your goods across borders.
Give us a call at EP Logistics, and get ready for some serious tariff engineering that will make your company effectively manage tariff changes and take care of your profits with the support of our professional, trusted team.
