How Companies Avoid Tariffs.

It is extremely important to understand strategies on how companies can avoid tariffs. The following strategies may have varying degrees of effectiveness and may not be suitable for all situations. Companies should carefully analyze their specific circumstances and consult with trade experts to determine the best approach for mitigating the impact of tariffs. Here are some common approaches:

1. Utilizing Free Trade Agreements (FTAs):

FTAs are agreements between countries that reduce or eliminate tariffs on goods traded between them. Companies can leverage FTAs by ensuring their products meet the rules of origin criteria, which determine where a product is considered to have been made.

2. Tariff Engineering:

This involves modifying the product or its components to fall under a different tariff classification with a lower or zero tariff rate. For example, importing components separately and assembling them in a different country may result in a lower overall tariff.

3. Operational Engineering:

This strategy focuses on changing the country of origin of a product. By shifting manufacturing or assembly processes to a different country, companies can avoid tariffs imposed on goods from specific regions.

4. Duty Drawback and Deferral Programs:

Many countries offer programs that allow companies to recover or defer duties paid on imported goods that are later exported. These programs can help reduce the overall cost of tariffs.

5. Lobbying for Exclusions:

Companies can lobby governments for specific exclusions from tariffs on products they import. This can be particularly effective if the product is not readily available from domestic sources.

6. Absorbing Costs or Adjusting Prices:

In some cases, companies may choose to absorb the cost of tariffs to maintain competitiveness or market share. Alternatively, they may adjust prices to reflect the increased cost of imported goods.

7. Sourcing from Different Countries:

Companies can diversify their sourcing strategies by shifting to countries not affected by tariffs. This can help mitigate the impact of tariffs on specific regions or products.

8. Negotiating with Suppliers:

Companies can negotiate with their suppliers to share the burden of tariffs or find ways to reduce costs. This may involve seeking discounts or exploring alternative sourcing options.

9. Product Reclassification:

Companies can work with customs authorities to ensure their products are classified correctly. Sometimes, products may be misclassified, leading to higher tariffs than necessary.

10. Utilizing Foreign Trade Zones (FTZs):

FTZs are designated areas where goods can be stored, manipulated, and manufactured without being subject to tariffs until they enter the commerce of the host country.

Tariff Quotes

“The benefits of a tariff are visible. Union workers can see they are “protected”. The harm which a tariff does is invisible. It’s spread widely. There are people that don’t have jobs because of tariffs but they don’t know it.” ~Milton Friedman
“We are going to have 10% to 20% tariffs on foreign countries that have been ripping us off for years, we are gonna charge them 10% to 20% to come in and take advantage of our country because that is what they have been doing.” ~Donald Trump
“Supply Chain is like nature, it is all around us.” ~Dave Waters
“Many economists and industry experts agree that the United States faces unfair competition and artificially low prices that have damaged the domestic steel industry. But they don’t agree that a tariff is the right approach for addressing the problem.” ~Annie Lowrey
“The income tax is a twentieth-century socialist experiment that has failed. Before the income tax was imposed on us just 80 years ago, government had no claim to our income. Only sales, excise, and tariff taxes were allowed.” ~Alan Keyes
“The single most important thing to remember about any enterprise is that there are no results inside its walls. The result of a business is a satisfied customer.” ~Peter Drucker, Father of Modern Management.
“It’s so hard to get our goods into China. And when we do get in they charge us a huge surtax. They call it a surtax or a tariff. I call it a tax.” ~Donald Trump