Trade Policy: Key Strategies for Being Proactive in the Face of Potential Tariffs

Feb 3, 2025Customs, Customs Brokerage, Imports and Exports, International Logistics, Market Advisory

Following President Trump’s announcement of tariffs on Canada, Mexico, and China, customs brokers and importers should be prepared to mitigate potential disruptions and financial impacts that increased duties could bring. Even if negotiations between the trade partners result in the tariffs being delayed or avoided, a proactive approach is recommended to alleviate potential future trade policy changes.

At the least, importers should review their import data with their U.S. Customs brokers to get a clear picture of the financial impact that increases could have on their business. A data review can also identify areas where an importer can implement changes, such as using bonded warehouses or Foreign Trade Zones (FTZs) to provide deferrals and/or other cost-savings on certain goods.

When new and significant tariffs are implemented, a high number of bond insufficiency notices can also be anticipated. It is crucial for importers to understand the current saturation of their existing bonds and start acting early to mitigate any costly delays. Let’s explore some key strategies to help reduce risks.

 

Top 5 Tips for Being Prepared for Tariffs

  • Proper Classification and Valuation – Ensure that goods are accurately classified and valued under the HTS (Harmonized Tariff Schedule) system to help avoid penalties and additional liability. Accurate classification, valuation, and country of origin will help determine if the goods are subject to proposed increases, identify potential duty-saving strategies, and ensure that goods are consistent with international nomenclature.
  • Work with Professionals – Work with customs brokers to determine the proper bond amount at each renewal and with a surety agent to ensure compliance and avoid costly delays.
  • Monitor Bond Sufficiency – Review current bond amount and saturation rates, analyzing bond importing activity to determine if the bond limit needs to be increased. During this tumultuous time, we recommend reviewing your saturation rates monthly and beginning proactive measures once saturation hits 50%.
  • Strategic Forecasting – While Customs only reviews bond sufficiency on a rolling 12-month retroactive basis (i.e., the last 12 months of activity), it is better to be proactive in anticipating bond amounts needed over the next 12 months to cover duties, tax, and fees. We recommend adding 25% to activity forecasts to accommodate the announced tariffs, plus another 10% contingency for potential growth.
  • Plan Bond Replacement – Although it’s typically best to wait until the end of the current bond term to terminate before replacing it with a new one, it may be necessary if action is not taken proactively. Having open exposure in multiple bond periods will cause a stacking liability exposure for the importer and the Surety. It is important to note an importer must begin this process with their Surety at least 15 calendar days before the effective date of their bond.

Increased bond amounts required in insufficiency letters from the U.S. Customs and Border Protection (CBP) will not contemplate additional tariffs that an importer may be subject to over the next 12 months. In the case of receiving a bond insufficiency letter, simply increasing the minimum bond amount required by Customs at the time of the insufficiency letter may result in a bond repeatedly being rendered insufficient.

 

Review Credit Limit and Payment Terms with Your Customs Broker

Customs brokers often advance duties and taxes on behalf of importers by paying the required customs duties, tariffs, and taxes upfront to customs authorities on imported goods. This practice can often streamline the customs clearance process, enabling faster release of goods. Typically, brokers have established systems in place to manage the risks associated with advancing duties and taxes, ensuring compliance with customs regulations and reducing the likelihood of errors. In the face of additional tariffs, however, the credits brokers allow for these payments are at risk of being exceeded. Importers should check their credit limits with brokers and make adjustments if needed.

U.S. Customs has seen an increasing number of applications for duty payments to be paid via ACH and periodic monthly statements as brokers are increasingly requiring their clients to remit payments to US CBP directly.  If your customs broker is advancing duties and taxes to CBP on your behalf, ProTrans and TOC Logistics International LLC recommend considering changing to payment direct to US CBP.

Paying duties and taxes directly allows importers to maintain direct control over their payments, have awareness of the amounts and timing of their payments, and reduce their reliance on customs broker credit limits. If there are any discrepancies in duties or taxes, dealing directly with CBP can facilitate faster resolutions.

While working directly with CBP may offer some benefits, it also may require importers to develop a deeper understanding of customs processes, regulations, and compliance requirements. It’s essential to weigh these benefits with the knowledge and expertise of customs brokers, ensuring that shipments meet all legal requirements.

 

Our team at ProTrans and TOC Logistics International includes full-service U.S. Customs brokerage services. Contact our team for valuable insights into tariffs and duties applicable to your shipments and help you make informed decisions. We can also help you identify potential savings through proper classification, valuation, and duty reduction strategies.

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