As U.S. President Donald J. Trump adds new tariffs to his trade agenda, a company’s in-depth knowledge of its supply chain could help it mitigate any new duty exposure.
That’s the conclusion of Laura Siegel Rabinowitz, an international trade expert at Greenberg Traurig who counsels businesses on complex supply chain issues. She spoke at a webinar Wednesday hosted by CohnReznick on “New Administration Policy & Priorities: Strategies to Consider Right Now.”
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So how can importers mitigate duty exposure?
“My mantra is that companies first need visibility into their supply chain,” she said. “Where are their goods manufactured, and not just to understand level one suppliers, but drill down to level two, level three, [and] level four to understand where the components are from.”
That knowledge is needed first before companies can do a risk analysis to see if their products are on the duty list.
“Am I manufacturing in a country that’s been targeted to date? Do that, then look at production agreements, which are negotiated months before date of entry into this country,” she advised.
And as companies look at those production agreements, they should find out if there is a tariff section on who is bearing the cost of the increased tariffs or duties in general, as well as any increased costs.
“What is the language like? Is there opportunity to share this increased burden?” she said, noting that for new agreements, companies should be negotiating “well drafted tariff sections in their production agreements [while] keeping in mind that it’s not static, it is very fluid.”
Because duties are determined by the classification of the product, the valuation and the country of origin of the product, companies should look to see if there is any way “I can move around the classification or the origin so that I am compliant, but it’s more advantageous from a duty perspective,” the attorney said. “Companies need to be compliant, but there’s some wiggle room in terms of how do you classify merchandise.”
And in terms of origin, she said the question is what is the essential character of the product, and it what country is the product substantially transformed to create that essential character. Siedel Rabinowitz gave an example of an item that contained a motor made in Germany but assembled in China. Because the motor was central to the item, the company was able to use Germany as the country of origin instead of China, which enable it to save 35 percent on duties owed.