Navigating Tariffs: 10 Strategies to Protect the Bottom Line
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marzo 07, 2025
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Tariffs have long been an economic strategy tool, but their current use to achieve policy goals is perhaps the strongest it has been in a century. Shifting trade policies, escalating geopolitical tension and economic fluctuation all influence tariff dynamics, with a second Trump administration likely to reshape the landscape further. Mitigating new, unforeseen tariff exposure can challenge even the most sophisticated organizations. Uncertainty is exacerbated in an environment where policy can be issued faster than organizations can react and responsibly insulate their interests.
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Navigating tariff challenges can be simplified by focusing on 10 key mitigation strategies, categorized into three areas: customs programs and partnerships; strategic planning and supply chain optimization; and risk management and advocacy. While other more nuanced solutions exist, these 10 strategies are applicable and accessible across a range of industries, offering flexibility to organizations of different scope. Often organizations can, and should, leverage more than one strategy, realizing tariff relief through a combination of efforts in concert.
Customs Programs and Partnerships
For organizations with U.S.-based operations – irrespective of any tariff mitigation efforts – following guidance and regulations from U.S. Customs and Border Protection (“CBP”) is essential. Compliance with CBP builds trust and can enhance an organization’s reputation for reliability and integrity, similar to when a frequent flyer enrolls in TSA’s PreCheck program. Beyond general cooperation with CBP, organizations can also partner with the agency in trusted trader programs to help alleviate duty costs.
- U.S. Foreign-Trade Zones (“FTZs”)
FTZs are designated areas within the United States that are considered outside of U.S. customs territory for duty and customs entry purposes. Designed to encourage American investment, incentivize job creation and promote U.S. exports, becoming an FTZ operator offers a wide range of duty, tax and fee benefits for U.S. manufacturers and distribution operations. - Duty Drawback
The Duty Drawback program provides refunds on some duties paid for imported merchandise that is subsequently exported or destroyed. While drawback is not permitted for all tariffs – like merchandise subject to antidumping or countervailing duties, for instance – this program offers a significant opportunity for organizations to retroactively recover costs associated with international trade. -
Temporary Importation under Bond (“TIB”)
The TIB program allows goods to be temporarily imported into the United States without immediate payment of duties, taxes or fees, provided they are used for specific purposes. Goods must be exported, destroyed or otherwise accounted for within a set timeframe, typically one year, making this program ideal for short-term imports. - Partnership Programs
Programs like Authorized Economic Operator (“AEO”) and Customs Trade Partnership Against Terrorism (“CTPAT”) offer organizations opportunities to partner with customs authorities to enhance supply chain security and offer tangible benefits. From a tariff mitigation perspective, these benefits can include reduced import costs and expedited clearance at customs. CBP has signaled a desire to expand benefits for CTPAT members, underscoring the importance of these partnerships in securing additional advantages.
Strategic Planning and Supply Chain Optimization
In an age of vast, deeply rooted global supply chains, change can seem daunting, but optimizing supply chains can offer short-term duty relief and help organizations remain agile in the face of uncertainties further down the road. Though achieving tariff relief does not require a complete overhaul of these systems, tweaks and refinements can have a substantial impact. Many times, a careful reexamination of the existing supply chain framework – in tandem and cooperation with other trading partners – can help identify tariff savings opportunities.
- Supply Chain Restructuring
Supply chain restructuring is a comprehensive strategy aimed at optimizing an organization’s international supply chain to improve tariff positioning. This approach often involves a combination of origin planning, tariff engineering and other considerations, requiring careful collaboration among internal stakeholders to achieve holistic results. - Free Trade Agreement (“FTA”) and Non-Preferential Country of Origin Reviews
Strategic evaluation of product origin is essential for reducing tariff costs. Organizations should assess whether their imported products qualify under available FTAs while also confirming proper origin determination under non-FTA situations, like substantial transformation. Many tariffs are tied to the country of origin, so optimizing supply chain decisions can help reduce or avoid tariff liabilities when effectively deployed. - Tariff Classification Reviews and Tariff Engineering
Tariffs are heavily influenced by a product’s specific tariff classification. Organizations should review the accuracy of classifications across their global supply chains and explore tariff engineering strategies to shift classifications where appropriate. These reviews are often conducted alongside supply chain restructuring and country-of-origin planning to cover comprehensive cost-saving strategies. - Valuation Reduction
Organizations can explore strategies to appropriately reduce the declared customs value of imported goods, thereby lowering duty costs. These strategies may include:- First Sale for Export: Leveraging lower transaction values earlier in the supply chain
- Unbundling: Separating non-dutiable charges that are not subject to duty
- Transfer Pricing: Aligning intercompany and transfer pricing to optimize declared values
Risk Management and Advocacy
Customs programs and supply chain optimization might appear as obvious routes for tariff mitigation, but organizations should also consider advocacy and contract reviews. These strategies might not seem like the most attractive or immediate options but, if executed with precision and consistency, these proactive approaches can help lay the groundwork to avoid or reduce future tariff challenges.
- Advocacy Programs
Organizations can engage directly with elected officials or leverage industry associations to advocate for tariff-related topics, such as tariff exclusion processes. Leading organizations often combine internal trade expertise with government affairs strategies to achieve meaningful mitigation results. - Global Risk Assessments and Contract Reviews
Tariff liability is often overlooked in procurement contracts. Organizations should evaluate historical and future contracts to clearly define tariff responsibilities, negotiate creative solutions with partners and incorporate transparency in change-in-law or similar provisions.
In today’s world of increased tariff reliance and rapidly evolving trade policies, organizations must take a proactive, multipronged approach to mitigating tariff exposure. By leaning into customs programs, strategic supply chain optimization and risk management strategies, organizations can navigate uncertainty while maintaining compliance and cost efficiency. Engaging with CBP through trusted trader programs, reassessing supply chain structures and incorporating advocacy efforts can present viable paths toward duty mitigation. In a tumultuous, unpredictable global market, organizations that remain agile, informed and shrewd in their tariff planning will be best positioned to minimize financial strain and maintain a competitive advantage.
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Publicado
marzo 07, 2025
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