Navigating Tariffs: Why Valuation, Classification and Origin Demand Your Attention
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September 30, 2025
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In today’s volatile trade environment, organizations can no longer treat tariffs as fixed landed costs. Import duties and related fees have become critical factors in strategic decision making. While duty rates themselves may be fixed, importers have two key levers to influence costs: valuation and country of origin. With punitive tariffs persisting—especially under Section 301 of the Trade Act of 1974 and other retaliatory measures—it’s essential for companies to regularly reassess product valuation and origin determinations, areas where they still have some control.
Financial exposure often goes unnoticed or misunderstood. Organizations must have full confidence that their import valuation, Harmonized Tariff Schedule (“HTS”) classifications, and country of origin declarations are accurate, up to date and defensible. Otherwise, companies risk overpaying duties—or worse, underpaying them and facing significant regulatory penalties.
Valuation and origin play a crucial role not only in determining duties, taxes, and fees on imported items, but also in assessing whether those items are subject to additional tariffs. As examples, Section 301 tariffs on goods from China, anti-dumping or countervailing duties (“AD/CVD”) and other retaliatory tariffs hinge on these determinations. An undervalued invoice can lead to underpaid duties. Even when unintentional, such a snafu could expose companies to penalties, audits and reputational harm. Similarly, incomplete or inaccurate origin documentation can trigger tariffs that might otherwise have been avoided.
Customs authorities in the U.S. and globally are intensifying their scrutiny. Valuation and origin are no longer mere technicalities; they carry significant risk. The burden of proof lies squarely with the importer. Given this complexity, HTS classification must be clear and precise, as proper classification can reduce risk while errors may amplify it.
Every item contained in an import shipment is assigned an HTS classification. This code determines the duty rate, product admissibility and often interacts with origin rules to establish if additional duties apply. Yet many companies assign HTS codes once—sometimes years ago—and never revisit them. This complacency is risky. Even minor classification changes can mean the difference between a 5% and a 25% tariff, or the ability to avoid a Section 301 duty altogether. Product changes, evolving legal interpretations and new rulings all affect classification accuracy.
Conducting proactive classification audits can uncover discrepancies that save costs or help avoid enforcement actions. For high-volume or high-value imports, the returns on such reviews are typically immediate and measurable. These audits cannot happen in isolation, though; they must be integrated into broader compliance and supply chain operations.
Treating classification and origin analysis as a one-time or occasional concern is no longer viable. Leading organizations build annual or biannual review cycles into their import compliance programs, involving compliance, procurement, supply chain and legal teams.
Key Areas to Evaluate Include:
- Valuation methodology across different transaction types
- Completeness and accuracy of supplier origin documentation
- Consistency of HTS codes across product SKUs
- Related party transactions
- Incoterms and transfer pricing
While perfect audits may be difficult to achieve, the primary goals are to identify risks and establish defensible positions. When questioned by U.S. Customs and Border Protection (“CBP”), responsible importers can quickly demonstrate clear, documented logic supporting each classification and origin claim. This preparedness not only fosters goodwill with CBP but also reduces the likelihood of intense scrutiny or costly penalties.
Beyond financial exposure, incorrect valuation or origin claims can disrupt supply chains. Customs investigations often cause shipment delays that impact customer satisfaction and harm brand reputation. Compliance, therefore, is not just a cost-control measure—it is a key element of operational resilience.
Global companies face even greater challenges navigating the differing customs rules across jurisdictions, where valuation and origin regulations vary widely. A comprehensive, cross-border compliance strategy is essential to avoid gaps that could lead to penalties or delays in multiple markets.
Investing in compliance can also unlock benefits through programs like the Customs-Trade Partnership Against Terrorism (“CTPAT”) or Authorized Economic Operator (“AEO”) certifications, which help reduce inspections and strengthen customs relationships.
Case in Point
A multinational electronics manufacturer recently discovered several SKUs misclassified under a tariff heading with a 20% duty rate. After reclassification to a more accurate HTS code, the duty dropped to 5%, generating substantial savings and reducing landed cost estimates. Simultaneously, they identified gaps in supplier origin documentation, mitigating potential Section 301 penalties.
Next Steps for Importers
- Schedule regular classification and origin audits (annually or biannually)
- Update and enforce supplier documentation requirements
- Provide ongoing training for procurement and supply chain teams on tariff risks
- Explore and adopt automated classification and origin management tools
- Monitor regulatory changes and evolving trade policies closely
Key performance indicators to track progress include the percentage of SKUs reviewed annually, realized duty savings, resolution rate of classification discrepancies and closure of audit findings.
Inaction is not an option. Regulatory oversight continues to increase, with CBP and other customs authorities using advanced analytics to detect discrepancies across importers and supply chains. The risk of retroactive duty assessments, penalties and shipment delays is substantial.
By prioritizing classification and origin accuracy, organizations can reduce costs, qualify for duty-free treatment and better forecast landed expenses. In a world marked by uncertainty and rapid change, any degree of predictability is a competitive advantage. While the immediate financial benefits are significant, the greatest gain lies in the ability to respond agilely to future uncertainties, whether geopolitical or otherwise.
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Published
September 30, 2025
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