Donald Trump duties. Strange but legal ways to avoid duties

CNN in the article “Business found strange but legal ways to bypass Trump's duties” reports that after the customs tariffs entered: 145 percent. for most of the goods with China25 percent duties on cars, car parts, aluminum and steel and 10 percent Dutch for imports from almost every country – American companies desperate are looking for ways to reduce import costs.

Two legal strategies are in the first place. Slightly forgotten customs warehouses that allow you to postpone tariffs and harmonized system codes, thanks to which lower rates can be used to the product.

As CNN indicates, there are over 5,000 different product classification codes that governments around the world use to assess what customs tariff to use. Consumers do not care whether the imported coat they wear has been officially classified as a wind jacket or raincoat. Manufacturer – but already.

For companies, this distinction can be a difference between lower and higher customs rates – and potential profits or losses. To qualify the product to a lower rate, it is enough for the manufacturer to slightly “piss” with, for example, the materials from which the products are made or add a zip pocket. This is tariff engineering.

For example, the characteristic Converse All Stars sneakers have a sole that contains felt, unlike the fully rubber, traditionally found in sneakers. It could have been a deliberate decision, because shoes produced abroad with felt pits can be considered “home slippers” for tariff codes. And home slippers have qualified in the past to much lower customs rates compared to other types of footwear.

CNN points out that “she could”, because Nike, the mother company Converse, did not respond to the station's request for comment. In turn, journalists failed to set the latest customs rates for sneakers compared to home caps, taking into account their appropriate classification codes.

However, the station indicates a clear example – Columbia Sportswear, which is not ashamed of using tariff engineering. “I have a whole team of people who work … with designers, programmers and sellers, as well as with customs offices to make sure that during the design process we take into account the impact of customs,” told Marketplace in 2019 Jeff Tooze, vice president of global customs and trade in Columbia Sportswear.

– Even in the current environment, with Trump's efforts to impose duties on China and specific sectors, there are still many possibilities for companies in the field of tariff engineering on products – said Erik Smithweiss, a partner at GDLSK's legal company, which specializes in commercial compliance.

While there are not many ways to avoid the initial 20 % duties imposed by Trump on China at the beginning of this year, there are some possibilities to avoid an additional 125 percent that came into force last month. This is due to the fact that Trump in some cases quietly slowed down some products from these tariffs.

– We work with companies that say: oh, I really want to be on this list, look at my tariff codes – said Smithweiss. – If we think there is something that can be modified in the product, which will change it into one of those with released codes, we will work with them on whether it is a reasonable position – he added.

But just placing the new code on the product is not enough. – The product itself must be somehow different. American customs and border agents can carefully examine goods, including, for example, send fabrics to laboratories to check if they meet the applicable requirements, “said Smithweiss in an interview with CNN. If not, the importer may be punishable in addition to the higher customs tariff.

The second way is the opposite approach. The entrepreneur in his goods does not change anything, neither his composition or where he comes from. He continues to bring him as he is and does not pay any tariffs at all, when the goods go to USA. How is this possible? All you have to do is go to the customs warehouse.

Entrepreneurs can store goods in them up to five years without paying any additional duties. They pay them only when they take it from the composition and at the rate that is currently in force. As CNN states, “this is a kind of plant that tariff rates will fall in a short or medium period.”

Jennifer Hartry, president of Howard Hartry, a customs broker who rents customs, said Julia Vargas Jones from CNN that 95 percent. The queries she received applies to goods from China.

Hartry added that her family company based in the port of Los Angeles has experienced a clear slowdown in recent years, but since Trump introduced a number of new aggressive tariffs – business flourishes.

There is no restrictions on the monetary value of goods stored in customs warehouses – the only limitation is how much the company can fit in the rented space. For example, Hartry said that the value of its tenants ranges from 37,000 to half a million dollars. These goods include lithium batteries, metal rods and electronics, such as televisions or moving treadmills.

Hartry said that she was not losing sight of how much duties are reflected in enterprises, although she pointed out that “it saves our business, for which we are grateful.”