Tariff Talk

Say it with me: “If it sounds too good to be true, then it probably is.”

As new tariffs impact U.S. importers, foreign suppliers are offering solutions that claim to be the golden ticket to bypass tariffs or the trick to securing a reduced rate. The catch? The supplier requires the use of their freight forwarder and mandates delivery under DDP (Incoterms 2020).

It’s true—Delivered Duty Paid (DDP) places the responsibility on the shipper to deliver the goods customs-cleared and with all costs paid. On the surface, this sounds appealing. But the flip side is that the U.S. party:

Has no rights to the cargo until (or if) it clears customs.

Still holds responsibility to the U.S. government as the consignee.

Has zero control over transportation service levels, accuracy, or the ability to import.

Additionally, is the U.S. customs broker known and reputable? If the import fails, the U.S. importer may be left without the product and with little recourse.

Beyond the dreaded “my guys know the right guy” assurance, these so-called solutions often involve devaluing the product to minimize—or eliminate—duty and tax bills, sometimes exploiting loopholes the administration has already stated it is working to close. Since the U.S. party is only the consignee, the foreign entity likely will not share access to import documentation, while the U.S. party remains the most accessible point of contact for government follow-up. The most common method of devaluation is taking advantage of de minimis treatment, which is particularly popular for smaller shipments. Shipments with a commercial invoice value under $800 have a lower chance of being flagged, as they do not require a formal entry and have historically avoided much of the partner government reporting and ad valorem tariff treatment.

With each trade-related executive order issued by President Trump, de minimis shipments have not been granted special treatment, instead being processed similarly to formal entries to ensure the proper application of new tariffs. Due to the overwhelming surge in e-commerce and small-package volumes, the administration paused its actions on de minimis on February 5. As each tariff action has unfolded, this treatment has remained available until “adequate systems are in place” for efficient revenue processing and collection. Final attempts to exploit this loophole should be expected, as new guidance on de minimis is still pending.

The second common tactic is misdeclaring an item. While avoiding the 20% IEEPA (International Emergency Economic Powers Act) tariff on Chinese goods is difficult, it is easier to sidestep the 25% steel tariff by misclassifying a product as something other than steel or a derivative article. Customs authorities are likely watching for shifts in tariff classifications from duty-heavy to duty-free, especially for steel products, as an indicator for increased examinations. Any legitimate efforts to update a product’s HTS classification should be thoroughly documented.

The third strategy revolves around first sale valuation, where documents are provided to show a sale prior to U.S. import at a lower value, suggesting that the goods were later resold in transit. The requirements for first sale extend beyond a single customs filing and must be properly established for the importer. Since declaring “first sale” at the time of import is a key component of entry, a sudden shift in clearance procedures for a commonly used HTS/shipping lane combination could raise red flags. The documentation and audit requirements far exceed those of a standard import of purchased goods.

Of course, it’s tempting to chase the magic beans that could reduce or eliminate up to 45% in additional tariffs compared to 2024 rates. Could some goods successfully clear and be delivered without issue? Yes. However, with the current trade environment focused on closing loopholes and ensuring fair competition, importers should anticipate increased enforcement and examinations. There is no magic trick for avoiding these tariffs. New reciprocal tariffs are scheduled for April 2 (details pending), which may help guide supply chain decisions—but again, no magic.