Tariff

The tariff, along with other assessments, is collected at the time of customs clearance at the international port of entry. Although estimated tariffs and taxes can be calculated in advance, only customs officers in the receiving nation can make the final determination on cost.

• A fixed fee per unit, regardless of weight or size

• A percentage of the value of the imported goods

• A quota that allows a specific quantity at one rate, then increases the cost beyond that quantity

In the U.S. and most other countries, the importer is responsible for tariff payment. Payment is required when goods enter the country—once they have been cleared by customs.

Each nation levies tariffs based on factors such as the country of origin, materials used in the commodity and the classification code. Tariff rates are set by the country of import but are often negotiated between two or more countries through trade agreements. For exports between the U.S. and other countries, free trade agreements (FTAs) may apply.

When businesses do not comply with tariff regulations, they may experience short-term delays, financial repercussions or reputational harm. Freight management companies that fail to comply may find it difficult to continue importing goods into specific countries.

Businesses that meet specific requirements for rules of origin may be able to take advantage of free trade agreements (FTAs), which reduce or eliminate tariffs for eligible goods.

The United States has several free trade agreements in effect with multiple countries. According to the United States Trade Representative, these agreements "build on the foundation of the WTO Agreement, with more comprehensive and stronger disciplines than the WTO Agreement."

Many FTAs are bilateral agreements between two governments, while others are multilateral agreements made among several parties.

Harmonized System (HS) codes are used by countries around the world to classify goods during import and export processes. The World Customs Organization (WCO) administers the HS, which:

• Assesses duties and gathers statistics as goods move through customs

• Identifies and describes products uniformly

• Assigns specific six-digit codes for varying classifications and commodities

• Allows countries to add longer codes to the first six digits for further classification

The Harmonized System is not used by U.S. Customs to classify imported goods. The U.S. instead uses the Harmonized Tariff Schedule (HTS).

The HS is updated every five years. Businesses must stay current to avoid using outdated codes.

According to the United States International Trade Commission (USITC), "the Harmonized Tariff Schedule of the United States (HTS) sets out the tariff rates and statistical categories for all merchandise imported into the United States. The HTS is based on the international Harmonized System (HS), which is the global system of nomenclature applied to most world trade in goods."

Companies importing goods into the U.S. can visit the USITC website to search the current HTS database and access related resources.

Companies may need to adjust sourcing strategies to reduce tariff costs—including diversifying suppliers or shifting production locations. Renegotiating supplier contracts and leveraging FTAs can help reduce overall costs related to international shipping.

During unexpected disruptions, a transportation management system (TMS) that supports global operations can help manage costs related to:

• Finding and booking transportation

• Managing documents and signatures

• Reducing manual errors that create additional costs

Automation and artificial intelligence (AI) tools in transportation management systems can streamline tariff classification, customs documentation and compliance monitoring for imports and exports. A TMS helps automate and expedite tariff management tasks—preventing unexpected fees and avoiding delays and customer service issues:

• Classify goods accurately using HTS codes

• Identify tariff exemptions and FTAs for specific commodities

• Estimate the cost of tariffs and duties for specific goods or shipments

• Maintain visibility to shipment location, customs clearance and estimated time of arrival

• Manage documents, including signature acquisition and sharing with stakeholders

• Incorporate regulatory changes through alerts and automated updates

• Conduct audits to identify excessive costs, fees, detention and compliance issues

• Directly file Electronic Export Information (EEI) via the Automated Export System (AES) and submit Importer Security Filings (ISF) to comply with 10+2 regulations