U.S. Customs Compliance and Enforcement

• Overview of new policies and enforcement priorities
• The state of IEEPA reciprocal tariffs (including in-transit rules and exclusions)
• Current dynamics of China tariffs and retaliatory efforts
• Insights on the future of the USMCA and qualification best-practices
• Where things stand with Section 232 tariff investigations on aluminum, steel, pharmaceuticals, critical minerals and more
• Auto industry offsets for U.S. assembly: Eligibility requirements
• Considering benefits under Trump’s “America First Investment Policy”
• Use of Chapter 98 and 99 Entry Provisions: Qualifying goods for any of the temporary entry provisions may result in tariff mitigation
• Which countries are under the tariff microscope and how might they retaliate?
• What are the economic and supply chain impacts of recent developments?

• Understanding which business stakeholders are impacted most by tariff confusion
• Guiding C-Suite through the ups and downs: Explaining what they need to look and support from a high level to help compliance teams
• Where does General Counsel fit into the compliance picture: Contractual impacts
• When to expand relations with outside counsel
• How rapid change in tariff compliance can present opportunities for growth in due diligence: Understanding what exactly is baked into the compliance challenge

• First sale for export: Leveraging lower transaction values earlier in the supply chain
  • Overview of first sale valuation and use of first sale rule to lower Section 301, IEEPA, and other tariff increases
  • Identification of suppliers for first sale valuation to maximize savings
  • Determining whether your suppliers are candidates for first sale
• Examining the transaction value process – Defining a “related party transaction” – When not to use transaction value
• Unbundling: Separating non-dutiable charges that are not subject to duty
• CASE STUDY: Fall back method ruling request
• Understanding assists, royalties and other additions as part of the dutiable
• Transfer pricing: Aligning intercompany and transfer pricing to optimize declared values
• Identifying the different types of deductions and how deductions are determined – What you need to prove eligibility for a deduction
• Understanding what a revoking of China’s PNTR status would do to valuation of goods coming out of China

Foreign Trade Zones (FTZs) and Bonded Warehouses both offer duty deferral benefits, but overall benefits depend on a company’s business objectives, location, industry-specific activities, customs compliance capability, time restrictions, cost analysis, security measures, and potential trade policy changes. This session will explain the benefits and limitations of each, giving you the insider views you need to optimize duty deferrals.

FTZs

• Pros
  • Duty deferral
  • Entry of goods: No formal customs entry required for FTZs
  • Re-exportation: Easy to access international markets
  • Leverage Privileged Foreign Status
  • Tax savings
  • Inverted tariff advantages
• Cons
  • Limited location
  • Setup costs
  • Strict compliance and security requirements to maintain FTZ status, which can involve additional administrative efforts and potential penalties for non-compliance

Bonded warehouses

• Pros
  • Duty deferral
  • Re-exportation: Easy to access international markets
  • Tax savings
  • Inventory management to improve supply chain efficiency
  • Licensed and regulated by Customs authorities
• Cons
  • 5-year storage limit
  • Limited manufacturing
  • Only foreign status goods
  • Storage costs
  • Limited availability
  • CBP oversight and scrutiny

A serious step up in civil and criminal enforcement of customs laws, including tariff evasion, False Claims Act violations and duty enforcement is imminent. Developing a compliance program to avoid enforcement exposure is neither difficult nor costly, and a small price to pay to avoid government scrutiny.

• Customs’ increased attention to tariff underpayments, particularly for the new Trump tariffs
• The threatened use of alternative enforcement tools on top of normal Customs penalty procedures, including the FCA and potential criminal penalties
• The increasing incentives for employees, competitors, and other potential relators to become whistleblowers
• The enhanced ability of Customs and plaintiff law firms to target and identify tariff underpayments
• Best practices for compliance program updates/improvements to ensure correct protocols are in place to avoid violations amid increased CBP scrutiny

Supply Chain Diversification Strategies: Evaluating Alternative Suppliers

• Rethinking contract negotiations: Understanding the scope of force majeure clauses, and holding other party to existing pricing terms
  • Preemptively evaluating dispute resolution processes in the event of a demand for pricing change
  • Delivery terms: Which delivery terms make sense for your business when you are dealing with imported goods
  • Price terms: Price provisions are provisions you can negotiate for new contracts to allow for absorption of tariffs as these tariffs change going forward
  • Taxes/duties term: Review this provision to determine which party is responsible for payment
  • Termination/enforceability: Examine your contracts to determine whether you have the right to terminate and seek an alternate supplier that may not impose tariff-related costs
• Duty drawback: Ensuring your suppliers are leveraging drawback benefits
• Conducting an audit for sourcing vulnerabilities
• Building redundancy and diversification with multiple suppliers and manufacturing sites
• Demand planning: Ensuring that you have enough materials on hand for the looming interim period of possible further tariffs

• Tailoring your customs compliance program to your company’s risk profile – Key factors to consider
  • Large vs. small importer
  • Number of imports
  • Complexity of classification
• Valuation transfer pricing approach
• Tax approach vs. customs compliance approach
• Raising awareness of your compliance program within your company
• Upgrading internal controls
• Working with other stakeholders in your company
• Developing effective written procedures
• Review of sample procedures

Given the uncertainty surrounding the implementation of new tariffs by the United States and the potential for retaliatory tariffs by targeted countries, it is essential that importers dig into the impact of these policies and develop plans to mitigate the financial and other negative consequences. A strategic tariff-mitigation strategy can result in significant savings for businesses in an era increasingly marked by uncertainty in international markets.

• Implementing tariff engineering strategies:
  • Considering minor modifications to products or production processes to shift classification to a lower tariff bracket
  • Conducting a thorough review of the Harmonized Tariff Schedule of the United States is essential for this strategy
• Getting a handle on your import operations to better understand the potential impacts of tariffs on your business
  • Identifying all importer-of-record (IOR) numbers associated with your company at all divisions and subsidiaries
  • Taking stock of all customs brokers used by your organization over the last five years, and determining which ones are still active
  • Identifying which types, which product lines, or which divisions each broker is handling
  • Pulling the Automated Commercial Environment (ACE) data with all your company’s identified IORs to gather the data needed to analyze import trends and the accuracy of information submitted to Customs at the time of entry
  • Collaborating with procurement teams to anticipate future orders, including for new products, suppliers, and sourcing regions under consideration
• USMCA scenario planning: Pulling and analyzing data, and calculating the supply chain impacts of potential changes
• Revisiting product classification and valuation: Ensuring accurate tariff classifications and properly valuating imports to prevent overpayment and reduce compliance risks
• Conducting a product classification review to determine if you should apply for tariff exemptions or reclassifications
• Utilizing tariff drawback programs, or bonded warehousing to manage or defer costs
• Strategies to Mitigate Tariff-Driven Cost Increases
  • Pricing provisions
  • Force Majeure clauses
  • Changes in law provision
  • Indemnification provisions
• Strategic Contract Negotiation: Businesses may negotiate cost-sharing arrangements or tariff-specific price adjustment provisions with suppliers or customers to distribute the burden of tariffs.

• How to use the Harmonized Tariff Schedule and where importers make mistakes
  • Understanding HTSUS structure and framework
  • Applying the General Rules of Interpretation, heading terms, relevant section, and chapter notes, heading and subheading notes, general notes, and explanatory notes, and using the rulings as guides
• Navigating the ambiguities in HTS classification, especially for products that can fit multiple descriptions
• Special HTS classification resulting in increased duties (chapter 99, 301, 232, IEEPA) or decreased duties (chapter 98, goods returned, Us government imports, agricultural imports, samples/test products, temporary imports)
• Understanding the impact of proper classification on duty rates and compliance
• Key pitfalls to avoid
• Mitigating risks and CBP rulings

• Transfer pricing: Forming basis of customs value for duty and needed tax adjustments
• What are the tax implications of changing the way you sell into a market: Inter-company transfer pricing in sales for an affiliate company
• Where can you deduct value in freight and tax implications
• Separating out tangibles for intangible goods and associated tax implications

• Detecting communication breakdown warning signs: How far you need to go in conducting due diligence
• Designing a questionnaire for brokers: Assessing the skills, experience, and resources of customs brokers
• Evaluating brokers’ supply chain relationships: Quantifying risk factors
• Communicating compliance expectations and requirements to brokers, and developing guidelines for your brokers
• Where the importer and broker responsibilities begin and end
• Incorporating contractual safeguards, including audit mechanisms
• How to monitor compliance, and what to do if you suspect or discover non-compliance by a broker
• Auditing foreign brokers, and conducting periodic reviews and site visits
• When and how to terminate the relationship
  • When to seek outside counsel
• How brokers and importers can work together to implement global policies and procedures