High Import Costs? 8 Ways to Reduce Tariff Fees

Import tariffs can seriously impact your business costs, but there are practical ways to reduce them. Here’s a quick overview of eight strategies to help you save money while staying compliant with trade regulations:

• Use Trade Agreements: Leverage free trade agreements (FTAs) to lower or eliminate tariffs on eligible goods.
• Monitor Temporary Tariff Changes: Stay updated on policy shifts using tools like the FTA Tariff Tool and industry resources.
• Improve Product Classification: Use accurate Harmonized Tariff Schedule (HTS) codes to avoid overpaying duties.
• Apply for Duty Drawback Programs: Reclaim up to 99% of duties on exported or destroyed goods.
• Use Foreign-Trade Zones (FTZs): Defer or eliminate tariffs by processing goods in FTZs.
• Diversify Suppliers: Source from countries with lower tariffs to reduce costs.
• Modify Products: Adjust materials or packaging to fit lower tariff categories.
• Automate Processes: Invest in technology to streamline classification, tracking, and compliance.

These steps can help businesses manage rising import costs, protect profit margins, and maintain compliance with U.S. trade rules.

How U.S. Companies Legally Cut Tariffs Through Supply Chain Strategy

Use Trade Agreements and Preferential Programs

Trade agreements can significantly lower import costs. Right now, the United States has 14 free trade agreements with 20 countries, offering businesses the chance to cut or even eliminate tariffs on eligible goods. This can mean the difference between paying full tariffs and benefiting from duty-free treatment.

"Free trade agreements can reduce tariff impacts." - Karen Lobdell, Senior Manager, Product Management at Thomson Reuters

Here’s an example: imagine a product with a 10% standard duty rate. If additional tariffs increase that rate to 35%, goods qualifying for zero-duty treatment under a free trade agreement (FTA) would only face a 25% rate. For businesses handling large import volumes, this difference can have a big impact on profitability.

Find Applicable Free Trade Agreements

The first step is to determine whether your product originates in the U.S. or an FTA partner country. This is key because preferential treatment only applies to goods that meet specific origin requirements.

Start by checking if your product was made or significantly altered in an FTA partner country. If it doesn’t qualify, you’ll need to follow standard export documentation. Then, compare the standard Most Favored Nation (MFN) tariff rate with the preferential FTA rate using tools like the Customs Info Database or the FTA Tariff Tool.

There are several ways your product might qualify for preferential treatment. It could be entirely produced in an FTA partner country or made using materials from those countries. Even if non-originating materials are used, the product might still qualify if those materials fall below the de minimis threshold of 7–10% or meet specific Product-Specific Rules of Origin (ROOs). Keep in mind that ROOs differ by agreement and product.

For instance, in the apparel industry, a t-shirt made in the U.S. with materials sourced from FTA partner countries - like cotton and dye - may qualify for FTA benefits. Components such as sewing threads and labels, if manufactured domestically, further support eligibility. For smaller shipments, a simple invoice statement may suffice, while larger shipments require certification on company letterhead, with records kept for five years.

Once you confirm eligibility, stay vigilant about policy updates to maximize potential savings.

Monitor Temporary Tariff Changes

Trade policies can shift quickly, so it’s essential to stay updated. The Office of the U.S. Trade Representative (USTR) and the United States International Trade Commission (USITC) are excellent sources for tracking updates and temporary tariff changes.

Several tools can make this process easier. The FTA Tariff Tool, launched in 2011 by the USTR, International Trade Administration, and Small Business Administration, provides tariff details for goods exported to 20 foreign markets with U.S. trade agreements.

Other helpful resources include CustomsInfo and the U.S. Department of Agriculture's Agricultural Tariff Tracker for industry-specific data. Additionally, IBISWorld’s US Trade Tariff Exposure Tool helps businesses evaluate tariff impacts and monitor policy changes.

Building an internal compliance program can help your team stay on top of trade law changes. Partnering with industry associations and chambers of commerce can also provide tailored resources and advocacy support. Staying informed through official channels and industry networks ensures businesses are ready to adapt their import strategies, take advantage of policy shifts, and avoid compliance issues. Regular monitoring can lead to significant cost-saving opportunities when temporary reductions or new agreements arise.

Improve Product Classification with HTS Codes

Getting product classification right is a big deal when it comes to managing import costs. The Harmonized Tariff Schedule (HTS) code you assign to your goods determines the duty rate you’ll pay. Importers are legally required to classify their goods correctly. If you don’t, you could face delays, higher duties, fines, or even penalties. Beyond meeting legal requirements, accurate classification can help you manage costs better, working hand-in-hand with other tariff reduction strategies.

Review HTS Codes Regularly

The Harmonized Tariff Schedule isn’t static - it’s updated every five years by the World Customs Organization to reflect changes in technology and global trade patterns. On top of that, country-specific tariff codes and duty rates often change multiple times a year. This means staying current is essential.

Start by gathering detailed product specifications. Work your way through the HTS, beginning with broader categories and narrowing down to more specific headings and subheadings. Pay close attention to chapter notes - they provide essential guidance for accurate classification. It’s also critical to understand the General Rules of Interpretation (GRIs), which outline six key rules for classifying goods.

If you’re unsure about a classification, consider requesting a binding ruling from U.S. Customs and Border Protection. While this process can take time, it provides a definitive answer and helps avoid disputes down the line. To stay on top of things, set up regular audits for your tariff classifications, train your team on HS codes and classification rules, and keep thorough records of product specifications and manufacturing details.

Apply Technology for Better Classification

As product catalogs grow, manual classification becomes less practical and more error-prone. This is where technology steps in. With AI-powered tools and machine learning algorithms, businesses can automate classification processes and improve accuracy. For instance, Sony Electronics adopted Descartes’ cloud-based solution to automate product classification, saving time, cutting costs, and boosting accuracy.

Modern classification tools can integrate seamlessly with business systems, provide access to updated tariff databases, and enhance team collaboration. Platforms like GetTariffs offer AI-driven tariff calculations with daily updates, ensuring businesses choose the correct HTS codes while minimizing errors.

Investing in these tools can lead to significant savings. A one-year subscription to classification software typically costs about $1,400, which is often a small price compared to the potential savings in duties. Depending on your needs, you can choose platforms that rely on AI/ML automation or those offering expert support, ensuring the solution aligns with your product complexity and team expertise.

Shea Felix, Vice President of GlobalPost International, highlights the value of such tools:

"The Self-Serve Tariff Code Classification tool has transformed the way our merchants approach international shipping. It's an easy, accurate, and cost-effective solution that has streamlined the process, enabling our customers to expand their operations without the fear of customs-related complications."

Ultimately, while technology can significantly enhance accuracy and efficiency, it’s no substitute for a deep understanding of your products and the HTS system. The best results come from combining advanced tools with solid product knowledge and diligent compliance practices.

Apply for Duty Drawback Programs

Duty drawback programs allow businesses to reclaim refunds on duties, taxes, and fees for goods that are either exported or destroyed. Similar to fine-tuning HTS codes, leveraging duty drawback programs can help businesses save money while staying compliant. In the U.S., companies can recover up to 99% of the duties and fees they've paid, making this an effective way to cut down on import-related expenses. It also fits into broader strategies aimed at reducing tariff costs by recapturing funds already spent.

Learn Eligibility Requirements

To qualify for duty drawback, you need to be the legal owner of the goods at the time of export, and the applicable customs duties must have been paid on the imported items. Most goods that meet these criteria are eligible for refunds.

There are three main types of duty drawback programs:

Type	Description
Unused Merchandise	Refund for duties on items imported and then re-exported without being used domestically.
Manufacturing Drawback	Refund for duties on imported materials used to manufacture goods that are exported.
Substitution	Refund for duties on imported goods offset by the export of similar domestic products.

The manufacturing drawback option is especially beneficial for businesses importing raw materials or components. For instance, an automotive manufacturer used a duty drawback program to track imported parts used in exported vehicles, reclaiming millions of dollars annually and boosting its competitive position.

To successfully file a claim, you'll need to maintain precise records of your import and export activities. This includes purchase orders, invoices, packing lists, and entry summaries. As Oracle advises:

"Businesses that wish to claim duty drawback should keep all relevant records - such as invoices, bills of lading, and packing lists - and be sure to apply for the appropriate type of drawback."

Timing is another critical factor. Duty drawback claims must be filed within five years of importing the goods, but completed claims - with all necessary documentation - need to be submitted within three years of exportation or destruction. Familiarizing yourself with these requirements ensures you're ready to take full advantage of the automated tracking systems discussed next.

Set Up Automated Drawback Tracking

Tracking duty drawback manually can be overwhelming, especially for businesses dealing with high transaction volumes. The process involves gathering data, retrieving documents, and completing paperwork - similar to filing taxes but often more intricate.

Specialized software can simplify this process by integrating with CBP's ACE system to automatically match imports and exports. These tools can link CBP 7501 forms, export invoices, and bills of lading. They also trigger workflows when exports occur, speeding up refund cycles.

To streamline record-keeping, consider using a digital documentation system with strong indexing capabilities. Modern duty drawback software not only helps verify eligibility but also automates key tasks such as document collection, compliance checks, and filing claims. The software ensures that you're applying for the correct drawback type and meeting all regulatory requirements.

"Businesses can use software to help automate the filing of duty drawback claims so that such claims are filed for the appropriate drawback type, all necessary documentation is completed, and other regulations are complied with."

To get the most out of automation, train your team to identify eligible transactions and understand program requirements. It's also crucial to integrate this system with your existing ERP software, enabling automatic data capture and reducing manual errors. This approach ensures that every eligible transaction is included, maximizing your refunds.

Lastly, all duty drawback claims must be filed electronically through the Automated Broker Interface (ABI), as required by TFTEA regulations outlined in 19 C.F.R. §190. A complete claim must include specific forms and documentation, such as Customs Form 7551, certificates, and proof of exportation or destruction, to ensure successful processing.

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Use Foreign-Trade Zones (FTZs)

Foreign-Trade Zones (FTZs) offer a practical way to cut down on import tariffs, alongside trade agreements and duty drawbacks. By treating goods stored or processed in these zones as being outside U.S. Customs territory, FTZs let businesses defer, reduce, or even eliminate tariff payments altogether. This approach not only improves cash flow but also helps lower overall import costs. Like other strategies in this guide, FTZs aim to reduce tariff-related expenses while ensuring compliance with regulations.

U.S. Rep. Emmanuel Celler once described FTZs as "a neutral, stockaded area where a shipper can put down his load, catch his breath and decide what to do next".

Currently, there are nearly 400 subzones operating across the United States, employing about 460,000 people and handling over $767 billion in shipments annually. These zones enable businesses to delay duty payments for goods sold in the U.S. and avoid duties entirely on items that are re-exported.

Establish Operations within an FTZ

Setting up operations in an FTZ takes some planning. The application process typically spans six to nine months. Start with a feasibility study to determine whether an FTZ is a good fit for your business. Key factors to evaluate include shipment volumes, duty payments, and the potential for re-exporting goods. Involve your IT team and other key staff to ensure proper record-keeping and data management. FTZs are especially helpful if you handle more than 52 shipments annually, pay substantial duties, or re-export part of your imports. They can also be a game-changer for companies dealing with product damage, regulatory delays, or shifting tariff policies.

Gaining buy-in from employees and suppliers is another important step. For a faster setup, consider the Alternative Site Framework (ASF), which allows businesses to join an existing zone. Once your application is approved, U.S. Customs and Border Protection must activate the zone before you can begin operations under the Foreign-Trade Zones Act. The Foreign-Trade Zones Board, established under the 1934 Act, oversees the approval process, with production-related decisions typically taking 120 days from submission.

FTZ operators are required to account for all goods exiting the zone and ensure duties are paid correctly. Failing to track inventory properly can lead to hefty fines, so investing in a reliable tracking system from the start is crucial. Once your FTZ is up and running, tracking and quantifying the benefits becomes an important part of the process.

Calculate Cost Savings from FTZ Use

FTZs offer cost savings through duty deferral, duty elimination, and reduced Merchandise Processing Fees (MPF). For high-volume importers, the savings from reduced MPF fees alone can be substantial.

Duty deferral improves cash flow by postponing payments until goods enter the U.S. market. For goods that are re-exported, you can avoid U.S. duties altogether. Take the automotive industry as an example: In 2019, vehicles from Germany, Japan, and Korea arrived at FTZ 113 without incurring immediate tariff charges. Duties were only applied when these cars were released for shipment to dealerships, saving manufacturers money while supporting American jobs and generating revenue for local businesses.

FTZ Benefit Type	How It Reduces Costs
Duty Deferral	Delays payment until goods enter the U.S. market, improving cash flow
Duty Elimination	No duties on goods that are re-exported
Inverted Tariff	Pay a lower duty rate on finished products compared to raw materials
MPF Reduction	Reduces Merchandise Processing Fees on zone admissions

On average, setting up an FTZ takes 4–6 months, though more complex operations may require additional time. Costs vary depending on the type of site and application, so include these in your analysis. For instance, the Capital Region FTZ #121 charges administrative fees for establishing new zones, along with annual fees based on the type of operation and site activity.

Another benefit of FTZs is locking in duty rates at the time goods are admitted, which protects against future tariff increases.

To get the most out of an FTZ, consider hiring an external consultant. These professionals can streamline the application process and make sure you’re taking full advantage of every savings opportunity. While the upfront cost of hiring a consultant may seem high, it often pays off by speeding up implementation and optimizing your zone’s operations.

Diversify Suppliers and Adjust Supply Chains

Expanding your supplier network can be a game-changer when it comes to reducing tariff expenses and strengthening your supply chain. This strategy works hand-in-hand with trade agreements and duty drawback programs, creating a comprehensive approach to cutting tariffs. By relying less on suppliers from high-tariff regions and broadening your sourcing options, you can lower costs while making your supply chain more resilient.

Companies that optimize their supply chains see 15% lower costs and maintain less than 50% of the inventory levels of those that don’t prioritize optimization. They also enjoy cash-to-cash cycles that are at least three times faster than their competitors.

This strategy becomes even more critical when you consider how tariffs vary globally. For example, Hong Kong and Singapore impose 0% tariffs on most goods, while Tunisia, Algeria, and Gabon have rates of 19.5%, 18.9%, and 18.1%, respectively, for countries with Most Favored Nation status.

Research Alternative Supplier Countries

Shifting to suppliers in countries with lower tariffs involves thorough research. Start by analyzing trade agreements, tariff structures, and total landed costs. Free Trade Agreements are a great resource, as they can open doors to preferential rates.

To begin, identify your product’s Harmonized System (HS) code using the US Census Bureau’s Schedule B Search Engine. This code determines the tariffs and taxes for specific products in each country. Additionally, rules of origin play a key role in determining the applicable tariff rates for your product.

But it’s not just about tariffs. You’ll also want to consider factors like valuation methods, quotas, seasonal rates, and special customs programs. Developed nations often have lower average tariffs, while developing countries tend to impose higher rates. Keep in mind that total landed costs include much more than just tariffs - transportation, quality standards, and supply chain reliability all factor in.

"Nearshoring is moving from just a contingency plan to becoming a core part of how UK manufacturers structure their operations." – Nigel Pekenc, Partner at Kearney

A great example of supply chain optimization is Walmart’s use of RFID technology. By implementing a real-time tracking system, Walmart improved inventory management, reduced stockouts, and streamlined warehouse operations. This not only cut manual labor costs but also allowed the company to leverage data analytics for more accurate demand forecasting.

Once you’ve identified potential suppliers, use precise cost analysis tools to calculate the financial impact of each option.

Calculate Costs with Tariff Tools

After exploring alternative sourcing options, the next step is to assess supplier scenarios using accurate tariff tools. Platforms like GetTariffs can provide instant calculations of import duties, tariffs, and total landed costs, using daily updated official rates. These tools allow businesses to compare sourcing options across multiple countries and products, offering a clear picture of the financial implications.

When evaluating suppliers, double-check HTS codes and consult with customs brokers to ensure accuracy. Use tools that allow side-by-side comparisons of tariff rates for different countries, but be aware that some calculators may not include additional fees like the Merchandise Processing Fee (MPF) or Harbor Maintenance Fee (HMF).

"The tariff resources listed (public and private) are not exhaustive; however, they can help you estimate tariff rates for your shipment." – trade.gov

Toyota’s approach to supplier collaboration highlights the benefits of strong partnerships. Through the Toyota Production System, the company works closely with suppliers to ensure seamless communication and coordination. Their just-in-time inventory system minimizes holding costs by delivering materials exactly when needed. This integration fosters continuous improvement, reduces waste, and enhances product quality through their "kaizen" philosophy.

Since tariff rates change frequently, it’s essential to consult official sources like U.S. Customs and Border Protection for the most up-to-date information. To gain full visibility into your supply chain, track every stage and conduct cost-to-serve analyses. This will help you understand the true expenses of serving specific markets through different supplier relationships.

Finally, aligning your company’s culture with cost-saving goals can lead to long-term reductions of up to 11%. Incorporating AI into supply chain operations can further cut manufacturing, warehousing, and distribution costs by 10% to 20%.

Modify Products to Lower Tariff Classifications

Adjusting products to fit into lower tariff categories can significantly cut import costs. This strategy, known as product reclassification, involves making specific changes to products so they qualify for lower duty rates - all while staying in full compliance with U.S. trade regulations. This approach, often referred to as tariff engineering, is a practical way to tackle high import duties, especially for goods affected by tariffs like the Section 301 tariffs on Chinese imports, which can reach a hefty 25%.

U.S. Customs and Border Protection recognizes tariff engineering, as long as it's done transparently and within the boundaries of established regulations.

"Sometimes, a minor product modification - like changing a material component or adjusting packaging - can shift a product into a lower tariff bracket." - Shapiro

Even small tweaks can translate into big savings. For instance, replacing high-tariff materials with alternatives that fall under a different Harmonized System (HS) code can reduce duty rates significantly.

Change Product Materials or Packaging

Many companies have successfully slashed their import duties by modifying product materials or packaging. These changes don’t compromise the quality of the product but instead take advantage of differences in tariff classifications to lower costs.

Some notable examples:

• Converse: Added a felt layer to sneakers, reclassifying them as slippers.
• Columbia Sportswear: Adjusted product components to qualify for lower tariff brackets.
• Marvel: Reclassified action figures as toys.
• Packaging Adjustments: Importing goods in bulk and completing packaging locally can not only reduce tariffs but also allow for customization to match seasonal promotions or customer preferences.

During the U.S.–China trade war (2018–2020), tariffs on materials like plastic resins, aluminum, and paper drove up costs. In response, many companies modified their supply chains or sought domestic alternatives to mitigate these increases.

When considering such changes, it’s essential to work closely with customs brokers and legal experts. Proper documentation and compliance with international trade regulations are critical to avoid any perception of deceptive practices.

Maintain Accurate Valuation and Records

Making product modifications is only part of the equation. Accurate recordkeeping is just as important to ensure compliance and avoid penalties. Misclassifications can lead to higher duties, fines, or even more severe consequences, negating any potential savings.

Here’s how to stay on track:

• Keep detailed records of all product modifications, along with the rationale and supporting documentation.
• Collaborate with experts to establish and document proper tariff classifications.
• Maintain updated product databases with accurate descriptions and classification numbers.

Several tools can help streamline this process. The US Census Bureau's Schedule B Search Engine is a great resource for identifying the correct HS codes, while the Customs Info Database provides duty rates and local tax information for over 170 countries. Additionally, WorldTariff offers standardized duty and tax details for more than 200 countries.

"The specific tariff classification to be applied to a specific entry of merchandise is to be determined by the licensed customs broker or other agent engaged to file the entry." - WorldTariff

For complex modifications, professional support can be invaluable. Customs brokers and freight forwarders can assist with tariff calculations, while data management services help maintain accurate product databases.

Companies with global operations benefit greatly from systematic approaches. As Jim Park, CEO of Otter Products, LLC, explains:

"For a consumer products company that ships products all across the globe, it's nearly impossible to keep track of all we need to, regulatory-wise, and having WorldTariff API gives us the ability to scale up our business in a way that we never would have been able to previously."

Regular monitoring is essential to stay compliant as trade regulations evolve. Services offering classification support at both the HS 6-digit level and national tariff code level can help businesses navigate these changes while maintaining accuracy.

Conclusion

Lowering import tariffs requires a mix of eight targeted strategies, all working together to ensure compliance and achieve cost savings. These strategies hinge on the accurate classification of materials under the Harmonized System (HS) and a well-rounded approach to tariff management.

With tariff rates climbing from 2% to over 20% as of April 2025, businesses face mounting pressure to refine their import processes. A 10% tariff on raw materials alone can drive up a product’s overall cost by 5%, making it critical to adopt effective cost-reduction measures.

The risks of non-compliance are real and costly. In 2020, a U.S. company was fined $1.1 million for misclassifying imports to evade tariffs. As Harris Sliwoski LLP warns:

"Tariff compliance is not something to guess at. You must have a qualified expert conduct your substantial transformation and accurate tariff due diligence before committing to a new production plan."

Automated tariff management tools are game-changers, minimizing errors and delays while reducing the risk of penalties. These systems provide real-time updates and data-driven insights to support better decision-making. For example, GetTariffs offers automated classification capabilities, ensuring compliance and streamlining the implementation of these strategies.

The most successful companies integrate multiple methods - leveraging Free Trade Agreements, utilizing Foreign-Trade Zones, and more - to build a comprehensive cost-reduction framework. Each strategy plays a critical role in achieving meaningful savings.

"By adopting a proactive approach, businesses can mitigate risks, protect profit margins, and remain competitive in the global market. Remember, being informed today lays the foundation for successful international trade tomorrow." - Vigilant Global Trade Services

As trade regulations continue to evolve, staying ahead requires ongoing effort. Regular tariff audits, continuous training for staff, and keeping up-to-date with global trade changes will ensure your strategies remain effective and compliant.

The eight methods outlined here provide a strong starting point for reducing your import costs. From utilizing trade agreements to modifying products, each approach is a vital piece of your overall strategy. By implementing these methods, you can lower costs and maintain a competitive edge in the global market.

FAQs

How can I find out if my products qualify for reduced tariffs under a Free Trade Agreement?

To find out if your products qualify for reduced tariffs under a Free Trade Agreement (FTA), you'll need to check whether they meet the rules of origin specified in the agreement. Generally, this means your products should either be wholly obtained within the FTA region or have undergone a substantial transformation in the exporting country.

It's also crucial to ensure all necessary documentation is accurately completed when submitting to U.S. Customs. If you're uncertain about the requirements, take a closer look at the specific FTA guidelines for your product category or seek advice from a trade professional. Getting the classification and compliance right can help you fully benefit from tariff reductions.

What are the advantages and challenges of operating within a Foreign-Trade Zone (FTZ)?

Operating within a Foreign-Trade Zone (FTZ) can bring a range of benefits to businesses. Among the most notable are the ability to defer or eliminate import duties, lower merchandise processing fees, and streamline customs procedures. On top of that, FTZs can improve inventory management and cut costs, making them an appealing choice for companies aiming to refine their supply chain operations.

That said, there are hurdles to keep in mind. Running an FTZ involves dealing with intricate regulations and ensuring strict compliance to avoid penalties. Businesses also need to be vigilant about risks such as the potential misuse of the zone for illegal activities or environmental issues linked to specific operations. With thorough planning and the right expertise, companies can navigate these challenges and fully capitalize on the advantages FTZs offer.

How can businesses use technology to improve product classification and lower tariff costs?

Technology, especially AI and automation tools, plays a key role in improving how products are classified for imports. These tools dive into detailed product data, pinpoint the right tariff codes, and keep up with shifting trade regulations. The result? Fewer mistakes that could otherwise lead to extra costs or compliance headaches.

Automating this process offers businesses several advantages. It saves time, cuts down on human errors, and ensures companies make the most of potential tariff reductions. Beyond cost savings, it also keeps businesses in line with trade laws, helping to avoid penalties or shipping delays.