Who pays Import Tariffs?

What are tariffs and how are they applied?

In simple terms, tariffs are taxes or duties that a government places on imported goods.

Tariffs primarily serve two key purposes:

1. To shield domestic industries by increasing the cost of imported goods—making locally made products more competitive.
2. To provide a valuable source of income for the government, especially in nations with high trade volumes.

In the United States, tariff payments are handled by the Customs and Border Protection (CBP) agency at various entry ports. The specific duties owed depend on several factors, including the product’s classification code, declared value, country of origin, and related shipping costs.

Who pays tariffs?

In general, responsibility for payment of the tariff will be agreed between the shipper and recipient upfront. This forms part of the shipment’s Incoterms®  – a uniform set of international trade standards that outline who is responsible for transportation, cargo insurance, export and import formalities, payment of duties and taxes, and at what point risk transfers from the seller to the buyer. This helps all parties meet their obligations.

The impact of the US tariffs

In recent months, the United States has introduced a series of tariffs, many aimed at imports from China, the European Union, and other key trade partners. These rapid policy shifts have posed significant challenges for foreign SMEs, which often lack the financial cushion and operational agility of larger firms.

Policy changes were often rolled out quickly, with minimal lead time, leaving SMEs scrambling to adapt – all whilst trying to meet US expectations for fast and reliable delivery.

Wider trade disputes have also contributed to rising shipping costs, particularly along major trade lanes like those connecting Asia to the U.S. Some exporters have been forced to reroute goods, navigate more complex customs procedures, or face delays at ports. These complications often lead to added expenses such as demurrage, warehousing fees, and other unexpected logistics costs.

Perhaps the most pressing question for any SME is this: who will end up covering these increased costs? For most, absorbing them internally simply isn’t realistic. But passing them on to customers can make their products less competitive. It’s no surprise, then, that this period has been deeply concerning for many businesses. The good news? While the challenges are significant, there are still steps SMEs can take to navigate them more effectively…

How can businesses mitigate the impact of US tariffs?

To lessen the impact of tariffs introduced this year, businesses should take strategic steps to adapt. Here’s how:

Start by performing a thorough assessment of your supply chain to identify where your business may be vulnerable to tariff impacts. Consider asking yourself the following critical questions:

• Which components or raw materials are imported?
• From which countries are these goods sourced?
• Are any of these items subject to existing or potential tariffs?

Tools like supply chain mapping software or even simple spreadsheets can help you track and assess where risks lie. This clarity will allow your business to anticipate cost increases and adjust procurement strategies before disruptions occur.

Rather than relying heavily on a single country – particularly those subject to high tariffs – your business can:

• Seek out alternative suppliers in countries with which the US has favorable trade agreements (e.g., certain Southeast Asian nations).
• Consider nearshoring or reshoring to reduce dependence on international shipping and avoid geopolitical risks.

Expanding and diversifying your supply chain can help minimize the impact of tariffs while also strengthening your business’s ability to withstand other disruptions, such as  pandemics or natural disasters.

There’s a big world out there! If US tariffs are cutting into your profit margins, you can consider other markets:

• Domestic markets, where tariffs are not a factor.
• Expand into other countries or regions where trade conditions are more favorable and tariffs are lower.
• Target emerging markets with growing demand for your products and fewer trade barriers.
• Look into regional trade agreements your country is part of, which might open doors to neighboring markets.

By not relying solely on the US, you’ll reduce your exposure to tariff-related risks and open up new revenue opportunities elsewhere.

Strong partnerships can offer more flexibility and better pricing during turbulent times:

• Work closely with freight forwarders, customs brokers, and logistics providers to understand shipping timelines and costs.
• Develop relationships with suppliers that allow for better negotiation on terms or alternative sourcing options.
• Foster transparency and collaboration throughout the supply chain to make joint decisions that benefit all parties.

Reliable partners are crucial when adapting logistics strategies or when immediate shifts in supply are needed.

US tariff policies can change quickly and often without much warning. SMEs need to:

• Monitor government announcements from the US Trade Representative (USTR) and the Department of Commerce.
• Subscribe to industry newsletters or join trade associations that provide updates and policy analyses.
• Consider engaging customs brokers or trade compliance consultants to navigate complexities and stay ahead of changes.

Staying informed empowers your business to respond swiftly, whether that involves stockpiling inventory ahead of a new tariff or fast-tracking entry into alternative markets.

For SMEs, managing tariffs goes beyond cutting costs; it’s about building long-term resilience. By taking a forward-thinking approach—focusing on supply chain diversification, exploring new markets, and strengthening strategic partnerships—your business can not only weather trade disruptions but also position itself for future growth.

US tariffs: FAQs

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