How duties actually work for importers

[Tradd]

This post has nothing to do with poitics, policies, or arguments for/against the new tariffs. This is how they actually work for importers and what the numbers look like. US importers pay the duty. So if Walmart imports a certain item, Walmart pays the duties, and the cost is passed along to the consumer.

It’s education time on the tariff numbers you hear in the news. You hear numbers like 54% duties for China thrown around. Standard duties are often not mentioned. This is a women’s cotton coat under 6102.20.0010. Standard duty is 15.9%. That little blue superscript 1 next to the duty percentage takes you to the end notes and indicates the HS code for the 2018 China duty percentage, which is 7.5% on top of the standard duty (most items get 25% in the 2018 duties, but clothing is mostly all 7.5%). Now there is 20% additional China duty that was recently assessed, plus the 34% reciprocal duty that goes into effect Wednesday. Total: 77.4% duties from China.

For goods from other countries, it’s standard duty + whatever the reciprocal duty is.

Even if the reciprocal tariffs and the additional China ones go away, this item would still have 15.9% duty.

CBP comes down HARD on importers who try to pay lower duties. Import duties are the second highest source of revenue for the Feds after the income tax. That’s why proper classification, determine which HS code applies, is so important. The feds want their money! I had a customer who wanted me to use a totally different HS code in 2018 when the first round of China duties went into effect. They had been using the same HS code for more than a decade. They didn’t believe CBP’s system wouldn’t catch the different. They went to another broker who was willing to commit the fraud for them. I refused to and told them so. I wasn’t risking my brokers license for them. They ended up with a $1 million fine and were placed on the national sanctions list, which means they unable to import again.

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[catherine]

It's great to have a resident trade expert!! Very interesting. It seems very complex to me, given that every item from every country has its own set of rules. Thanks for the concrete example.

[Tradd]

It's great to have a resident trade expert!! Very interesting. It seems very complex to me, given that every item from every country has its own set of rules. Thanks for the concrete example.

Things only got more complicated recently.

[early morning]

Thanks for the breakdown, Tradd - really interesting!

[Tybee]

Until you laid this out for us, I had no idea that Americans were paying these tariffs on the imported goods. It honestly makes no sense, to put these huge tariffs on things that your citizens then pay.

[Tradd]

Until you laid this out for us, I had no idea that Americans were paying these tariffs on the imported goods. It honestly makes no sense, to put these huge tariffs on things that your citizens then pay.

I don’t know why everyone think the overseas suppliers pay for the duties. The importers always do. And that’s the companies who import these goods, not the end customers, although the tariff cost probably gets passed along, at least in part.

[rosarugosa]

I don’t know why everyone think the overseas suppliers pay for the duties. The importers always do. And that’s the companies who import these goods, not the end customers, although the tariff cost probably gets passed along, at least in part.

Well to be fair, I don't think everyone thinks the overseas suppliers pay for the duties, only Donald and the MAGA crowd perhaps.

[Tradd]

Well to be fair, I don't think everyone thinks the overseas suppliers pay for the duties, only Donald and the MAGA crowd perhaps.

I posted the stuff in the OP on FB. People well known to be Democrats also thought the overseas suppliers paid duties on imports to the US.

[rosarugosa]

I posted the stuff in the OP on FB. People well known to be Democrats also thought the overseas suppliers paid duties on imports to the US.

Wow, that's crazy! I just always understood without a doubt that whoever actually pays them initially upstream, as the final consumer, I'm the one who ultimately pays via increased prices.

[Tradd]

Excellent NYT article on how all the different China duties work.

https://www.nytimes.com/interactive/...e=articleShare