As international trade faces increasing turbulence and uncertainty, understanding the basics of trade law is crucial for navigating these challenges effectively. Join Miller Johnson’s international transactions team as they unpack key elements of international trade law.
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The U.S. can impose tariffs on essentially all goods entering the country. The Harmonized Tariff Schedule of the U.S. (HTSUS) is the method by which import tariffs are assessed on goods entering the U.S. The HTSUS is published, maintained, and updated by the International Trade Commission, an independent agency of the U.S. government. Tariff rates in the HTSUS are divided into two columns:
A prevalent misconception is that foreign suppliers automatically pay tariffs. This is not true. In the U.S., tariffs are legally required to be paid by “the importer of record” at the time the goods enter the U.S. The importer of record is typically a U.S. buyer. The party that ultimately bears the cost of the tariffs is a little more complex, however, as the payment ultimately depends on the contractual agreements between the U.S. buyers and their foreign suppliers.
Sometimes the contract sets forth these responsibilities through the use of the International Chamber of Commerce’s International Commercial Terms (also known as Incoterms), which provide a shorthand for the responsibilities for various costs in international trade transactions. For instance, the term Delivered Duty Paid (DDP) indicates that the seller is responsible for all costs, including duties and tariffs, until the goods reach the agreed location inside the buyer’s customs territory. Conversely, terms like EXW (Ex Works) or FOB (Free on Board) place the burden of import duties and tariffs on the buyer.
When the contract does not explicitly address tariff responsibility, the economic burden becomes a matter of negotiation between the exporter and importer.
For businesses engaged in international trade, understanding the allocation of tariff payments has practical implications. It is advisable to review existing contracts to understand tariff responsibilities and discuss steps going forward.
Please contact the authors Wei Wang , Aimee J. Jachym and/or Marcus C. Hoekstra or another member of our corporate international practice.
