Seeking different ways to beat the China tariffs

With trading tension boiling between the two biggest countries in the world, China and US. Companies looking for ways to contain the costs of President Donald Trump’s tariffs on goods from China, looking for legal loopholes to help avoid or reduce duties without shifting production to other countries.

Law firms and consultants say they are being inundated with requests for assistance from importers seeking to use provisions such as the “321 de minimis” rule, which allows goods worth less than $800 to be shipped to the US without being subject to tariffs.

US companies have issued a series of warnings about the economic fallout from the trade war ahead of a meeting planned this week between Mr Trump and Xi Jinping, the Chinese president, at the G20 summit in Osaka.

In addition to billions of dollars in charges imposed on Chinese imports, the Trump administration is threatening levies on an additional $300 bn of goods, increasing pressure on companies with longstanding relationships with Chinese suppliers.

Rules on “first sale valuation” provide another way to curb import duties. Tariffs are levied on the value of the good being imported, yet companies may be able to persuade customs officials to assess the levy on a lower valuation if the goods had been purchased at a lower price further down the supply chain.

So-called “origin engineering” is another technique. Goods are typically considered to have come from a country if they have been “substantially transformed” there. Companies may be able to adjust parts of their production to argue the goods originated outside China.

Companies can also manage tariff expenses by using facilities known as “bonded warehouses”, where imported goods can be stored without payments being due. Duties are levied only when the goods leave the building. The warehouses can be used either to manage cash flows by spreading the duties over time, or to pay lower rates if tariffs are reduced at a later date.