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Last updated April 9, 2025.
Last updated April 9, 2025.
A tariff is essentially a tax on imported goods, charged by the importing country’s government.
Governments impose tariffs to make foreign products more expensive, protecting domestic industries and jobs from overseas competition. Tariffs can also be used to generate revenue or as a bargaining tool in trade negotiations. In practice, when a tariff is in place, it raises the cost of the affected imports, which can influence business supply chains and consumer prices.
Tariffs are paid by the importer – typically the company or entity bringing the goods into a country – not by the foreign exporter.
For example, if a North Dakota company imports parts from overseas, that company must pay any U.S. import duties at customs. Importers often pass on some or all of this cost to customers via higher prices. Likewise, if another country puts a tariff on U.S. goods, the importer in that country pays it, but the added cost can make the American product (for instance, North Dakota agricultural goods) more expensive and less competitive abroad.
Back to the Basics: What Are Tariffs? – North Dakota Trade Office
Tariffs can increase the cost of raw materials and products. For businesses that import inputs, tariffs mean higher costs of production. For exporters, foreign tariffs on their products can lead to reduced demand if buyers shift to cheaper local or third-country suppliers. Tariffs can also lead to retaliatory measures between countries, creating uncertainty. Many of North Dakota’s key industries (like agriculture and manufacturing) rely on global markets, so they feel the impact when tariffs are imposed. For instance, tariffs on U.S. soybeans or machinery can cause buyers in other countries to purchase from different suppliers to avoid the extra cost, making North Dakota products less competitive internationally.
On the other hand, tariffs on imported competitors can give a temporary advantage to domestic producers. Overall, understanding tariffs is important so businesses can plan for price changes and adapt their sourcing or sales strategies accordingly.
Back to the Basics: What Are Tariffs? – North Dakota Trade Office
Protective Tariffs
Tariffs were initially designed to give domestic products a competitive edge over foreign products. Protective tariffs force foreign producers to pay more to export their products, which typically results in them raising their shelf prices to compensate. Consumers then turn to purchasing the cheaper domestic products, encouraging upward national business progression.
However, protective tariffs can still harm the businesses they’re meant to help. Manufacturers often import certain parts or components they can’t make themselves. If these components are subject to tariffs, it raises production costs, which can then be passed down to consumers. This can make domestic products less competitive overall, especially in industries that rely heavily on global supply chains.
Revenue Tariffs
Unlike protective tariffs, revenue tariffs are implemented primarily to generate income for the government rather than shield domestic industries. These tariffs are usually lower, allowing foreign products to remain competitive while still contributing to national revenue. Many developing nations rely on revenue tariffs as a significant source of funding for public services and infrastructure.
Retaliatory Tariffs
Governments may impose retaliatory tariffs in response to another country’s trade restrictions or economic policies. These tariffs are designed to pressure the offending country into reversing policies deemed harmful to the retaliating nation’s economy. While they can be an effective diplomatic tool, retaliatory tariffs can also escalate into trade wars, leading to economic slowdowns and higher prices for consumers.
Specific & Ad Valorem Tariffs
Tariffs can be structured in different ways:
If you import goods into the U.S., you are responsible for paying any applicable import tariffs (also called import duties or customs duties) to U.S. Customs and Border Protection. The tariff rate depends on the product’s classification under the U.S. Harmonized Tariff Schedule (HTS). Every product type has an HTS code and a corresponding duty rate. Some goods have low or zero tariffs, while others (e.g. certain metals or electronics) might have higher rates or additional duties due to trade policies. It’s important to determine the correct HTS code for your imports to find the right tariff rate. You can search the HTS online or consult a customs broker for help. Also, keep in mind that free trade agreements (FTAs) can eliminate or reduce tariffs for qualifying goods. For example, under the USMCA (formerly NAFTA) many goods traded between the U.S., Canada, and Mexico enter duty-free if they meet rules of origin requirements. To claim such benefits, you’ll need to provide documentation like a certificate of origin proving your goods qualify.
No, the U.S. generally does not impose tariffs on exports. American exporters don’t pay U.S. export taxes on goods leaving the country. (In fact, U.S. law prohibits export tariffs.) However, your foreign buyer will usually have to pay import tariffs to their country’s customs when your product arrives. In other words, when you export from North Dakota to another country, that country may levy its own import duty on your goods. It’s important to research what tariffs (if any) will apply to your product in the destination market so you can price your goods competitively or find ways to reduce those charges through trade agreements.
Note: While U.S. exports aren’t taxed by the U.S., you still must follow U.S. export regulations (like filing export documentation) and use the correct export classification (Schedule B number) for your product, which is used for U.S. statistical purposes and helps determine the corresponding foreign tariff classification.
These are all terms related to tariff classification. The Harmonized System (HS) is an international coding system for products. An HS code is a series of digits (usually 6-10 digits) that identify what a product is. Countries base their tariff schedules on HS codes. In the U.S., import tariffs are listed under the Harmonized Tariff Schedule of the U.S. (HTSUS) – a 10-digit code system for imports. For exports, the U.S. uses Schedule B numbers, which are 10-digit codes used for classifying exported products (the first 6 digits of a Schedule B are the same as the universal HS code).
Knowing the correct HS/HTSUS code for your import or the Schedule B for your export is essential. It ensures you find the right tariff rate and comply with customs rules. You can look up U.S. import codes and duty rates via the U.S. International Trade Commission’s HTS database, and find export Schedule B codes using the Census Bureau’s search tool.
Proper classification will also help you and your buyers claim any preferential tariff rates available under trade agreements or other programs.
Sometimes, beyond the normal import duty, a foreign government might add extra tariffs on certain U.S. goods in response to trade disputes or other issues. These “retaliatory tariffs” target specific products. For example, in recent years, China, Canada, and others placed additional tariffs on certain U.S. agricultural and manufactured goods during trade conflicts. If your product is hit with such tariffs, it can significantly raise the cost to your overseas customers. In this case, consider these steps:
Retaliatory tariffs usually last until the dispute is resolved or an agreement is reached. Maintain open communication with your foreign partners during these periods so you can jointly navigate the challenges.
To determine the tariffs in another country for your product, you will first need your product’s HS code (usually a 6-digit base code). With that, you have a few options:
Even when tariffs are in place, businesses can take proactive steps to reduce their impact. Here are several strategies to consider:
Always do this in compliance with the law (misclassifying or disguising a product to avoid tariffs is illegal). Consulting a trade compliance expert can help identify if there’s a legitimate way to classify or modify your product for a better rate.
For exports, ensure you provide the proper certificate of origin so your buyer can claim the FTA’s preferential rate. For imports, work with your supplier to get documentation showing the goods meet the FTA requirements (e.g. a USMCA certificate for North American trade).
For instance, if your company imports components, uses them to manufacture a product in North Dakota, and then exports the finished product, you can claim back most of the import duties. This can significantly cut costs for exporters descartes.com, though it requires careful recordkeeping and documentation to demonstrate the link between the imported inputs and the exported product.
FTZs can improve cash flow and reduce overall duty costs (and also avoid the lengthy drawback process in some cases). Setting up in an FTZ or using an existing zone does involve an application and compliance with zone procedures, so weigh the benefits with the administrative effort.
By combining these strategies, companies often find they can significantly soften the impact of tariffs on their bottom line descartes.com
The right mix will depend on your specific situation – consider consulting a trade specialist to develop a tailored mitigation plan.
Yes, shifting your supply chain can be an effective strategy to mitigate the impact of high tariffs. Businesses employ several approaches to achieve this:
Section 301 of the Trade Act of 1974 allows the U.S. to impose trade sanctions on countries that violate trade agreements or engage in unfair trade practices. To apply for an exclusion under Section 301:
Proper documentation ensures you receive any tariff benefits and remain compliant with regulations:
In summary, always double-check that your trade documents are complete and accurate. Good documentation not only helps avoid paying unnecessary tariffs (for example, by proving eligibility for a lower rate) but also protects you during audits or if there’s a dispute about your shipments. Many companies use checklists or work with experienced freight forwarders and brokers to ensure all tariff-related paperwork is in order for each shipment.
You don’t have to navigate complex tariff and trade regulations alone. Several resources and organizations can assist:
When in doubt, start by reaching out to the North Dakota Trade Office or a trusted trade advisor. They can often assess your situation and direct you to the right resources, whether it’s clarifying a regulation, finding a tariff rate, or obtaining legal counsel. Remember that tariff and trade policies can change, so staying connected with these support networks will help you remain informed and prepared for any new developments.
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