Five Strategies for Cost-Saving

Free Trade Agreements: If you can follow the rules and keep the meticulous records necessary to pass government scrutiny, you can save money just by rethinking sourcing strategies. For instance, men's trousers imported from China have a 16.6% duty rate while the same pair imported from Nicaragua would be duty-free - for a $10 million shipment, that's over $1.6 million in savings.

Tariff Engineering: This is a technique to minimize the duty by tweaking its design. For instance, a woman's shirt made of 51% polyester, 49% silk has a duty rate of nearly 27%. By altering the fabric ratio to 51% silk, 49% polyester, the duty rate would drop below 7% - for a million dollar shipment, this would result in the $200,000 in savings for the importer.

Foreign-Trade Zones (FTZ): FTZs are particular geographical locations where commercial merchandise receives the same customs treatment it would if it were outside the commerce of the United States, which results in advantages such as duty deferral, reduction, and even elimination.

First Sale Rule (FSR): Also known as middleman pricing, the FSR creates a viable and legal method to reduce duty by allowing duty assessment on the factory invoice amount, regardless of whether subsequent sales occurred prior to importation. Simply put, importing companies can lawfully reduce duty paid by basing the customs import value on the factory's sale price to an intermediary rather than the intermediary's sale price to the US importing company.

Duty Drawback Opportunities: Customs has a refund called drawback - this allows for the refund of duties paid on imported merchandise linked to exportation of the article. If requirements are met, it allows exporters to recover 99% of duties paid on imported merchandises, even if the exporter was not the original importer. Eligible exporters can file for these benefits for up to three years following exportation.

For more information regarding these strategies, please contact your Liberty Account Representative.