NAFTA and Strategic Planning Programs

Customs duties are a significant cost of doing business for many companies. Many importers will vigorously pursue cost savings initiatives to lower expenses. Some of these initiatives include the following planning options:

Tariff engineering, which may be defined as the design and construction of imported articles or the placement of production steps calculated to gain the tariff classification with the lowest assigned duty rate.

NAFTA and other free trade agreements (FTAs), which allow importers to move goods between the US and selected partner countries enjoying FTA status on a largely duty-free basis. Tariff

preference programs such as the Generalized System of Preferences (GSP) and its regional variants which convey duty-free status to eligible articles.

Valuation planning, such as the unbundling of nondutiable elements from the invoice price, the use of interest on trade payables, the use of “middleman” strategies such as first sale for export (FSFE) and buying agent structures, and the use of royalty and license fees without triggering duty payments.

Duty Drawback is the oldest customs planning program on the statute books, and it may provide an opportunity for a refund of duties on previously imported products or materials used to make finished goods that are exported.