To strengthen their competitiveness and mitigate tariff costs, businesses involved in global trade implement a range of strategies. In the subsequent sections, we will present a brief summary of the key strategic approaches utilized to minimize expenses associated with tariffs.
1. Free Trade Agreement (FTA) and Country of Origin Regulations
In order to minimize the impact of tariffs, it is crucial to have a clear understanding of the rules of origin that apply to imported and exported goods. These rules determine where a product was manufactured, which plays a significant role in determining tariff rates. The criteria for establishing country of origin can vary, so it is important for companies to diligently verify the country of origin based on the rules outlined in Free Trade Agreements between importers and exporters. By having a comprehensive knowledge of these regulations, companies can explore various strategies to alleviate tariff burdens. This may involve changing the source country for raw materials or adjusting component proportions during production. A thorough grasp of the rules surrounding product origin enables businesses to proactively navigate trade barriers and optimize their operations within international markets
2. Accuracy of tariff classification
Under the international Harmonized System (HS), every foreign trade product is assigned a specific HS code. Each country has its own tariff classification system, which classifies products based on factors such as raw materials, processing level, and intended use. Tariff rates and imposition differ depending on these HS codes. Therefore, it is crucial to develop strategies for precise and optimized product classification by leveraging expert knowledge and staying informed with the latest information.
3. Advantagesof tariff benefits and preferential treatment
Many countries try to reduce the burden on companies and improve their competitiveness by introducing benefits and preferential treatment in relation to tariffs. Companies can take advantage of these benefits and incentives to reduce the burden of tariffs. Countries that have signed up to free trade agreements offer various tariff preferences between each other, so they should actively take advantage of those benefits. For example, the CUSMA (USMCA, US-Mexico-Canada FTA) strives to increase international competition for end-to-end products by establishing various procedures and benefits for import and export of automotive parts and assemblies distributed across member countries.
4. Tariff refund and exemption programs
In certain nations, there exists a framework where specific criteria are outlined, enabling companies that fulfill these requirements to be relieved of or reimbursed for tariff obligations through exemption programs or tariff refunds. It is imperative to thoroughly examine the different programs and their associated conditions in order to leverage them effectively. For example, the Korea Customs Service has initiated a tax support initiative aimed at suspending customs inquiries or extending delivery deadlines for exceptional export small and medium-sized enterprises.
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5. Supply Chain Optimization
Strategies such as importing or producing from countries that impose relatively low tariffs on major raw materials or parts can optimize production supply chains and reduce tariff burdens. Furthermore, we need to explore ways to devise new manufacturing processes and logistics systems.
6. Advices from a customs expert
Regional customs experts can have a detailed understanding of the country's customs regulations and build on them to present optimal strategies for specific trade items. A tariff minimization strategy requires the active acceptance and application of these expert advice.
To ensure competitiveness and achieve success in global trade, it is crucial for companies to adopt a multi-pronged approach to minimize the impact of tariffs. By thoroughly evaluating and implementing various strategies, companies can effectively reduce tariff burdens. Moreover, continuous monitoring and anticipation of customs regulations and policies are essential for optimizing the tariff burden. This proactive approach empowers companies to enhance their international competitiveness and stay ahead in an ever-evolving trade landscape.