Podcast: How to Prepare for Trump's Tariffs: The Do's and Don'ts

GH: We're definitely seeing that. For some of our clients, they're trying to see where they can get goods that they were planning to bring in maybe next year and get them into the country sooner. Anything that's entered into the United States is obviously immune to the tariffs. People have already been in a multi-year process of moving production out of China. We're telling them that's great because they're at the highest level of tariffs, generally, but make certain you understand the substantial transformation rules. And if you're using parts and components from there, make sure you are doing it correctly because customs has unprecedented ability to see into importing patterns now, with all the data being electronic, and they're using that quite frequently and finding a lot of instances where people aren't really doing enough in the third country because they're using substantial parts and components from China. Those efforts by customs are only going to go up if the tariffs from China go up, because that's going to give people even more incentives to try to claim their products are from a different country. And that could lead to big, big bills for unexpected tariffs if customs disagrees with you on your tariff engineering strategies.

JT: To add on to that and to answer the question about large capital investments, that is the one area we are recommending potentially looking at for our clients. We know there is uncertainty, but we serve the upper mid market Fortune 1000 type of clients. So they don't always have the largest capital lying around for some of these major investments into manufacturing and automation and things of that nature. So any of those types of instances where we may not be 100% certain what the impact is going to be, but if it’s already in your plan for the future, do what you can to expedite that as much as possible to avoid additional tariffs on top of that.

IW: Dan, would you like to share some of your thoughts on what manufacturers can do to prepare with this level of uncertainty that still is facing us?

DS: I think there's two suggestions I have. I know everybody's recommending things such as going back and looking at your tariff classifications, looking at options for nearshoring. But from our experience with the 2018 tariffs, I really recommend everybody who's attending today's meeting find out who your customs broker or your bond broker is. A lot of companies have no idea who has sold them their customs bond, yet it's going to be one of the most important relationships that you have as we go through this period of increasing tariffs. The reason why is that your bond has a limit, and that limit is based upon the amount of duty that you accumulate during the 12-month period. And as the tariffs increase, your bond limit is going to have to follow. And as the bond limit climbs higher, the underwriters of the bond are now going to pay more scrutiny to your company. They're going to be wanting to look at audited financial statements, and in many cases, they're requiring that you put up collateral in the form of letter of credit. So I recommend now is the time to reach out to your bond broker. Start having a conversation with them instead of waiting until you start receiving insufficiency notices down the road with everybody else, and then trying to vie for some time from your bond broker. Also, if you're in the market shopping for a bond broker, there are some really good ones out there. They're relationship-oriented and have good relationships with underwriters.