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Importers Getting ‘Aggressive’ With Duty-Saving Measures

As companies look for savings in all aspects of their business, import costs can be one way to find them.

Elizabeth Shingler, manager of tax, trade and customs at multinational advisory firm KPMG, said during a Footwear Distributors and Retailers of America Sourcing Summit webinar last week that in the past two years, the trade environment has experienced some major disruption, forcing executives to strategize how to best adjust.

“As we look at what happened, a key consideration for most importers is understanding how they can recoup duty spend and how to minimize it,” Shingler said. “We’ve seen importers embrace a more aggressive position and look across the spectrum of duty-savings measures and have a combination of programs in place to meet their needs.”

She said many importers have benefited from the duty drawback because the requirements have been simplified and automation has been deeply integrated. A drawback is the refund of certain duties, taxes and fees collected upon the importation of goods when goods are then used for export. Automation, Shingler said, can clean up the data and allow for faster claims processing and validation of drawbacks.

“Claims can now be turned around much faster on a more consistent basis and it’s just not as resource-intensive, which is going to be important as we look ahead,” she said. “The economy is starting to come out of some of the crisis, we hope, but we’re not sure, of course.”

Shingler said another popular program is first sale for export, which enables importers to reduce the dutiable value of their products by using the “first sale” price as the one on which duties are assessed upon entry into the U.S., rather than the “second sale” price that incorporates the markup from the middle man such as a third-party distributor or wholesaler.

“It can be a tremendous savings opportunity and those savings can be realized year after year,” she said.

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Another key development has been raising the level of so-called de minimis shipments, which allow duty-free transactions on many direct-to-consumer e-commerce purchases.

“This is another strong tool for many retailers and what it really comes down to is data management–making sure that you have the ability and visibility to track those shipments to customers to make sure you don’t exceed the $800 a day per customer threshold,” Shingler said.

She said another opportunity lies in the Section 301 tariff exclusions. These stemmed from the tariffs imposed on China by the Trump administration that allowed for exemptions on products needed for domestic production or that could not be imported from elsewhere.

“Even though you can’t submit an exclusion anymore, existing exclusions can be leveraged,” Shingler said. “These means staying on top of your broker to make sure you get the refunds on those imports in the Section 302 exclusions because many are coming up on their expiration dates.”

On a separate webinar from CITTA Brokerage, Troy Larkin, a duty drawback specialist, said between the coronavirus outbreak that shut down much of the economy and the 301 duties, many companies have been struggling to turn a profit.

“Our services have helped many companies across the nation to cushion these losses and obtain refunds from exclusions granted to another company as well as, if available, through a duty drawback program,” Larkin said. “Duty drawback is a great opportunity for importers and exporters to recover duties and taxes previously paid on imported merchandise which in turn is being exported or destroyed.”

In addition, Shingler said companies should make sure they are taking advantage of other places to achieve cost savings, such a free trade programs like the just-implemented United States-Mexico-Canada Agreement, or the potential for using a foreign trade zone.

‘We’re at a real crossroads here and it presents a real opportunity for trade professionals to look at what we’re doing today and think about how we can do it better tomorrow,” she added. “That may mean automation, it may mean increasing managed services, it may mean expanding duty-savings programs.”