Companies Adjusting to Fresh Customs Fees: Strategies in Action

In the face of evolving trade policies and new tariffs, businesses are employing various strategies to mitigate or avoid tariffs and navigate supply chain challenges.

One such strategy is duty mitigation, which includes leveraging the first-sale-for-export principle, duty drawback programs, and Foreign Trade Zones (FTZs) to reduce tariff costs. Companies are also modifying product designs or manufacturing processes, a practice known as tariff engineering, to fit more favourable tariff classifications.

Another approach is the make vs. buy analysis, where companies assess the cost-effectiveness of manufacturing products in-house or outsourcing to suppliers in regions with lower tariffs. Geographic diversification is another key strategy, with businesses expanding their supplier networks beyond traditional locations like China to regions such as Southeast Asia, Eastern Europe, and North America.

Alternative sourcing strategies, transfer pricing strategies, and supply chain resiliency are other methods companies are using to adapt. These strategies enable businesses to maintain competitiveness despite the challenges posed by new tariffs.

In the aviation industry, Delta Airlines is removing engines from new Airbus SE jets in Europe to power US planes and avoid aircraft import tariffs. Meanwhile, Canadian bike wheel manufacturer NOBL Wheels opened a manufacturing and distribution center in Bellingham, Washington to ensure tariff-free shipping.

Companies like Levi Strauss are strategically planning ahead, having brought in 60% of U.S. inventory needed for the second half of the year. Trade deals have been reached with the UK, China, Vietnam, and Indonesia regarding tariffs, offering some relief to businesses.

However, new tariffs are still on the horizon. A 50% tariff on copper imports will be implemented on August 1, and companies like Abacus Brands Inc. are taking measures to prevent price increases, such as using slightly thinner paper in their project books.

Integrated data tools enable organisations to identify high-risk SKUs and automate sourcing decisions. Strategic planning and cross-functional collaboration are crucial for business decision-making in navigating new tariff deadlines. The Port of Los Angeles experienced the busiest June in its 117-year history, handling 8% more units than June 2024, demonstrating the ongoing impact of these changes on global trade.

In conclusion, businesses are adapting to the evolving trade landscape by employing a range of strategies to minimise tariff impacts and maintain competitiveness. These strategies include duty mitigation, tariff engineering, make vs. buy analysis, geographic diversification, alternative sourcing strategies, transfer pricing strategies, and supply chain resiliency. By building agility, transparency, and adaptability into every layer of their supply chain, companies can better respond to changes in trade policies and maintain operational continuity.

To reduce tariff costs, businesses are utilizing the first-sale-for-export principle, duty drawback programs, and Foreign Trade Zones (FTZs) in their consulting strategies.
In the retail and consumer products industry, companies are modifying product designs or manufacturing processes to fit more favorable tariff classifications, a practice known as tariff engineering.
Geographic diversification is a key strategy for businesses, expanding their supplier networks beyond traditional locations like China to regions such as Southeast Asia, Eastern Europe, and North America.
In light of new tariffs, companies are undertaking alternative sourcing strategies and transfer pricing strategies to adapt and maintain competitiveness in the pharmaceuticals and life sciences industry.
Delta Airlines is employing tariff avoidance tactics by removing engines from new Airbus SE jets in Europe to power US planes, demonstrating the industry's need for supply chain resiliency.
In the manufacturing sector, businesses like NOBL Wheels are diversifying their operations by opening manufacturing and distribution centers in regions with lower tariffs.
Integrated technology solutions, such as ERP systems like SAP, help organizations identify high-risk SKUs and automate sourcing decisions, aiding in strategic planning and cross-functional collaboration during new tariff deadlines.