A Guide for Importers

Importing goods from overseas is a complex process. Importers need to liaise with manufacturers, freight forwarders, customs brokers, etc. Managing this supply chain is a significant challenge that takes away from the core business focus, selling. In the changing world of global trade, something that often gets overlooked by SME importers, are tariffs.

What is a Tariff?

Tariffs are imposed by countries as a tax on imported goods. This effectively raises the price of imported goods which can make domestically produced goods more competitive. For example, if Country A produces steel for $5/kg and Country B produces steel for $4/kg, then companies in Country A might choose to import steel from Country B instead. To protect domestic steel producers, the government of Country A may place a tariff of 25% on steel imported from Country B. This incentivises companies in Country A to purchase domestic steel as the landed cost (combined cost of transport and associated duties) of foreign steel will be higher. The end result however, is that prices are increased for the purchaser.

In 2024 the EU imposed tariffs on Chinese EV imports of 35%. This was done to protect domestic car manufacturers from competition from the largely subsidised Chinese EV producers. There are ongoing negotiations to replace these tariffs with minimum price commitments.

What is a Commodity Code?

The rate of duty for a particular good is set by it's commodity code. This is a 6-10 digit code that specifies what a good is and its purpose. The first 6 digits make up the Harmonized System (HS) code. This is set by the World Customs Organization and is globally recognised. The remaining digits are market specific. In the US, there is the Harmonized Tariff Schedule (HTS). In the EU, there is the TARIC.

The various systems diverge in how the remaining digits are classified. They also disagree on how the General Interpretive Rules (GIR) should be used, leading to the same product having an entirely different HS code in 2 different markets.

Trade Agreements

Tariffs are often negotiated between countries as part of trade agreements. Trade agreements such as the EU-Mercosur trade deal seek to facilitate free trade for the majority of goods exchanged between these markets. EU producers benefit from a lower landed cost of exports to Mercosur countries and vice versa. As a result, consumer prices should be reduced and trade between these markets should increase.

Tariffs as Tools

Tariffs can be employed by countries as political tools. Sanctions often take the form of tariffs. For example, following the Russian invasion of Ukraine, several countries imposed significant tariffs on Russian imports as a means to apply political pressure on the Russian government.

In recent years, the US has sought to utilise tariffs to pressure it's trade partners and as a means to reduce its trade deficit.

Types of Tariff

• Ad Valorem: Calculated as a percentage of the total value (E.g. 20% of a $10,000 car).
• Specific: A fixed fee per physical unit (e.g., $1.50 per kilogram of butter).
• Compound: A mix of both (e.g., 5% of the value plus $0.50 per unit).
• Retaliatory: Additional tariffs imposed as part of a trade war.

Who Really Pays?

The importer pays the tariff. This price is either swallowed by the importer, reducing their margins, or passed on to their customers.

What are the Risks?

Tariffs change frequently. In 2025, the US ended the de minimis exemption, which waived tariffs on all imports with a value lower than $800. This lead to duties becoming payable for millions of additional products. US duties collected more than doubled to over $216 Billion in FY2025.

Importers need to keep up to date with changing rules, classifications, agreements, etc. If they work in several markets, then this multiplies the compliance overhead and risk. Non-compliance can result in significant fines and delays at ports, tying up cash flow. Changing tariff arrangements can entirely wipe out margins.

How can Importers Protect Themselves?

Importers need to be aware of the costs associated with sourcing goods internationally. Large scale importers have access to dedicated supply chain consultants, but SMEs are often locked out. Harbour AI is an alternative for these SMEs to take advantage of the type of expertise that large companies have utilised for decades.

• Tariff Classification: Harbour AI's tariff agent manages classification of codes for your entire product catalogue. Our agent ensures you have accurate and defensible classifications in each market you operate in, drawing on interpretive rules and legal rulings.
• Legal Rulings: Harbour AI can assist importers in obtaining binding legal rulings for their classifications. For high volume SKUs, this ensures compliance and ensures the correct duty is applied.
• Trade Audits: Our audit agent trawls through years of your imports and exports to identify opportunities for refunds and future savings. Our in-house trade consultants then review this report with you and assist in implementing the optimisations.
• Tariff Engineering: Our product agent assists design teams to optimally design their products to achieve the lowest possible rates.
• Trade Compliance: With Harbour AI, importers can monitor and track their imports and exports. ensuring they are audit ready.