Issue link: https://iconnect007.uberflip.com/i/1531014
36 SMT007 MAGAZINE I JANUARY 2025 a server imported into the U.S. from Mexico. ere are some things to figure out to know what tariffs apply. Before you get to the origin, you have to know how it's classified. Ever ything that comes into the U.S. is classified under the Harmonized Tariff Schedule (HTS). ere's a specific classification code attached to ever y import. Sometimes, it's easy to figure out; sometimes, it's more ambiguous. You have to determine the classification code because ever y classification will have a different gen- eral tariff that usually applies regardless of what countr y it's from. Second, you must determine the origin of that server. Let's assume there's enough pro- duction in Mexico to make it a Mexican prod- uct. en you apply the tariffs on Mexican products. If there are no special tariffs on Mex- ican products, you just pay the regular tariff. Trump is now suggesting tariffs of 25% or more on Mexican products, but that could change. We have a free trade agreement with Mexico, so if it qualifies under the USMCA for special tariff treatment, you could potentially bring it in duty-free, but that's a separate analysis. ere's a lot to consider, but the key to fig- uring out which tariffs might apply is knowing what's actually being imported. How often is U.S. Customs checking on the coun- try of origin? What's the likelihood that a com- pany, especially a small one, will get checked? Customs pulls in tons of data using its own targeting algorithm. Imagine the volume of imports and all the information that has to be declared to cus- toms when the import comes in. Some of that data has nothing to do with tariffs, but it could be useful for security reasons; you don't want illegal drugs or weap- ons or things like that coming in. Border security has many rea- sons to target a shipment: Has this company had other non- compliance issues in the past? Have they been subject to an audit in the past? Are there high- risk factors like imports from China? Are the goods coming from a countr y known for transshipping? ose factors could put you on the radar. Electronics get a lot of scrutiny for tariff rea- sons, but also for forced labor. It's a major con- cern and something that U.S. Customs has a major role in enforcing. Companies should think about having some transparency into their supply chains to ensure there isn't any- thing like that in their product. Companies must learn how to mitigate some of these issues, such as requesting an exclu- sion on a good. Can you explain that process? at's been one of the main tools that com- panies use to exempt their products from the Section 301 China tariffs. e U.S. Trade Rep- resentative (USTR) issued these HTS codes— classification codes subject to those tariffs— and ultimately totaled about $300 billion worth of goods from China. at's almost everything, with certain exceptions. In the past, USTR also created a process to allow companies to request an exclusion on specific products. e companies would have to make an argu- ment that their product is not really available anywhere else: "We're looking for an alterna- tive supply, but it's only being made in China. It's needed for production so we're requesting exclusions." Some companies were successful in getting those exclusions. ere was criti- cism that there wasn't a lot of rhyme or rea-