Donald Trump’s punitive tariffs have brought customs duties back into focus for many companies. At KLOEPFEL Consulting, we frequently observe in practice that customs-related issues are often neglected. That’s why we’ve developed a compact checklist to help companies optimize their customs strategy, minimize risks, and increase transparency.
Building Customs Expertise with a “Foreign Trade Task Force”
Establish a multidisciplinary Foreign Trade Task Force consisting of representatives from procurement, logistics, sales, legal, IT, and management. This task force should assume the following responsibilities to manage customs effectively and ensure transparency:
- Analyze customs relevance: Identify products, supply chains, and markets relevant to customs.
- Develop strategies: Define measures to reduce costs (e.g., leverage preferential agreements, evaluate production relocation).
- Coordinate processes: Align procurement, logistics, sales, IT, and legal for smooth customs operations.
- Ensure compliance: Monitor legal compliance and manage risks.
- Communication: Regularly report current developments to management and relevant departments.
- Organize training: Provide knowledge transfer and training on customs regulations and preferential agreements.
Responsibilities of the Foreign Trade Task Force in Detail
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Product and Supply Chain Analysis
- Verify HS codes: Ensure all products are correctly classified (errors can lead to delays or penalties).
- Determine country of origin: Analyze the origin of goods and assess eligibility under preferential agreements.
- Evaluate supply chains: Identify critical suppliers or production locations and explore alternatives in duty-free or low-tariff countries through nearshoring (e.g., Eastern Europe, Turkey).
- Check for dual-use goods: Ensure compliance with export control regulations and determine if special licenses are needed.
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Data Management and Documentation
- Create a customs database: Implement a central database with the following information:
- Product
- HS Code
- Country of Origin
- Destination Market
- Current Customs Duty
- Potential Punitive Tariff
Integrate this database into your ERP system for automated management.
- Regular updates: Continuously update the database in case of tariff or trade agreement changes.
- Use standardized documents: Apply uniform formats for invoices, packing lists, and certificates of origin.
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Use of Digital Solutions
- Implement customs software: Use tools for automated classification, origin checks, and management of preferential agreements.
- Integrate into ERP systems: Embed customs processes into existing ERP systems for centralized data management.
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Risk Management
- Simulate customs scenarios: Evaluate the impact of punitive tariffs or trade conflicts on products and supply chains using simulation software (e.g., scenarios for 10% or 25% tariffs).
- Assess compliance risks: Regularly check suppliers and partners for compliance (e.g., denied party screening).
- Develop crisis plans: Prepare strategies for handling sudden tariff increases, embargoes, or sanctions.
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Cost Optimization
- Utilize preferential agreements: Benefit from tariff reductions or exemptions for origin goods if specific rules are met (e.g., EUR.1 certificates). Analyze target markets and agreements, document origins precisely, and use digital tools for management.
- Leverage free trade zones: Take advantage of lower tariffs and simplified procedures in free trade or special economic zones.
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Ensure Communication
- Regular updates: Inform management and relevant departments weekly about changes in customs regulations or trade conditions.
- Transparent communication with customers: Clearly explain the potential impact of tariffs on pricing or delivery times.
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Collaboration with Experts and Authorities
- Involve consultants: Consult external customs experts for complex matters such as anti-dumping rules or preferential trade agreements (e.g., Kloepfel Consulting).
- Partner with authorities: Consider participating in programs like Authorised Economic Operator (AEO) to simplify customs processes; apply for binding tariff information (BTI).
- Use networks: Engage with industry associations or chambers of commerce working groups.
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Sustainability
- Consider sustainability requirements: While customs duties are not a direct component of ESG criteria, sustainability can still be viewed through the customs lens. Therefore, ESG aspects (Environmental, Social, Governance) should be integrated into the supply chain, and CO₂-related duties (e.g., CBAM) should be considered. Evaluate how sustainable initiatives (e.g., CO₂ reduction) can indirectly facilitate market access or customs advantages.
Authors:
Do you have questions about customs? Or are you lacking the resources to tackle this topic thoroughly? Then book a free, non-binding consultation!
Contact:
Kloepfel Group
Damir Berberovic
Tel: +49 211 941 984 33 | Email: rendite@kloepfel-consulting.com