Private Group Chat with Tariff Expert Tom Gould

1. The Most Common Cost Savings Solutions

When helping clients, the four things he finds himself looking at first are…

• Classification: There may be a different one for your product with a better duty rate, or you might be able to change your product specs to be more tariff efficient.
• Valuation: Duties are calculated based on your FOB price, meaning you may be able to carve out some costs, like trucking from factory to port, or flying the goods to the US.
• Country of Origin: Similar to classification, if your product is partially made in different countries, there may be an opportunity to switch to one with lower duty fees.
• Duty Drawbacks: If you import something, pay tariffs, then later export or destroy it, you can get a refund of up to 99% of the tariffs paid.

Changing classification is tricky. But you can actually work with customs and get a binding ruling recognizing alterations. Tom often compiles several possible options, so that if one gets denied, clients have a fallback.

For more on these topics, or other cost-saving options, like Bonded Warehouses and Foreign Trade Zones, check out our recent interview with Flexport CEO, Ryan Petersen.

2. Scams To Watch Out For

The most common one Tom sees is with DDP solutions, where your supplier acts as the importer of record, and handles all duties and customs clearance.

“Most of those are scams,” he said.

The factories create shell companies, and under-report the value of your imports. If they get caught, they disappear, leaving you on the hook for penalties from CBP.

While there are some rare circumstances where Tom has seen a company cut or completely avoid tariffs, typically, you’re going to see 5-15% savings. If someone’s offering more than that, it’s a red flag.

Other rules of thumb…

• The best way to tell if a DDP offer is a scam is to ask for an FOB price and a DDP price. The difference between the two should equal the cost of transport and tariffs. If it doesn’t, you’re looking at a scam.
• More broadly, Tom says, if you haven’t been buying DDP in the past, and your factories are suddenly offering it today, eight out of ten times it’s a scam.

Remember, CBP is the biggest police force in the country, and they’re ramping up enforcement. The statute of limitations goes back 5 years, so cutting corners now may come back to bite you years after the dust has settled on this trade war.

3. Unexpected Implications for Your Brand

One of the many reasons to consult an expert – Tom brought up an angle to this whole thing that we hadn’t heard anyone else talk about: Your customs bond

The minimum is $50k, but the amount required is calculated based on duties paid in the last 12 months, or projected for the next 12 months (whichever’s higher).

As tariffs go up, so will your requirement. As that happens…

• Insurance companies may require a review of your financial statements
• They may require guarantees, letters of credit, or collateral
• If customs finds your bond insufficient, they only give you 15 days to replace

This is yet another reason to ensure your financials are investor-ready.

4. One Thing We Disagree On…

Well, “disagree” might be too strong a term, but Tom had this very interesting take on re-locating your supply chain.

“There’s a significant push to make it harder and harder to import products from China,” he said.

With Chinese manufacturers setting up factories in Vietnam, Mexico, and elsewhere, he’s seeing hints that future tariffs may be based not on where a product is made, but where the ownership of the factory is.

“If you don’t have a current strategy to look for alternative sourcing, that would be my number one recommendation for you to do after you get off this call.”

I agree that diversifying away from China seems like an important consideration these days.

I just don’t know how many 7-figure sellers are going to pull it off, especially when you factor in hurdles like:

• Finding a new supplier (do you leave the family for weeks to tour SE Asia?)
• The time delay getting samples, signing contracts and placing orders
• Up front payment, terms, and possible retooling costs

Compare that to the other option – wait it out, and see if things change – and I’m not sure the cost/benefit has tipped far enough one way or the other yet.

Still, I definitely agree with Tom’s other two underlying suggestions – that founders who want to thrive in this environment need to…

1. Educate Yourself & Your Team Deeply on the tariff implications of your product, industry, and supply chain. Tom recommends going to your customs broker for the latest data, and joining (or paying for your employees to join) trade associations unique to your industry.

2. Re-Examine Past Decisions, for example, in the past, companies optimized around tax savings (often by minimizing profit). Today, with tariffs playing a bigger role in decision-making, you may decide its best to move your supply chain, or otherwise cut product costs to save on tariffs. Those changes can impact profitability and taxes, and you’ll need to weigh the trade-offs.

Tom goes into all of this and more, and I highly recommend watching the full video. You can also find him on LinkedIn or at his website. Thank you, Tom, for taking the time to chat with us!