Lawyers: Importers Should Be Cautious of Tariff Mitigation Advice From Suppliers
In an effort to drive sales, suppliers have been offering dodgy tariff mitigation strategies to importers, lawyers with Foley and Lardner warned during an Oct. 22 webinar. Suppliers, particularly in countries hard-hit by tariffs like China and India, are as desperate as importers to avoid the painfully high tariffs imposed by the Trump administration, and may offer bad advice to importers to drive sales, lawyer John Turlais said.
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Turlais said that suppliers can resort to bad advice because "they want to make sure that customers in the U.S." continue to buy their products. He said that they "often end up offering a lot of advice," which "is sometimes not very good." Clients at his firm "have already run into issues" where suppliers recommend "alternate" Harmonized Tariff Schedule codes and suggest that importers should "restructure" invoices with "vague product descriptions," he said.
The suppliers might say, "Don't call it a steel rod. Why don't you call it an installation set, or something like that?" Turlais said, adding that this "always comes up" when importers are working with "an experienced supplier that's been in operation for 50 years." This is a trend his firm has been seeing, he warned, which is dangerous for importers because they are "responsible for providing accurate and complete information" to CBP.
"If your compliance program consists of, 'hey, my broker handles it,' you really want to take a deep dive and see if things" are being done correctly, Turlais said.
Foley lawyer Greg Husisian agreed, saying that companies often overly rely on customs brokers: "People are like, 'Oh, it's OK. Our customs broker is covering all that for us.' But that is not the view of Customs." Customs places liability on the importer of record, he said, so if companies don't have a compliance program "tailored to the individual company's operations," then they "should really be looking into having one of them."
Turlais also noted that CBP is increasing enforcement because it is a "policy feature of the Trump administration" with the goal of raising revenue. He said that CBP has been able to find companies' "creative workarounds" for tariffs because they are "looking for anomalies" and are often using AI software to compare "your entries against those of your competitors."
Another "theme that we're seeing," Turlais said, is "a lot of incentive" to report competitors for customs violations. He said that because of the increased tariff environment, companies "want to make sure that the playing field is level," and the government is encouraging them to report or refer situations "where they see tariff evasion."
Foley lawyer Matt Krueger noted that DOJ is "willing to go after" companies and individuals that it "believes are responsible for promoting tariff evasion." He also said such cases have "a long tail," and that he suspects they may not "ultimately be resolved and brought public well into the 2030s, which is somewhat frightening to think about."