NEW U.S. TARIFFS ON CANADA, CHINA, MEXICO: OVERVIEW
The global supply network is rapidly adjusting to new U.S. tariffs on Chinese-origin goods, effective February 4, 2025, at 12:01 a.m. ET. While tariffs on Canada and Mexico remain on hold until March 5, 2025, businesses relying on China for raw materials, energy products, and manufactured goods will feel the impact almost immediately.
Importers utilizing Foreign Trade Zones (FTZs), Duty Drawback, De Minimis, and other trade programs will need to reassess their strategies in response to these changes.
ARE THERE ANY EXCEPTIONS TO THE NEW U.S. TARIFFS ON CHINA, MEXICO, AND CANADA?
As the tariffs on Mexico and Canada are on hold for a month, this section focuses primarily on the U.S. tariffs on China. The 10% ad valorem tariff applies broadly to products of China (including Hong Kong), some limited exceptions exist.
Goods in Transit Before February 1, 2025 – Products that were loaded onto a vessel at the port of loading or in transit on the final mode of transport prior to entry into the United States before 12:01 a.m. ET on February 1, 2025, and are imported and entered with U.S. Customs and Border Protection (CBP) before March 7, 2025 may qualify for an exemption under HTSUS subheading 9903.01.23.
Humanitarian and Informational Exemptions – Donations of food, clothing, and medicine fall under HTSUS 9903.01.21, while books, films, and other informational materials are classified under HTSUS 9903.01.22. However, humanitarian aid originating in China is NOT exempt from these tariffs.
Certain Duty-Free Provisions Remain – Most Chapter 98 duty-free provisions still apply, but goods classified under subheadings 9802.00.40, 9802.00.50, 9802.00.60, and 9802.00.80 will be taxed based on their China/Hong Kong content value.
WILL THE NEW U.S. TARIFFS ALLOW ME TO APPLY FOR DUTY DRAWBACK?
Businesses cannot claim duty drawback on the tariffs imposed by the Executive Order, even if they later export or destroy the goods. Duty Drawback Is still allowable for other tariffs such as Section 301.
ARE DE MINIMIS SHIPMENTS STILL EXEMPT UNDER THE NEW U.S. TARIFFS?
Products of China subject to the new 10% tariff no longer qualify for duty-free entry under the $800 de minimis threshold. As a result, these Imports are now subject to regular duty, and applicable tariffs, even if they would normally qualify for duty-free entry under the de minimis rule.
E-commerce and direct-to-consumer shipments will face higher costs and longer processing times. The Executive Order requires that all mail shipments from China—regardless of value—must go through formal customs entry procedures before being cleared for delivery. This applies to shipments arriving through international mail, ensuring that no packages from China bypass the new tariff rules.
HOW WILL THE NEW U.S. TARIFFS IMPACT MY FOREIGN TRADE ZONE OPERATION?
The new U.S. tariffs significantly impact Foreign Trade Zones (FTZ). Articles that are products of China or Hong Kong admitted into a Foreign Trade Zone as of February 4, 2025, must be admitted as “privileged foreign status.”
Articles will be subject, upon entry for consumption, to the tariffs imposed by the Executive Order and the rates of duty related to the classification under the applicable HTSUS subheading in effect at the time of admission into the Foreign Trade Zone.
This means that when these goods are withdrawn from an FTZ and enter U.S. commerce, the entry will be based on the duty rates and tariffs in place at the time they were admitted into the FTZ.
Business that utilize FTZ lose flexibility in managing costs for raw materials and goods imported from China or Hong Kong. Bonded warehousing and supplier diversification may be a beneficial cost-savings tool to mitigate increased FTZ operations.
SHOULD MY BUSINESS CONSIDER BONDED WAREHOUSING IN RESPONSE TO THESE NEW U.S. TARIFFS?
Bonded warehousing is a useful tool to manage increased duty costs under the new U.S. tariff structure. With bonded warehouses, duties are only paid when goods enter U.S. commerce and can be stored while Importers assess demand, policy shifts, or make supply chain network adjustments. If products are exported from a bonded warehouse without entering the U.S. market, no duties apply.
U.S. Customs and Border Protection (CBP) defines bonded warehouses as secured areas in which imported dutiable merchandise may be stored, manipulated, or undergo manufacturing operations without payment of duty for up to 5 years from the date of importation (19 U.S. Code § 1555).
JOIN US FOR A WEBINAR THAT ADDRESSES THE CANADA, MEXICO, CHINA TARIFF IMPACT FOR U.S. SHIPPERS & SUPPLY CHAINS
This webinar offers essential insights for businesses navigating evolving trade regulations. Attendees will gain a deeper understanding of new compliance requirements, legal considerations, and strategies to mitigate risk. This session will also explore the financial and operational impact of these new tariffs.
Stay up-to-date on freight news with Green’s Weekly Freight Market Update by following us on LinkedIn. For continuous updates, make sure to check out our website at greenworldwide.com.
