There are a number of duty savings strategies companies can use to conserve cash, lower customs duties and tariffs, and seek refunds. These strategies are always a high priority for businesses involved in international trade, but particularly so during this difficult period.

This is the fourth in ST&R’s series of articles examining these strategies in more detail and covers the use of downward price adjustments. Previous articles addressed the first sale ruletransfer pricing, and duty refunds.

U.S. importers anticipating significant downward adjustments in the price of their goods due to COVID-19 and other market disruptions may have a unique opportunity to achieve substantial duty savings. Sandler, Travis & Rosenberg’s Downward Adjustments for Tariff Savings program is a customs valuation methodology that employs this concept to secure lawful duty savings. 

In determining U.S. dutiable value, importers typically use the transaction value method of appraisement, which is the total price actually paid or payable for the goods, without regard to its method of derivation. While U.S. Customs and Border Protection normally ignores any price decrease after the time of export in determining dutiable value, one exception is for formula pricing agreements established prior to exportation based on certain accepted factors. For example, if such an agreement provides that the price paid by the importer to the foreign seller is tied to the price of the retail sale in the U.S., and the retail price is lower than purchase price (e.g., due to lower demand associated with COVID-19 or other factors), the importer may be eligible for a refund of duties paid on the higher price.

DATS helps companies develop formulas in which goods are provisionally priced in accordance with a properly developed sales contract. The final price is then determined by an examination or analysis based on the formula at the time of delivery. This price must be established carefully and documented with customs counsel based on the formula prior to importation.

There are two stages to the DATS program. First, ST&R will analyze the feasibility of using this approach to achieve duty savings by conducting a review of your import data in the Automated Commercial Environment, an initial questionnaire, outreach to and meetings with selected foreign suppliers, and relevant legal research. If this analysis is positive, in the second stage ST&R will help you gather selected commercial documentation, supporting agreements, and financial data and adapt documentation with selected vendors to support formula pricing in accordance with U.S customs laws and regulations. A memorandum and/or ruling request to CBP is then prepared based on the facts.

For more information on this cost-saving opportunity, please contact trade attorneys Chuck Crowley at (212) 549-0134, Mark Segrist at (312) 279-2834, or Lou Shoichet at (212) 549-0136.

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ST&R: International Trade Law & Policy

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