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How do you manage tariffs on manufactured parts?
A tariff is a duty the importer pays when goods enter the US, set by the part's HTS classification, its country of origin and its customs value. Managing tariffs means getting those three right, then using legal tools such as first sale valuation, duty drawback, foreign-trade zones, USMCA qualification, dual sourcing and nearshoring. A licensed customs broker confirms what applies to your parts.
What is a tariff, and how is it calculated?
Most duties on parts are a percentage of customs value. Three facts set the amount: what the part is, where it is from, and what it is worth.
Duty per part
(price paid+assists)×rate stack=duty
- Price paid
- The transaction value, normally without international freight and insurance.
- Assists
- Tooling, molds and dies you paid for, spread over the parts they make.
- Rate stack
- The HTS general rate plus every trade action on the code and origin.
The importer of record pays at entry, through a customs broker, secured by a customs bond. Merchandise processing and harbor maintenance fees ride on top of duty on most ocean entries. Terms: tariff, landed cost, DDP.
How is a part classified in the HTS?
Every imported part has a 10-digit Harmonized Tariff Schedule number. The classification decides the base rate and which trade actions apply.
7318.15.xx.xx
- 73Chapter 2 digitsArticles of iron or steelInternational (HS)
- 7318Heading 4 digitsScrews, bolts, nuts, washers and similar articlesInternational (HS)
- 7318.15Subheading 6 digitsOther screws and bolts, with or without nuts or washersInternational (HS)
- 7318.15.xxTariff line 8 digitsSets the US general duty rateUnited States
- 7318.15.xx.xxStatistical suffix 10 digitsTrade statistics; no rate of its ownUnited States
How are machine parts classified?
- By what the part is, under the heading texts and the section and chapter notes, read in the order the General Rules of Interpretation set.
- Parts made for one machine often classify with that machine, unless they are goods with a heading of their own.
- Screws, bolts, springs, gaskets, bearings and similar general-use parts go in their own headings, whatever they end up in.
- Past CBP rulings for similar parts are searchable in CROSS, and a binding ruling settles a doubtful case before import.
Glossary: HTS code
How is country of origin decided?
Origin is where the part was last substantially transformed: made into a new article with a new name, character or use. Not where it shipped from.
What happenedLikely originWhy
Resin from China, molded into housings in Vietnam
Likely originUsually Vietnam
WhyMolding turns pellets into a new article with a new name and use.
Die casting from China, drilled and tapped in Mexico
Likely originOften still China
WhyMinor machining rarely changes the name, character or use of a casting.
Chinese components, simple screw-together assembly in Vietnam
Likely originOften still China
WhySimple assembly is generally not a substantial transformation.
Steel bar from Asia, turned into shafts in the US
Likely originUsually United States
WhyMachining bar into a finished shaft creates a new article. Some steel rules look at where the steel was melted and poured.
These are illustrations. Origin decisions turn on the facts of each case, and USMCA uses its own product-specific rules instead of this test. Every imported part, or its package, must also be marked with its country of origin. Ask your broker, or request a CBP ruling when the answer moves real money.
At what duty rate does domestic become cheaper?
Offshore landed cost rises with duty; domestic doesn't move. Pick a part and a volume, set the duty rate, and find the crossover.
The rate is yours to set, because it depends on your HTS code and origin and changes often. Look it up at hts.usitc.gov and confirm it with a licensed customs broker.
Turn on first sale or drawback to see how much each flattens the offshore line. The same model runs the landed cost stack.
Part
- Offshore at 25%
$3.44$3.44 - Domestic
$3.62$3.62 - Breakeven duty
- 35%
Domestic becomes cheaper above 35% duty.
$2.00$4.00$6.00
0%50%100%150%
What are Section 301, Section 232 and other trade actions?
Additional duties stack on top of the general rate. This page names the mechanisms and does not quote rates: they change by notice, sometimes within weeks.
MechanismWhat it isSet byCheck
General rate (MFN)
What it isThe base duty in column 1 of the HTS for the 8-digit tariff line. Many industrial parts are low or free.
Set byCongress, through the HTS
CheckThe 8-digit line for your classification.
Section 301
What it isDuties on goods from a country found to use unfair trade practices. Applied to lists of HTS codes from China.
Set byUSTR
CheckWhether your HTS code is on a list, and any exclusion.
Section 232
What it isDuties on imports judged a national-security risk: steel, aluminum and their derivatives, and other product groups since.
Set byCommerce, then the President
CheckWhether your part or its metal content is covered, and how the covered value is measured.
Antidumping and countervailing
What it isDuties on a specific product from a specific country, sold below fair value or subsidized. Rates can be very high and company-specific.
Set byCommerce and the ITC
CheckScope rulings for your product and country. These can apply to parts and components.
Emergency-powers tariffs (IEEPA)
What it isCountry-wide duties imposed by executive order since 2025, changed often and challenged in court.
Set byThe President
CheckCurrent status on the entry date. Check CBP guidance before each shipment.
Current rates live in the HTS itself, in Federal Register notices, and in CBP's Cargo Systems Messaging Service. A broker watches these for you; a program with thin savings should be re-costed every time one changes.
What legal tools reduce duty?
Each fits a particular flow of goods. None works for every program, and each needs records. Talk to a licensed customs broker before you rely on one.
- First sale valuation
- When goods pass through a middleman, duty can be assessed on the price the factory charged the middleman, not the higher price you paid. The first sale must be a bona fide sale at arm's length, and the goods clearly destined for the US when sold. It needs the factory's invoice, which middlemen are often reluctant to share.
- Duty drawback
- A refund of up to 99% of duties paid on imports that are later exported, either as they are or inside a finished product, or destroyed. Claims can be filed up to five years after import. Eligibility differs by type of duty, so check which of yours qualify.
- Foreign-trade zones
- Goods in an FTZ are outside US customs territory until they leave for US commerce. Duty is deferred until then, not owed on goods re-exported or scrapped in the zone, and in some cases paid at the finished product's rate. Goods under Section 232 and 301 duties generally must enter in privileged foreign status, which fixes their duty at admission.
- Bonded warehouses
- Imported goods can be stored under bond for up to five years with duty paid only when they are withdrawn for US use. Unlike an FTZ, no manufacturing is allowed.
- USMCA qualification
- Goods that meet the USMCA rules of origin can enter from Mexico or Canada without duty. The rules are product-specific: a tariff classification change, a regional value content threshold, or both. Being made in Mexico is not enough on its own, and the importer needs a certification of origin.
- Classification review and binding rulings
- Parts are often classified by habit. A review against the HTS notes can move a part to the correct, sometimes lower, line. A binding ruling from CBP settles the question before you import.
- Tariff engineering
- Designing a part so it is legitimately classified differently, such as combining functions or changing material. The change must be real and made before import. Disguising a product is not tariff engineering; it is fraud.
When do dual sourcing and nearshoring beat duty engineering?
Duty tools trim the bill. Changing where the part is made changes the question.
Dual sourcing
A second qualified source, domestic or in another country, with its own tool and approval. When duty on one origin jumps, volume shifts to the other in weeks instead of the 6–9 months a new source takes. The cost is a second set of tooling and a split volume.
Nearshoring and reshoring
Moving the tool to Mexico or back to the US removes the offshore duty exposure and shortens the pipeline from months to days. It pays when duty is high, the savings were thin, or the part changes often.
What should I ask a customs broker?
SSG is not a customs broker, and this is not legal advice. These six questions get a useful answer from one.
- 1
Is my HTS classification right?
Send the drawing, material, function and what the part goes into. Ask whether a binding ruling is worth requesting.
- 2
What is the full rate stack?
The general rate plus every trade action on this code and origin, as of the entry date, and any exclusions.
- 3
Is my customs value complete?
Buyer-paid tooling, molds and dies are assists and belong in the value. So can royalties and some packing costs.
- 4
Where is origin, and can we prove it?
Where the part was substantially transformed, and what records the supplier must keep for origin and USMCA claims.
- 5
Which tools fit our flows?
First sale, drawback, an FTZ or a bonded warehouse, based on how much you import, export and scrap.
- 6
Are we marked and bonded correctly?
Country-of-origin marking on each part or package, and a continuous bond sized to your annual duty.
Questions buyers ask about tariffs
Who pays a tariff on imported parts?
The importer of record, when the goods enter the US. If you buy on DDP terms the supplier's agent acts as importer and builds the duty into your price; on FOB or EXW terms you or your broker pay it at entry. Either way the cost lands in the part price.
How do I find the tariff rate for a part?
Classify the part in the Harmonized Tariff Schedule at hts.usitc.gov to find its 8-digit general rate, then check trade actions that apply to its country of origin, such as Section 301, Section 232, antidumping or emergency tariffs. Confirm the full stack with a licensed customs broker before you order.
Is duty charged on freight?
Generally no. US duty is charged on transaction value, which normally excludes international freight and insurance when they are shown separately. Buyer-supplied tooling, molds and dies are assists and are added to the value, so tooling is dutiable.
Does shipping through another country change country of origin?
No. Origin is where the part was last substantially transformed into a new article, not where it was shipped from or repacked. Routing goods through a third country to avoid duty is transshipment, and it is illegal.
Does moving production to Mexico remove tariffs?
Only for goods that qualify under the USMCA rules of origin for their HTS code, or that have Mexican origin and face no other duty. Parts assembled in Mexico from Asian components may not qualify. Check the product-specific rule before you move.
Is this legal advice?
No. SSG is a manufacturers' representation firm, not a customs broker or law firm. This page explains how the mechanisms work so you can ask the right questions. Talk to a licensed customs broker or trade attorney about your parts.
Price the domestic option before the next rate change.
Send the drawing. SSG routes it to domestic, Mexican and offshore principals so you can compare landed cost at the duty rate your broker gives you.