How The US Tariffs Affect Prototyping and Volume Production

62% of all of our exports to the USA attract Zero Tariffs.  Here we explain why.

As you know, there have been further tariffs placed on manufactured goods and commodities shipped from China to the US. To support our customers during this time, we’ve put together some key information about the tariffs to help you understand how they might affect your product development projects. This information is applicable to rapid prototyping, rapid tooling and low-volume production parts such as we make at Michigan CNC Machining Parts, Inc.. 

What Goods are Affected by Tariffs?                          

The HTSUS (Harmonized Tariff Schedule of the United States) is the official schedule used by Customs and Border Protection to identify all incoming trade goods and to apply the correct tariff or duty to them. All importers should check this schedule frequently to see how their goods may be affected.

The United States uses an eight or ten digit code system, depending on the item, which differs somewhat from the international Harmonized System (HS) code, which is only 6 digits. Be sure that you use the HTSUS code when importing to the U.S. and not the 6-digit code, which might cause confusion since the two systems can refer to similar products using different numbers.

Tariffs currently affect a wide range of machinery, equipment, chemicals, apparel, foodstuffs and more. Some products, including prototypes, are exempt and we will continue to monitor the situation. The following are services offered by Michigan CNC Machining Parts, Inc. and how they are impacted by the tariffs.

Manufacturing Tooling = Zero Duty & Zero Tariff

Tools and dies used to make goods for export are themselves unaffected by duties and tariffs as long as they physically remain in our facilities in Zhongshan. Almost all our customers store their tools with us and therefore they are not impacted.

Prototypes

Prototypes, listed under the HTSUS code 9817.85.01, are also not affected by duties or tariffs and are unlikely to be in the future. A prototype is a manufactured item typically used for sampling, engineering, testing, certification and other product development purposes. It has no commercial value as such and cannot be sold or packaged with other items to be sold. A large proportion of the parts that we make at Michigan CNC Machining Parts, Inc. are prototypes, not finished products, and hence are not affected.

Production Parts

Unlike prototypes, production parts are meant for resale, either directly or as a component in a larger assembly for sale. Virtually all commercial products and commodities have a code number associated with them.

However, codes aren’t permanent or absolute. They can change depending on how a part is used. For example, a simple machine screw can be imported as a screw and a tariff might be levied on it. But if it’s later put into a computer for example, then the whole computer is taxed under a different code number. For some customers and some products, it might be possible to lower the effective tax rate by doing assembly at another location before importing the finished goods.

This is why we strongly recommend that you review the Harmonized Tariff Schedule and check back periodically to stay informed of any changes.

Who Pays for the Cost of the Tariffs?

Under the shipping terms used by Michigan CNC Machining Parts, Inc., taxes and duties are the responsibility of the buyer of the goods. The business or individual who fills out the import declaration documents and takes possession of the shipment at the port of entry is the buyer.

It is important that you know precisely what code(s) to use for your product since using the wrong code can result in costly delays of shipments.

Things to Remember When Choosing your HTSUS Code

You are the expert on your product. Therefore, if customs decides to challenge your HTSUS code you should be prepared to provide evidence to support the code choice.  Sometimes a code is challenged simply because a given official isn’t clear on the application of the product.

Michigan CNC Machining Parts, Inc., as your manufacturing partner, can also help by demonstrating a long history of making similar products for other customers and we will work with you and support you when appropriate. Historical precedent is an important factor in customs declarations and product categories.

Is There a Way to Avoid Tariffs?

Duty Drawback Program – This allows importers to reclaim 99% of taxes paid, as long as those goods are later exported.

Storage In Free Trade Zones – Importers of larger volumes of production goods may elect to store them for up to three years in one of the 230 free trade zones within the United States. This makes the most sense for companies that will later re-export the items to another market or who have confidence that the tariff situation is temporary and may be reversed in the near future.

How We Can Support You

As your manufacturing partner for rapid prototypes and production parts, we are here to ensure that your goods are manufactured quickly and arrive to their destination without delay. We will continue to bring you relevant information not only about tariffs but also any developments that may influence your strategic business decisions in the future. If you have any questions about the impact tariffs might have on your work with us, please send us an email or contact us and one of our representatives will get back to you right away.

Thank you.