Strategic Duty Mitigation in a New Tariff Era
With the return of aggressive U.S. trade actions—including new tariffs under the International Emergency Economic Powers Act (IEEPA)—companies are again under pressure to reduce duty exposure. While tariff engineering was once a popular tactic, today’s duty mitigation opportunities are less about classification and more about origin, valuation, and eligibility for relief mechanisms.
This article outlines duty mitigation opportunities based on the latest reciprocal and IEEPA duties in place in May 2025 such as country-of-origin strategy, valuation methods, FTA use, foreign trade zones (FTZs), and the limited role of drawback in the current environment.
Country-of-Origin Engineering: The Top Lever
Most of the new tariffs target specific countries of origin, not HTS classifications. A sound starting point is examining the supply chain and considering optimization of key operations along the supply chain to shift the country of origin of the imported product to a more favorable duty rate.
Under U.S. Customs & Border Protection’s regulations, a product’s origin changes when it undergoes a substantial transformation—a meaningful change in name, character, or use. Companies should evaluate:
– Where components are assembled
– Whether transformation occurs in a tariff-exempt country; and
– Whether Free Trade Agreement (FTA) origin rules can be met
Considering your origin strategy is especially important for most IEEPA and Section 301 duties, which are typically not mitigated by tariff classification changes.
Customs Valuation Optimization: Reducing the Duty Base
An additional and potentially supplementary consideration is reviewing the valuation basis. For example, consideration of the following can be considered:
– Qualification for the use the first sale rule if the transaction involves a middleman to allow for duties to be based on the sale between the earlier sale in a chain transaction involving multiple sales
– Ability to support the exclusion of non-dutiable charges like international freight, certain royalties, and post-import services
Careful valuation can legally reduce duties across all tariff types—including IEEPA.
Free Trade Agreements: Valuable, But Limited
FTAs like the United States Mexico Canada Free Trade Agreement (USMCA) still offer meaningful relief. Companies should evaluate their supply chain including understanding which suppliers are able to provide properly completed USMCA certificates to reduce duties on those imported products.
FTA rules of origin also require careful documentation and periodic reassessment.
FTZs and Bonded Facilities: Deferral, Not Elimination
Foreign Trade Zones allow deferral of duties until goods enter the U.S. market, and full elimination if the goods are re-exported. But when IEEPA or Section 301 goods leave the FTZ for domestic consumption, duties still apply.
Drawback: Diminishing Returns
While duty drawback programs allow refunds for re-exported goods, IEEPA duties are explicitly non-drawbackable. Section 301 is restricted in many cases as well.
Companies relying on drawback as a core duty strategy should recalibrate—refunds are no longer a given.
Summary Matrix
| Strategy | IEEPA Duties | Section 301 Duties | Reciprocal Duties |
| Country-of-Origin Shift | ✅ Yes | ✅ Yes | ✅ Yes |
| Valuation Optimization | ✅ Yes | ✅ Yes | ✅ Yes |
| FTA Utilization | ❌ No | ❌ / ✅ Limited | ❌ No |
| Foreign Trade Zones | Deferred | Deferred | Deferred |
| Duty Drawback | ❌ No | ❌ / ✅ Limited | ✅ Yes |
The landscape has changed: origin is king, valuation matters, and traditional relief programs aren’t always available. In-house compliance teams should revisit supply chain maps, customs declarations, and documentation procedures—especially when importing from high-risk jurisdictions. Updating supply chain maps today will help if the trade conflict continues.
