By Larry Felton Johnson

I’m writing this short nuts-and-bolts article on what the recent U.S. tariffs are because of the confusion I’ve seen on social media about who pays for the tariffs. Some people misinterpret the tariffs as money paid by the foreign exporter or foreign government.

Tariffs are a tax (usually called a “duty”) on U.S. businesses that import goods, and are collected by the U.S. government, specifically by the U.S. Customs and Border Protection division of the Department of Homeland Security.

Customs collects tariffs (import duties) at the time goods enter the United States, or usually within about ten days afterward, and they are collected from the importer of record—usually the person or company that brings the goods into the country.

When goods arrive at the port of entry, which could be a seaport, airport, or land border crossing, they are held until Customs clearance is granted.

The clearance process involves the importer filing an “entry” that includes:

• A detailed description of the goods
• The country of origin
• The Harmonized Tariff Schedule (HTS) code
• The declared value of the goods
• The applicable duty rate

Customs then assigns a tariff classification, which defines the duty rate.

When the tariff is paid, the American company can take charge of the goods they’ve bought.

What tariffs are not

Tariffs are not a tax on the foreign exporter or the foreign country. They are a tax on the American company. The foreign exporter and the foreign nation have no role in determining, paying, or collecting the tariff. That is a function of the U.S. government and the American company.

Do tariffs raise costs to consumers?

The answer to the above question is: probably. Any tax (or tariff) is a cost in the production or sale of the product. The company has the choice of swallowing the cost (lowering their profit) or passing those costs on to the consumer. Since companies do not generally have a practice of making decisions that lower their profits, the likelihood is that tariffs will cause a significant increase in the price of goods moving forward.