The 6 Most Common Tariff Mistakes Merchants Make

With shifting regulations and new tariffs in place, understanding the nuances of customs compliance is critical for merchants engaged in international shipping. Mistakes in tariff compliance can lead to unexpected costs, shipment delays, and even legal penalties. Here are five of the most common tariff mistakes merchants make when navigating new regulation—and how to avoid them.

Tariff Mistake #1 – Misunderstanding How Mixed Shipments Are Handled

U.S. Customs and Border Protection (CBP) has clarified that shipments containing even a single product from a tariffed country are subject to the applicable tariffs and compliance measures. If a mixed shipment includes one item made in a tariffed country, the entire shipment becomes ineligible for de minimis clearance. Merchants must carefully assess their supply chain and plan accordingly to prevent unintended tariff exposure. Read more about Mixed Shipments. 

Tariff Mistake #2 – Confusing Country of Origin with Shipping Location

A common misconception is that the country a product is shipped from determines its tariff treatment. However, tariffs are based on the Country of Origin (COO)—where the product was manufactured or produced. 

Country of Origin Classifications: 

• Preferential Origin: Applies to goods qualifying for Free Trade Agreements (FTAs) or duty exemptions, enabling lower duty rates. 

• Non-Preferential Origin: Used for standard customs entry, determining applicable duties and tariff treatments. 

For example, goods manufactured in China—including those shipped from Hong Kong—are subject to standard tariffs, duties, and fees, regardless of whether they are shipped from an intermediary country. Determining COO correctly is essential to compliance and cost planning. Read more about Country of Origin.

Tariff Mistake #3 – Relying on DDU as a Viable Strategy

Delivery Duty Unpaid (DDU) has long been a popular method for international shipments, allowing merchants to pass duties and taxes onto the buyer upon delivery. However, this strategy is becoming increasingly ineffective due to rising tariffs: 

• Higher Refusal Rates: Historically, ~10% of DDU shipments were refused due to unexpected duties. With new tariffs, refusal rates are projected to increase significantly. 

• Increased Landed Costs: Since Canada implemented tariffs on U.S.-origin goods in March, FlavorCloud has seen landed costs for these shipments rise from CAD $21 to CAD $79. 

• Customs Processing Delays: Many DDU shipments previously benefited from de minimis and Section 321 exemptions, avoiding full customs scrutiny. New regulations mean DDU shipments now undergo parcel clearance, leading to longer delays and additional compliance requirements. 

Given these challenges, merchants should reconsider their reliance on DDU and explore alternative shipping strategies such as Delivered Duty Paid (DDP) to improve the customer experience and reduce unexpected costs. Read more about DDU and Why Tariffs Have Changes Its Fate. 

Tariff Mistake #4 – Assuming De Minimis Still Applies to Tariffed Goods

Under current regulations, de minimis (which allows shipments valued under $800 to enter the US duty-free) does not apply if a product is subject to tariffs. Enforcement is temporarily on hold, so shipments can still enjoy this benefit for now. This exemption could be removed at any time. 

For instance, for goods made in China, there have been official announcements that de minimis exemption will be revoke starting May 2.  

 Merchants relying on de minimis clearance must stay informed about policy changes to avoid compliance risks.

Tariff Mistake #5 – Not Following Official Guidance

Tariffs are in the news a lot these days. That doesn’t necessarily mean that all the information provided is accurate and official. News organizations do not have the trade background to always represent the nuance of specific regulatory guidance. Therefore, it is important to follow official government sources like the Federal Register or Customs and Border Controls official messaging service, called the Cargo Systems Messaging Service. Internationally, official government websites like Canada.ca or the Ministry of Finance of the People’s Republic of China.  

For a comprehensive view, resources like FlavorCloud’s Trade and Tariff Hub provide information sourced exclusively from reliable government sites. These tools are useful for getting a clear, fact-based understanding of the current trade landscape.   

Tariff Mistake #6 – Manipulating Item Values or Country of Origin to Evade Tariffs

Some merchants attempt to lower declared values or misrepresent the Country of Origin to reduce tariff costs—a serious violation with severe consequences. A real-world example is Evolutions Flooring Inc., a California-based importer that settled an $8.1 million case for customs fraud. The company knowingly mis–declared made in China wood flooring as Malaysian to evade tariffs, ultimately facing penalties under the False Claims Act. 

Customs authorities are increasingly vigilant about fraudulent declarations, and penalties for misrepresentation can include fines, shipment seizures, and criminal liability. Merchants should ensure transparency and accuracy in their customs documentation to maintain compliance and avoid costly repercussions. 

Summary: 

Navigating tariffs and customs compliance can be complex, but avoiding these common mistakes will help merchants protect their bottom line and ensure smooth international operations. Stay informed, work with experienced compliance partners, and proactively adjust your shipping strategy to minimize risk and maximize efficiency. Read more about tariff strategies for your business.  

Not sure if your products are impacted by tariffs, go to the FlavorCloud Tariff and Trade Hub to see impacted countries and products. Also, try the new tariff calculator to see specific HS codes impacted.