Podcast

Episode: 231 |
Jay Charkow:
Trade Deals and Tariffs:
Episode
231

HOW TO THRIVE AS AN
INDEPENDENT PROFESSIONAL

Jay Charkow

Trade Deals and Tariffs

Show Notes

Our guest today is Jay Charkow, President of International Tariff Management.

For several years I’ve been wanting to understand the basics around tariffs. In the New York Times or Wall Street Journal, usually all you get is some very broad statement such as “the Administration has imposed a new round of tariffs on goods imported from China.”

I wanted to ask some basic questions: do Americans pay tariffs on goods imported from any country?

Does the tariff vary by country?

How much are the tariffs, and how are they calculated?

Does the tariff vary by the type of good?

What if you import some parts, make a good, and then export it?

What if you import a part into Mexico, do some processing in Mexico, and then import the good into the US?

Do we have trade deals with every country? If not, which ones do we have a deal with? If we don’t have a special deal with the country, how much tariff do we pay?

How much tariff do other countries charge when the U.S. exports goods?

What are the details behind the Trump trade war with China.

In this conversation, Jay answers many of these questions.

To learn more about Jay’s firm, visit: https://www.tariffmanagement.com/

One weekly email with bonus materials and summaries of each new episode:

Will:
Hello, Jay, welcome to the show.
Jay:
Well, thank you for inviting me, Will.
Will:
Jay, I’m so excited to have you on the show today to talk to me and explain to me what’s going on with tariffs. It’s an area that I don’t know anything about. And there’s so much news these days about tariffs.
Will:
The New York Times, The Wall Street Journal, you read articles in there, and it just has this very 50,000 foot high level view of the President is imposing penalties or whatever, but you never actually get the real detailed economics of what’s going on.
Will:
So, glad you’re coming on to talk to us about what’s happening with the Trump tariffs. Let’s start with that big picture view of what has actually changed and with what the current administration has imposed. Walk us through some of the actual what’s going on with it.
Jay:
Well, initially, the tariffs were imposed on imported goods coming into the country. This goes back to the 1700s, actually, and it was the only way that revenue could be obtained by the federal government. And these tariffs have been put in since then and they negotiated with various countries.
Jay:
And they were also negotiated on the basis of trying to protect U.S. interests in this country to protect jobs and to protect manufacturing base. What the Trump administration has done is there’s a section 301 of the Trade Act of 1974, which gives statutory authority to impose tariffs in violation of any trade agreement or unfair trade practices. And that’s what Trump’s administration has done.
Jay:
He has indicated that there’s some unfair practices. Initially, it was in steel and aluminum, and then it expanded into four rounds of additional tariffs on China with the idea of trying to change unfair trade practices, which were currency manipulation and things like that.
Jay:
They should be selective. They should be put in place to minimize the adverse effects on U.S. consumers and firms, but I think they’ve gotten a little bit out of control and they’ve had a tremendous effect negatively on the U.S. economy with indeed the increase in costs.
Jay:
There’s been a lot of promotion that these tariffs are being paid by China. China is not paying the tariffs. The American people are paying tariffs. When the goods come into the United States, duty is collected by Customs and Border Protection, and that duty is paid by the importer.
Jay:
That’s usually a large corporation. They pay that money, and then in some way, they have to pass that on to the consumer. So, in reality, the consumer is paying for these tariffs that are being imposed on Chinese goods coming into the country.
Will:
All right. So, you mentioned steal. Let’s use that as an example. So, setting aside for a minute all these trade agreements that exist, like NAFTA, and so forth, I’d like to understand kind of let’s say even how the steel tariffs works.
Will:
So, is it the case, for example, that there’s some kind of global tariff says if you’re importing steel from kind of anywhere, if we don’t have an agreement with that country, the tariff is X percent. And then if there’s some bilateral or other trade agreement, it might like replace that and be lower than that.
Will:
Is there kind of like a blanket, if you’re just importing it from somewhere, we don’t know where yet, assume it’s this percent? And then maybe it’s lower if there’s a separate agreement that supersedes it. Is that how it works, or is there something else going on?
Jay:
No. There’s a tariff for what we would call the normal trading partners of the United States, and that’s the tariff that’s defined as the most favored nation’s tariff. And for steel or steel products, that ranges anywhere from 1% to 10% depending on what you’re bringing in.
Will:
And when you say depending, is it like the grade or the type of the steel or the type of the product?
Jay:
It depends on the type of steel, and it also depends on the product, usually how more finished it is. If it’s a product made from steel, generally the duty rate is a little higher than if it’s the raw steel.
Will:
Okay. Can you give me even some specific examples? Do you happen to know any steel grade x, y, z something is X percent, just to kind of give us a real deep, crisp example.
Jay:
Yeah. I can give you that. If you’re importing say tubes and pipes of steel generally coming in from any country that they call the most favored nation country, it’s free. And it’s always been over the last many, many years, it’s free.
Jay:
This is one area where the Trump tariffs have put a 10% or 15% duty on it, where before there was no duty on it. There are generally three stages of duty rates. The most of the free ones are from these countries that I call most favored nations, which are our general trading partners.
Jay:
And then you have what they call stage two duty rates, and those are where the U.S. has a hostile relationship with the country, for example, North Korea. If you brought in this steel product from North Korea, instead of being free, it would be 35% duty on it.
Jay:
The idea was to prohibit imports or make it difficult to get imports from people that we don’t have what we call a good relationship with. Then, for example, if you brought in tubes and pipe fittings, which are a little more manufactured in just the raw steel, the duty rate coming in from these most favored nations would be about 5%.
Jay:
If you brought it in from North Korea, it’d be 25%. And then if you got into the Chinese tariffs, which were the 301 tariffs, you would pay another 15% on top of the 4.8% that normally would come in from China.
Will:
Okay. And then just sort of the baseline numbers, what would an example of something be with a 10% tariff? You said steel could range from 1% to 10%?
Jay:
Yeah. It could be threaded elbows or pipe bends or flanges, things like that.
Will:
Okay. So more finished, you pay a higher tariff. When you say most favored nation, is that pretty much just about every country in the world except for North Korea and a couple others, or is there a section of countries that are not quite so favored?
Jay:
No. It’s most of those countries, and then the exclusions would be where the United States has a favorable trade agreement with them. And in those cases, for example, here’s an example of an iron welded fitting, where if it came in from the normal trading partners, it would be 4.3%.
Jay:
If it came in from one of the NAFTA countries, or if it came in from Singapore, where the U.S. has a free trade agreement, that would be zero. And if you brought it in from North Korea, it would cost you 45% duty,
Will:
Okay. So it’s a little bit kind of a misnomer, at least in my vocabulary. We say most favored nations, but that’s basically everybody. And then there are some actually favored nations, which are the ones that we have a free trade agreement with, which is lower than the most favored nations.
Jay:
That’s correct.
Will:
So most favored nations, don’t take that too literally. It means basically everybody except for North Korea and one or two other countries that we hate. It’s just sort of your baseline countries, right? And then below that number, it sounds like a set of countries where we have a free trade agreement or some other kind of agreement. What are the main agreements people should be familiar with? You mentioned NAFTA, the North American Free Trade Agreement.
Jay:
There’s a North American Free Trade Agreement. There’s a U.S.-South Korea Free Trade Agreement. There’s a U.S.-Australian Free Trade Agreement. There’s an agreement with Singapore. And just recently, there was a trade agreement passed with Japan.
Jay:
In most of these trade agreements, what happens is the duty rates, whatever they are, and let’s say they’re an average of 5%, with the most favored nations, they would decline over a 10 year period 10% per year. So, if you are in one of these free trade agreements for 10 years, you would wind up paying zero duty from one of these countries that has a free trade agreement with the United States.
Will:
Okay. So with NAFTA, since it’s been more than 10 years, I think it was passed in the ’90s, ’96 or something with Bill Clinton?
Jay:
Yes.
Will:
I mean, is it in fact the case when it says North America Free Trade Agreement? If I, in the US, want to import just about anything from Mexico, is there just no duty on just about anything from Mexico?
Jay:
That’s probably about the 99% accurate. There’s always an exception to the rule. But in general, most things would be coming in duty free.
Will:
So, if I want to buy something from Mexico, some raw material, finished good, whatever, pretty much most of the time it’s safe to say no duty. And is it same thing if I’m trying to export something to Mexico, that they’re not going to pay any duty going into Mexico? That is correct. And is it the same thing with Canada?
Jay:
Yes, it is.
Will:
All right. And then, I suppose with Singapore and then South Korea, Australia, Japan are somewhere in the process of getting to zero after that step down period.
Jay:
Exactly.
Will:
All right. What’s the deal right now between the U.S. and the European Union? Are they just the most favored nations, we pay whatever the default rate is from most favored nations?
Jay:
Most of it is under the most favored nations general duty rate. There’s some initial negotiations going on to see if there can be some extended agreement where maybe some of the things would be reduced. Now, the idea of reduced duty in these free trade agreements is obviously reciprocal, in a sense, because the U.S. wants to ship goods into these countries and they don’t want to be penalized. So, it has to work out. The duty rates are manipulated in a way that benefits both countries. Some countries want to export different products than they want to import, so it works around that.
Will:
Yeah. And we should probably be careful when we talk about benefiting the country because a steel tariff into the U.S. might benefit us steel producers by protecting them, but it hurts U.S. steel consumers or someone who wants to buy a car made out of German steel. So, it’s not as if it’s necessarily benefiting the U.S. to have tariffs in place.
Jay:
No, it’s not. Most of the tariffs that have been put in place initially, as I mentioned, were to raise revenue for the United States Treasury. But over the years, they were put in primarily as protective means to protect businesses in the U.S, where if you were starting up, for example, a steel mill, you would want to initially, now the duties are zero in most cases, but you would want to protect that business and you’d want to try and make it non competitive for steel to come in from a foreign country.
Will:
So we talked about steel a bit. You say it kind of ranges between 1% to 10% depending on how finished it is. What’s the sort of typical ranges for other types of products? Maybe sort of consumer electronics, let’s say, being imported. So, my iPhone, how much tariff did I pay on that or other consumer electronics?
Jay:
The electronics tariffs are usually in the range between 1% and 4%. The higher tariffs are in the wearing apparel. And the idea was, as you know, there’s very little wear wearing apparel made in the United States these days. And over the years, they’ve been trying to protect the manufacturers over the last 50 years, not recent years. And they had imposed some of the tariffs on wearing apparel coming into the United States were as high as 25% before the so-called Trump tariffs.
Will:
And that’s interesting. So, to protect a few jobs, we have tariffs of… Wow. So you’re paying an extra 25%. Now, when we talk about 25%, if I buy a shirt and maybe… Let’s just keep it simple. I pay $100 for a shirt at Jay Brooks Brothers or something, and which I don’t by the way, but let’s say I did.
Jay:
You should. They’re very nice shirts.
Will:
I actually did an episode on custom made and why I think that custom made is a better deal. But nevertheless, let’s just say I went crazy and bought a shirt at Brooks Brothers and I pay $100. The actual probably cost to Brooks Brothers of that shirt is maybe 25 bucks or 20 bucks or something. When you talk about the tariffs, is it what the importer is actually paying, not the final retail price?
Jay:
The tariff is charged on the import price when it crosses the border. And in generality, and this is just experience over years and years of working in this area, I would say an item comes in if it’s selling for $100, it’s usually a three time markup, plus or minus.
Jay:
So, that good would probably enter the United States around $35. Then there’s duties that are paid on profits, logistics, marketing, all those kind of costs are added into it, and plus a little bit of profit.
Will:
So, if it’s $30 coming in, that would be $7.50. So, if you’re paying 100 bucks for the shirt, $7.50 of that is going to the federal government as tariff on importing the shirt. Now, is tariffs still hold if let’s say General Electric, I think they make aircraft engines.
Will:
If General Electric makes parts of that in India, let’s say manufacturers some pieces or some parts of that, and then they import those parts into the U.S. and then they finish the assembly here. If it’s the same company, so they’re not really necessarily selling it to each other, is General Electric still paying tariffs on importing those parts?
Will:
Do they have to figure out what the transfer prices? How does that work if you’re importing it, but it was your company overseas, so you’re not like selling it to yourself?
Jay:
Well, duties are predicated on the country of origin. So, if it’s coming in from India, there would be the most favored nation’s duty rate on it. And there’s a whole area of costing that is required by the U.S. Customs and Border Protection.
Jay:
You have to come up with the cost of your product, especially if you’re making it in your own factory. There are three ways to cost goods coming into the United States if you bring them in from your own factory. One way is to pay the going price in the United States for that product competitively.
Jay:
Another way is to take your cost and build it up and you can charge yourself a small profit margin. And the other is to take your selling price and deduct off your costs and you can charge yourself that price. That’s called the deductive way of pricing. So there’s three ways that you can price goods coming into the United States from a sister company.
Will:
Now, since I can bring something in from Mexico into the U.S. with no tariff, do companies try to do kind of an end run and say, I’m not saying we do this, but some company X will say, “All right. I’ll ship it from India to Mexico, and then maybe I’ll do something to it. And then I’ll import it from Mexico to the U.S. and I don’t have to pay any tariffs.”
Jay:
People try that all the time. And if they are found out, they’re in prison. You can transship something, but the duty rates are predicated on the country of origin where they were made and it’s very interesting. I was just personally in Vietnam on a little vacation.
Jay:
And the Vietnam factories are cranking up pretty hard because the U.S. had stopped buying from China because the Chinese have these 301 tariffs, which are 25% in many cases. So, I was talking to some people while I was there and there are companies there that import from China into Vietnam.
Jay:
They remark them and say these are made in Vietnam, and they import them into the United States at a much lower duty rate. That’s highly illegal, and I’m sure the government is looking all the time at these things when they come in, but it’s going on.
Will:
Probably very hard to detect.
Jay:
Well, the U.S. Customs Service has people all over the world and they probably on a routine basis will go into these countries, go into these factories. Here is a factory A in Danang making these goods and they’ll walk in and see nothing but a big warehouse. Well, you can’t be making something in a warehouse. You need some manufacturing equipment.
Will:
All right. So our baseline is, I’ll just recap what I heard, it’s basically we set these tariffs. You were looking it up before for steel, what’s kind of the Uber ultimate reference for knowing what the… Is there some government website where you can look up the tariff for a specific thing?
Jay:
There’s the Harmonized Tariff Schedule of the United States. That is the Bible for all duties.
Will:
And is that like an official U.S. government website or something, or is it published some…
Jay:
It’s official. It’s put out by the government and it’s published. It’s online. It’s updated every year and it shows all the free trade agreements that we have with the government, what the duty rates are under those free trade agreements.
Jay:
It shows every item that comes in from live animals to steal, to computer parts, everything that can possibly been brought in to the United States is covered in it. And it’s put out by the U.S. International Trade Commission.
Will:
And going in the other direction, is it typically the case that the tariffs in the other direction, if the U.S. is shipping to one of these other countries, that it’s pretty much the same tariff in the other direction or is it sometimes just very much country-specific, it could be way different?
Jay:
Well, the Harmonized Tariff Schedule is a 10 digit code. And the reason they call it harmonized, it’s harmonized up to the first six digits. And after that, every company has flexibility in the last four digits, and they have flexibility to charge whatever duties they want at any level of the Harmonized Tariff Schedule.
Will:
So, if you’re a company in the U.S. and shipping steel to some other country, whether it’s Poland or Fiji, is the tariff that they charge incoming? Is it typically the same as the U.S. would charge if we were importing from them, or some is way off?
Jay:
It’s usually similar. But in many cases… Coming in from several countries, there’s things called quotas. The U.S. has quotas and the other countries have quotas too where you’re only allowed in a given year to bring in so many dollars worth of a particular tariff item.
Jay:
And once a country, and it’s by country, reaches that level, you can no longer bring it in. Or in many cases where they have preferential duty agreements, if you exceed the minimum quantity, then you will be charged a penalty in additional tariff.
Will:
Now, these minimum quantities or quotas, is that by company or just the total imports?
Jay:
It’s total. It’s by a harmonized tariff number, and then it’s by country. So, if there’s 10 manufacturers in India, for example, and they’re all shipping against this one tariff number say jewelry, for example, once they hit a certain level, a certain number for that year, the duty rate would go up.
Will:
What would an example of some kind of good that has a quota on it be?
Jay:
It could be anything. It had been over the years some jewelry items, gold jewelry, from different countries.
Will:
Kind of bizarre. And there’s been a long kind of prep. So now talk to me… And I think I understand. And it sounds like, before the Trump tariffs, China had the same most favored nation status as kind of Lichtenstein or Angola or Bolivia, right?
Jay:
Yeah.
Will:
All right. So they were like just most favored nation status, just same tariffs. What’s changed with the current administration’s? Has it been just on China and what goods is it been on and what’s been the magnitude of the tariffs that they’ve put in place?
Jay:
Well, the bulk of the tariff increases has been against China. And there have been four rounds of additional tariffs. It started with a 10% tariff on a few hundred items. By items, I mean tariff numbers. There’s thousands of tariff numbers in tariff.
Jay:
Then a second round increased some of that duty from 10% up to 15%. The third round increased the list and it covered many, many more items. And then the fourth round included from China, almost everything that’s coming in from China, there was a duty on it in the range of 15% to 25%.
Will:
So, 15% to 25% on anything from China. What sort of impact have you seen on your clients that you consult to about tariffs? What sorts of things has it meant for some manufacturers in the U.S. those sorts of tariffs?
Jay:
Well, it’s a disaster. Some of the small companies, we work with some very small companies, they’re considering going out of business. They can’t be competitive with the costs.
Will:
Obviously without mentioning the names of these companies, can you give me like a sanitized idea of a type of company that’s been struggling with those terms?
Jay:
There was a lot of smaller apparel companies because they had a 25% tariff on it in the beginning, and now they have a 50% tariff. So, as you know, there’s a lot of small apparel companies making sweaters or jackets or whatever you want to call, pants with all different kinds of logos on them, sports things. In fact, one of them went out of business, just couldn’t compete because they were buying everything from China.
Will:
So these are apparel companies, brands that source the goods in China, import it, it’s their brand on it, and then they’re selling it to retailers at their own retail store. And so, their cost of goods went from X. So, in our example, if they’re selling something for $100 and their cost to China was $30, they used to be paying $7.50, which was 25% of the $30. That went up to 50% of $30, so their cost of goods sold went up by $7.50 out of a selling price of $100.
Jay:
Yep. Well, that’s just a duty cost. And then you have your logistics cost and you have your distribution costs, warehousing costs.
Will:
But all that stuff didn’t change. I guess the point is, if it’s $100 selling price, their cost of goods sold increased by $7.50, which could be more than their profit margin even was in the beginning.
Jay:
Exactly, Will.
Will:
Got you. I mean, their total margin at the end of the day might have been just $5 or $7, and now they’re their cost of goods sold went up by that much. So they either had to try to raise the prices or just take it out of their profit. But that could have been more than that profit.
Will:
All right. And what’s going on right now with… It sounds like from the press that there’s been an agreement reached, but I haven’t really been able to understand the details of it. What’s the kind of the details of this agreement that they reached?
Jay:
Well, there’s many issues. But a few of the issues were that the China was not buying enough goods from the United States. And another issue was they were manipulating their currency to take advantage of selling prices. So what this phase one did was they’re supposed to be buying over the next I think it’s two years $200 billion, and that’s B, dollars worth of American made imports.
Jay:
And for that, what the Trump administration has done is very little. They’ve stopped a new tariff increase that they were going to put on. So, most of the tariffs that were in place, these 25% are still there. And the idea is that over the next two years, China is supposed to buy $200 billion more of U.S. imports. Much of that is supposed to be agricultural products too, about $50 billion.
Jay:
And that’s what the deal was. We’ll stop increasing the tariffs on you if you buy some more goods from us. There was also some scientific property exchanges where they were stealing ideas from U.S. inventors and that’s supposed to be stopped. But I’ve always said, and this is my own opinion, the Chinese have 100 year plan. We have two months plan.
Jay:
And what’s happening, they’re agreeing, they’re agreeing, they’re agreeing. They’re hoping the administration will change in six months and they’ll go back to doing what they did. But the deal is supposed to increase by $200 billion the amount of goods we sell to China.
Will:
But the tariffs that have been applied and added sounds like they remain in force so that they haven’t reverted back to the most favored nation status?
Jay:
They remain in force. Many, many companies have applied for a variance for their goods. They put in an argument to reduce the tariffs back to the most favored nation tariffs and many, many of them have been approved and these tariffs have been taken off, but it’s a shotgun effect. You put it in and, not to be cynical about it, but it’s probably well politically connected, where if you have good political connections, maybe you get your tariff reduced. If you don’t, you don’t.
Will:
I’m shocked.
Jay:
Shocked. I can understand that Will.
Will:
All right. That’s a super helpful overview. Let’s talk about your firm and the kind of services that you provide to your clients.
Jay:
Well, we don’t get involved with the importation of the goods. We’re customs brokers. We’re licensed by the department of Customs and Border Protection. And we basically do three things. And they’re very appropriate in apropos of what’s going on today. One of the things is we do what they call duty drawback.
Jay:
And without giving you a long definition of what it is, it basically is, if you import something into the country and pay a duty on it, a tax, and that material leaves the country, you can get back 99% of the duty that you paid. And we’ve been doing this for 33 years we’ve been in business. And many of the companies are able because of that to compete internationally with their export sales because they’re not penalized for the duties they pay on the imported raw materials.
Jay:
We have companies now coming with us that never had a duty before. The example I gave before of the steel where there was zero duty, and then it went to 10%. Well, these companies never had a payment of a duty, and therefore, they never had to worry about getting it back when they exported.
Jay:
But we help companies when they export with this duty drawback to get money back, and therefore, be competitive and be able to be in the international marketplace. The other thing we do, as I mentioned before, the harmonized tariff number is where the duty is assessed, and many companies bring their goods in at the wrong harmonized tariff number.
Jay:
So what we do is we analyze their products to see if they’re bringing them in under the right number. And in many cases, if they’re not, we can get them a refund on the amount that they had paid. And if they haven’t paid any before with these new round of tariffs, we can prevent them from paying duties that they shouldn’t be paying because they misclassified their goods.
Jay:
And the other thing we do is we help companies with the free trade agreements. Free trade is not free. There’s a lot of paperwork that’s required. When you ship something from the United States into Mexico, for example, there’s a lot of paperwork that has to be provided to the government in Mexico, either as a per shipment or subsequent to the shipment, if they ask for it.
Jay:
And we help companies put the proper paperwork together to show that these goods coming from the United States are indeed goods of the United States, even though they might be manufactured with components that came from other countries.
Jay:
They still go through a criteria that approves them as goods of the United States, and we help them to bring goods into Mexico, Canada, Singapore, Australia, where there is a free trade agreement, properly so that they have the right documentation to support the fact that they shouldn’t be paying duty going into those countries. And that’s basically what we do.
Will:
Okay. And what sort of clients do you primarily serve?
Jay:
We have Fortune 10 companies we work with, and we have some mom pop shops that are just getting started and need some help with the classification, for example, kind of a thing. Most of the duty drawback are large clients because working with U.S. Customs and Border Protection has never been easy.
Jay:
And it takes a lot of time and effort to get the approval to do a program. And unless the recovery is significant, even though you’re leaving money on the table, it’s not worth the effort to go through the gyrations to get the approval and submit the documents that are required.
Will:
Give me a sense of what that’s like when there’s a lot of paperwork involved, for example. Are we talking one form? Is this hundreds of forms with different agencies?
Jay:
No. You’re dealing with only one department, it’s the Department of U.S. Customs and Border Protection. What you have to do is you need to get what they call a ruling in place. You have to present to them what you’re going to do, what items you’re going to import. If it’s a manufacturing process, what your manufacturing process is.
Jay:
And then you have to show them where you’re going to export it to and who you’re going to export it to. That’s a relatively easy part of it. The hard part of it is you have to accumulate the data from the imports and also the data from the manufacturing operation and also the data for the exports.
Jay:
For example, we work with several automotive manufacturers. They bring in engines and transmissions. They bring them in, they pay a duty on them. They make them plant out in the Midwest. They make the automobiles. We have to show that the goods have come in. We have to show the documents that they did come in on, these customs forms that they came in on.
Jay:
You have to relate that to which form came in and when it got into their factory. You have to show the manufacturing process, how these engines and transmissions went into automobiles. Most of these automobiles stay in the United States, but a fair amount, 10% or so, get export it to South America. Once they get exported, we have to show the export documentation to show that these cars were indeed put on a train, moved through the border and crossed over into Mexico, for example.
Jay:
So it’s a lot of data collection. Today, it’s a little easier than it used to be. There’s a lot of data that’s electronic and spreadsheets and computerized. But the requirement is from customs to make sure you can follow it from A to B to C. And if you don’t do that, they will not pay you the money that you’re entitled to.
Will:
How does your firm structure your fees? Do you work kind of just on a percent of value basis or project basis or hourly basis? As a firm, how do you structure your fees?
Jay:
We work on a contingency basis, if you feel it’s a good way to work. There’s a lot of upfront work. But our point is that we know how to do it and we get paid when our clients get money back from the government after we put all of this documentation together, get all the approvals in place, and sometimes that takes a year.
Jay:
But when it’s all done… And it runs forever. I mean, we’ve got programs now running 30 years. But once it starts running, it gets a little more routine. And when the money comes back from the government, we send the money. If it’s a check, we send it to our client with an invoice. Sometimes it’s sent electronically to our clients. We get notification of it and we send them an invoice for our service.
Will:
Okay, cool. Where can people find your firm online if they wanted to follow up with you?
Jay:
The company’s name is International Tariff Management, and they can find it at www.tariffmanagement.com. That’s probably the best place to find us. You can look us up online as International Tariff Management
Will:
And how did you get started in this world, Jay? How’d you get into kind of the world of managing tariffs?
Jay:
What happened, I used to work for a large company and it was Uniroyal. It used to be the old tire company. Probably people don’t even remember it anymore. But I worked with a fellow that did this work for Uniroyal and Uniroyal went through a leveraged buyout.
Jay:
It was one of Mr. Carl Icahn’s first ventures and the whole story the pieces are worth more than the whole and bought up Uniroyal and distributors started selling off all the pieces and this individual was left without a job. And I was running a particular business for them at the time, and I had gotten involved with doing this duty drawback thing.
Jay:
He was in his mid 50s. And I said to him, “You have some really great expertise here to help other companies.” And he had no business acumen. Didn’t know how to do anything. So I said, “Let me help you as a friend.” So I helped him and we started talking about it and he started putting together a basic marketing plan. And I said, “You know, I’m tired of the big corporate life. Maybe I should go along with you.” And I jumped in. And 33 years later, I’m talking to you on the phone, Will.
Will:
And tell me about your staff now. About how many folks do you have on your team?
Jay:
We have 21 people. We do the three things that I mentioned that we did. We have six tariff managers that work with the client and work with customs to provide the services that we do. And we have three in the operations department that files these duty drawback claims.
Jay:
And then the rest is a clerical staff. They’re still in this modern age. As I described the drawback processes, there’s still a lot of data that has to be manually put in from papers. It’s getting better, but it’s still not there, and we have clerical staff that does that for us.
Will:
Fantastic. Well, fascinating to get a view into this world of tariffs. I feel I understand it a lot better than at the top of the hour. So, thank you so much for joining, Jay. I really appreciate the conversation.
Jay:
I appreciate you calling, Will. And if you have any other questions, by all means, get back to me. I enjoyed our conversation.
Will:
Thank you very much.
Jay:
Thank you.

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