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In Times of Trade War, Companies get creative to avoid tariffs
Tactics range from using free-trade zones to bonded warehouses
Bloomberg--Andrew Mayeda and Mark Niquette

Facing the barrage of President Donald Trump’s tariffs, Steve Katz is ducking for cover in the trade-war version of a demilitarized zone.

Katz manages a plant at United Chemi-Con in Lansing, North Carolina, a village of about 150 people with no traffic signal. The facility, which makes capacitors for industrial and consumer products, is covered by a foreign-trade zone based in Greensboro. Trade zones are areas in or near ports of entry under U.S. Customs and Border Protection supervision that are generally considered outside of CBP territory. With the blessing of the U.S. government, companies can import goods into the zone with reduced duties on a case-by-case basis.

That can be a vital tool for a company in times of trade war. To avoid U.S. tariffs on imported aluminum from Japan, Katz secured U.S. Customs approval to alter the activated area of the trade zone to include a shipping dock for exports. The company is also hoping to designate a new trade zone around its warehouse in California to avoid tariffs on Chinese imports sent outside the U.S.

Trade zones aren’t a loophole for avoiding Trump’s tariffs on products destined for the U.S. market, but they can be a way for companies to avoid duties on goods shipped to the U.S. and subsequently exported.

“It’s one of the few tools that we have at our disposal to significantly reduce the impact of these tariffs,” Katz said.

Across America, companies are scrambling to respond to higher tariffs on the foreign goods in their supply chain. Since January, Trump has slapped duties on imported solar panels, washing machines, steel and aluminum, and $34 billion in Chinese goods. The administration said this week it will impose tariffs on a further $16 billion on Aug. 23, and the president has threatened to tax effectively all the $500 billion in products the U.S. imports from China.