Donald, Stop Lying. Tariffs: An Explanation

1. What Are Tariffs?

Tariffs are taxes or duties imposed on imported goods by the U.S. government. They serve multiple purposes, including:

• Protecting domestic industries from foreign competition.
• Generating revenue for the federal government.
• Influencing trade policies and negotiations with other countries.

2. Who Pays the Tariffs?

The entity responsible for paying the tariff is the importer of record (IOR)—typically the U.S.-based company or individual that brings goods into the country. This means:

• The foreign exporter does not pay the tariff.
• The tariff cost is usually passed on to consumers through higher prices.

3. How Are Tariffs Paid?

Tariff payments follow a structured process when goods arrive at U.S. ports of entry. Here’s how it works:

Step 1: Filing Entry Documents

Before goods can clear customs, the importer (or their customs broker) must file an entry summary using U.S. Customs and Border Protection (CBP) Form 7501 (Entry Summary). This form includes:

• Importer details.
• Product classification under the Harmonized Tariff Schedule of the United States (HTSUS).
• The duty rate applied to the product.
• The total amount of tariffs owed.

Step 2: Payment of Duties

Once CBP determines the tariff amount:

• Large importers: Typically have a Continuous Bond with CBP and may pay tariffs via periodic monthly payments through the Automated Clearinghouse (ACH).
• Smaller importers: Pay tariffs directly at the time of entry using electronic payments (ACH), checks, or credit cards.

Step 3: Payment Submission

The Department of the Treasury receives tariff payments, but the payments are processed by CBP, which is part of the Department of Homeland Security (DHS). Payments are sent through:

• CBP’s Automated Commercial Environment (ACE) system for electronic transactions.
• ACH Debit or Credit (preferred method for large-scale importers).
• Customs brokers, who often handle payments on behalf of importers.

4. Where Do the Tariff Revenues Go?

The funds collected from tariffs are:

1. Initially deposited into the U.S. Treasury’s General Fund.
2. A portion is allocated to CBP for operational expenses.
3. Some tariff-related revenues, such as antidumping and countervailing duties, may be distributed to affected domestic industries under programs like the Continued Dumping and Subsidy Offset Act (CDSOA) (if applicable).

5. Special Considerations

• Section 301, 232, and 201 Tariffs: Special tariffs imposed on goods from countries like China (e.g., Section 301 tariffs) are collected the same way but serve geopolitical or economic policy objectives.
• Exemptions and Refunds: Importers can apply for exclusions or refunds (drawbacks) if goods are re-exported or if an exemption applies.

Summary

• Who pays? The importer of record (U.S. entity bringing goods in).
• What form is used? CBP Form 7501 (Entry Summary).
• Where is the payment sent? To U.S. Customs and Border Protection (CBP), which processes it and deposits funds into the U.S. Treasury.