Aug 14, 2025
The executive order signed on July 31, 2025, represents one of the most sweeping tariff policy shifts in decades. Issued under the International Emergency Economic Powers Act (IEEPA), the order replaces the universal 10% ad‑valorem duty announced in April with a tiered system of country‑specific “reciprocal tariffs” ranging from 10% to more than 40%, and introduces a new 40% transshipment penalty.
Many importers are asking the same question: Do the new August 2025 tariffs apply to my products? The truth is, figuring that out isn’t always straightforward. Tariff applicability depends not just on the country of origin, but also on your product’s classification, the route it takes to get here, and whether it qualifies for any exceptions.
Tariffs are assessed according to the country of origin, not where a shipment was purchased or shipped from. The July 31 order divides trading partners into those listed in Annex I (which receive elevated country‑specific reciprocal rates) and the remaining partners (which face a baseline 10% duty). A handful of countries, Canada, Mexico, Russia, Belarus, Cuba and North Korea, are excluded from the baseline regime. Therefore, the first step is to accurately determine each product’s origin according to U.S. Customs and Border Protection (CBP) rules.
Even minor changes to your supply chain can alter the applicable tariff rate. For example, assembling an item in a low‑duty country using parts sourced from a high‑duty country does not necessarily change its origin. Under CBP’s substantial transformation test, only if the processing confers a new name, character or use does the country-of-origin change. If you import printed circuit boards from Vietnam but the boards are merely assembled from Chinese components, CBP may classify them as Chinese origin, meaning they would be subject to China’s cumulative tariff regime rather than Vietnam’s rate.
How to verify: Review your commercial invoice, packing list and supplier’s certificate of origin. Compare those documents with CBP’s rules of origin and ensure the declared country reflects where the product undergoes its last substantial transformation. Working closely with suppliers to document manufacturing steps is critical; marketing descriptions such as “made in Vietnam” carry no legal weight if the processing is minor.
Once the true origin is confirmed, consult the July 31 order’s Annex I to see if the country is listed. For countries in Annex I, imports will be subject to country‑specific reciprocal tariff rates that range from 10% to 41%. Goods from countries not listed in Annex I will continue to face a baseline 10% tariff (unless another order applies). This baseline is in addition to the product’s normal Most Favored Nation (MFN) duty.
· European Union (EU): The EU is treated differently. For EU‑origin goods with an MFN duty below 15%, the reciprocal tariff “tops up” the total duty to 15%, while EU goods with MFN duties of 15% or higher pay no additional reciprocal tariff. Entries must be filed under HTSUS headings 9903.02.20 (for the top‑up) or 9903.02.19 (when no top‑up applies)
· Brazil: In addition to the 10% baseline, the White House announced a 40% IEEPA‑based “free speech” tariff targeting certain Brazilian policies. These additional duties are explicitly stacked on top of the reciprocal tariff, resulting in a 50% total ad‑valorem duty on most Brazilian goods.
· Canada and Mexico: Both countries are exempt from the reciprocal tariff regime but remain subject to separate IEEPA‑based tariffs tied to fentanyl emergencies. In practice, this means imports from Canada and Mexico must be classified under special HTSUS headings 9903.01.26 and 9903.01.27 to avoid the 10% reciprocal tariff, but sector‑specific duties (e.g., on steel, copper or automotive goods) may still apply.
· China: Goods of China, Hong Kong and Macau remain subject to the 10% reciprocal tariff under heading 9903.01.25, plus separate Section 301 and IEEPA tariffs. As of this writing, these cumulative tariffs on Chinese goods can reach 40–55%.
A change in supplier or manufacturing location can shift a product from the 10% baseline into an elevated bracket. Conversely, negotiating with an Annex I country to conclude a trade deal could reduce its rate to the baseline in the future. Staying current on Annex I, updates and verifying your supplier’s original claims are therefore essential.
Beyond country‑specific rates, the July 31 order contains numerous exceptions and carveouts that dramatically affect duty liability:
1. Transit grace period: Goods from Annex I countries already loaded and in transit before 12:01 a.m. Eastern time on August 7, 2025, may clear under the prior rates if they are entered before October 5, 2025. Goods from non‑Annex I countries do not enjoy this carve‑out and pay the new tariffs regardless of shipping date.
2. Section 232 duties and other IEEPA tariffs: The reciprocal tariffs stack atop sectoral duties on steel (50%), aluminum (50%), autos (25%) and other commodities under Section 232. Certain copper products, semiconductors, pharmaceuticals, lumber and critical minerals also carry high duties.
3. Tariff exemptions: Items such as informational materials, donations, temporary imports under bond (TIB), and goods with at least 20 percent U.S. content may be exempt from reciprocal duties. There are also special headings for Canada, Mexico and countries without permanent normal trade relations (Belarus, Cuba, North Korea and Russia).
4. Transshipment penalty: To deter tariff evasion, the order authorizes a 40% duty on goods that CBP determines have been transshipped through a third country to disguise origin. Unlike traditional anti‑circumvention cases, the transshipment tariff applies at CBP’s discretion and is not mitigated by existing enforcement rules. Importers must therefore ensure that suppliers are not routing goods through intermediaries without substantial transformation.
5. De‑minimis elimination: A companion order issued on July 30 2025 suspends the duty‑free de‑minimis exemption for shipments valued at $800 or less. As of August 29 2025, all commercial goods, regardless of value, country of origin, mode of transport or entry method, are subject to tariffs. In other words, small e‑commerce shipments that previously entered duty‑free will now attract reciprocal tariffs (or the transshipment penalty if misrouted). Only narrow exceptions (donations, informational materials and certain travel‑related transactions) survive.
Determining the correct HTSUS code is therefore essential to filing the right entry and ensuring you do not overpay (or underpay) duties.
Work with your customs broker to review the product description, materials and end use; then cross‑reference the U.S. International Trade Commission’s online HTS tool. Be prepared to provide technical specifications to justify your classification in case of audit.
All new reciprocal tariffs apply to goods entered for consumption on or after August 7 2025. Goods already in transit on that date may be exempt from the new rates if entered before October 5 2025.
For any shipment loaded before August 7, maintain proof of departure such as bills of lading, shipping logs and AIS vessel tracking. CBP will require documentation to confirm the shipment’s load date and route. If you have goods in transit from an Annex I country, file under the old 9903.01.25 heading to obtain the 10% rate. For goods from non‑Annex I countries, be prepared to pay the new duties regardless of transit timing.
Tariff rates will likely continue to evolve as negotiations and litigation proceed. Companies should treat tariffs as a strategic variable, not a one‑time surcharge. Here are several long‑term strategies:
· Diversify suppliers: Source components from countries with lower reciprocal rates or from U.S. free‑trade partners. For example, negotiating a supply contract in Vietnam (19%) rather than Pakistan (15%) may reduce duties while preserving quality.
· Negotiate pricing flexibility: Build clauses in supplier contracts that allow for tariff adjustments based on future rate changes.
· Consider near‑shoring: Shifting production to Mexico or Canada, which are exempt from reciprocal tariffs but subject to sector‑specific duties, can reduce exposure, especially for high‑value consumer goods.
· Leverage bonded warehouses and foreign‑trade zones: These facilities allow you to defer or avoid duties if goods are reexported or processed domestically.
· Invest in compliance technology: Automated tariff classification, document management and trade analytics tools can help track rate changes and flag potential transshipment risks.
In this environment, guessing is expensive. The difference between compliance and misclassification can mean thousands of dollars in unexpected duties, penalties or shipment delays. That’s where Custom Goods can help. Our team of trade specialists works with importers to verify origins, ensure accurate HTS classifications, identify applicable reciprocal rates, and plan imports to minimize exposure.
We provide proactive documentation, expert review and customized compliance strategies so you can protect margins and keep your supply chain moving.
Ultimately, tariffs are as much about strategy as they are about compliance. The businesses that thrive under the August 2025 tariff regime will be those that monitor changes closely, audit their supply chains regularly and make informed adjustments, not those waiting for the next customs bill to reveal a costly surprise.
By Christian Herc