In some cases, US importers, contending with higher 2025 tariffs, are willing to temporarily take losses to stay in business. It is vital that they invest in additional expertise to survive, says Rich DiNucci, Senior International Trade Advisor with the law firm Venable.
DiNucci spoke at the October Port of Los Angeles media briefing with Executive Director Gene Seroka.
Taking Losses
In some cases, importers have been willing to take losses to stay in business: “Some have even gone as far as saying, ‘you know, we will take a loss just to stay in business because we have to deal with this.’ And they are not looking to really lose their … market share, so they are willing to take a loss. Others are looking at how do we structure the transactions? … So, there is a lot of different things going on. They will look at country of origin, too, because … the tariffs tend to shift very, very quickly given the way the (Trump) administration operates in a less bureaucratic fashion than I think we have seen in the past.”
DiNucci’s expertise comes from years of working for US Customs and Border Protection. He most recently served as Director of Field Operations in San Francisco, where he managed operations in six states and two U.S. territories carried out by more than 1,700 employees. He previously served as the Area Port Director for both San Francisco and Newark/New York, overseeing immigration and cargo operations at the associated airports and seaports.
Import rules, DiNucci said, are: “becoming much more complex across the board. The trade community is looking for a lot of different ways to deal with that, but for every reaction there is an equal and opposite reaction. So, when they look to change transaction structures, US Customs is also scrutinizing that because they are looking at ‘how do we react to that, what is the risk to the revenue?’ Are these transactional rearrangements compliant? And so, you are having a lot of different activities take place in that environment. There is a lot going on in terms of trying to deal with the tariffs, their impact across the board now.”
In response to those remarks, Seroka noted that consultation, origin rules, shifting supply chains with importers and shippers looking to make sure that they can keep people employed and the economy moving underscores a question many are asking: “What do you think the lasting effects are going to be of these sweeping policy changes? That maybe the story (that) hasn’t been written in completion yet. What do you see next? What’s the future of this supply chain going to look like?”
DiNucci’s response was: “What you will see is, … this has been talked about for years … and the ability to sort of adapt and change quickly, to be flexible. And I think increasingly that’s the case. You have to be able to do that. You have to have multiple points of origin for all intents and purpose, so that if there are changes made, you can adapt to them quickly.”
He said that there has been a huge swing in trends: “There’s these trends, we go from reciprocity revenue to reciprocity restriction, back and forth, revenue restriction, reciprocity. And I think what we are seeing with the current environment is a mix of all three.”
He added, “The tariffs are put out there… It is going to be 100%, 75%, whatever the total may be. And there the trade is sort of caught in the middle, and they have got to adapt. And the real challenge is finding that spot where you can. There’s very little middle ground, frankly. But a lot of what you have to do now is become much more flexible, much, much more willing to move quickly to take advantage of a reduction where in fact, you may find it. And that is not easy.”
The challenge needs to be met by investing in legal and regulatory expertise and working through industry associations: “I think you really have to engage carefully. You have to find the kind of folks who can give you the right advice. A licensed customs broker, for starters. Because as I indicated, when you are looking at the sorts of tariff situations or restructuring transactions, you have to do it right, because the Customs scrutiny in this regard is increasing daily.”
At Venable, DiNucci said, “We’ve got a lot of cliets. Clients are looking at audits because Customs is now looking deeply at in terms of how revenue is being protected. So, they are looking there. You’ve got to really take a good hard look at that. There are entities out there that offer the legal advice. And I’m not …there’s no pitch for the firm. You just need to find, as an operator, that kind of advice to make sure that the adjustments you’re making are going to be compliant. Because what you’re seeing now, I think with Customs as they are coming out on the revenue issues, they are looking to enforce, and a lot of the informed compliance that I think was in the past is in the past now. You’re seeing a lot more compliance efforts. I think you’ll see a great deal more of that as companies try to adjust. And so, the future I think demands, one is knowledge.
Two, find the right people that can give you that knowledge. If you do not have it, do not make assumptions about what Customs may or may not do. Find out. Establish those relationships not just with the experts like brokers and consultants … And if you are not involved in associations, you should get involved in associations because your knowledge is what is going to get you through this. And again, I think … there’ll be a time when this too shall pass, I guess is the way to put it. And I am not trying to be flippant, but you know, as I said, those trends, the trends of revenue restriction, reciprocity, it will come and it will go. You have to be flexible. But you’ve got to get the right advice because if you put the wrong foot forward, Customs is going to be on it, and they have been on it. We are working with a lot of clients that are having challenges with Customs in that regard.”
Is Customs Challenged by Bigger Mexican Volumes?
On another subject, DiNucci was asked whether the increased volume of goods legal and illegal being unloaded at Mexican ports and being trucked across the US border in Texas, Arizona and California was challenging the ability of US Customs to respond.
DiNucci said, US Customs was up to the challenge: “All the assets that Customs has been deploying for the last 25 to 30 years in the non-intrusive inspection arena, truck X rays, personal vehicle X ray equipment has all been exponentially increased in terms of its efficiency and its accuracy. That’s all deployed. The officer expertise is there, that targeting is done on a regular basis. In terms of the personnel, again, they are out there focused on this. I see it down here in San Diego. I live not too far from Otay Mesa Port of Entry. And I have a lot of good relationships down there. And you know, it’s a daily work that seizures are occurring … Texas is as well, but the assets are there.”
