Conferences offer fantastic opportunities to learn more about topics you may not have been actively seeking or weren’t even aware of the questions you should be asking. They also serve as a great introduction to experts with whom you may not have been familiar. Further, you benefit from questions other attendees ask that you weren’t even thinking of.

Recently, that’s been the case for me with gaining insights on tariffs. At our own MPO Medtech Forum in Costa Rica and FMMC’s annual event in Tampa, Fla., a number of speakers and several sessions offered expertise and information on tariffs. While these trade policies are incredibly complex (I’m still not confident with my level of understanding them), I have been fortunate enough to glean information from these sessions that I thought may be useful to others. If nothing else, some of the following may present ideas worth exploring further.

The first and most obvious point regarding tariffs is just how many details are in flux. Comments made or information shared in this Editor’s Letter could be significantly different by the time you read it. The news involving tariffs is shifting almost daily, so the most critical factor to keep in mind is to expect change to occur. 

With that in mind, one piece of advice provided was to hold off on moving production or embarking on reshoring initiatives until after July 9. Currently, the 10% reciprocal tariffs in place across the board for all countries will be reassessed on that date. So, for example, if you decide today to move from one country to another, after July 9, you may find yourself moving to a new location that has a higher tariff associated with it than the tariff on the country from which you left. In other words, it’s unclear at this point which countries will have higher tariffs after July 9 and which will remain at 10%. Unfortunately, even that may not reflect the long-term tariff for a region. 

Another aspect of this discussion that has emerged involves strategies to decrease or completely avoid tariffs. Some manufacturers in a high-tariff country may be willing to offer different versions of required documentation with the goal of reducing tariffs. Or, in other cases, a manufacturing partner may be willing to fabricate the product, ship to a lower tariff nation and identify it as the country of origin, and, from there, ship to the U.S. These companies are afraid of losing business due to the tariff associated with their country. As such, they are willing to “play ball” and help out their partners. The reality is, however, actions such as these are illegal and may end up putting a company into serious trouble with customs enforcement (which, according to one speaker, has increased significantly). 

On the other hand, shipping components from one country to be assembled and finalized in another country may be sufficient to legally identify the receiving nation (i.e., where the assembly is taking place) as the country of origin. As one speaker explained, this is dependent upon what’s called “substantial transformation.” Unfortunately, the definition of substantial transformation is not clear and can vary based on the sub-assembly or device. 

Another interesting piece of information I learned during our Medtech Forum was that materials or components from the U.S. could result in a discount on the tariff when the final product is shipped back into the U.S. If parts of a device originated within the U.S., there may be an opportunity to discount that value from the tariff cost. This was not an aspect I had heard about previously with regard to tariffs. 

Given the digital nature of many medical devices, hearing about this discount made me wonder if this would hold true for software that’s in a device. If a piece of software vital to a medical device was created in the U.S. and sent to another country where final assembly was taking place, would the software help bring down the tariff expense upon entry into the U.S.?

My apologies if this comes across as confusing, but I think in the current environment, that’s reflective of the misunderstanding regarding tariffs throughout the industry (and across all business sectors). There is significant uncertainty due to the general unfamiliarity with tariffs and how they function, and the rapid policy changes involving them. Perhaps the best piece of advice is if you are importing devices or components from another country, seek the expertise and assistance of a customs advisor to ensure you are meeting all your legal responsibilities and taking advantage of any financial adjustments to which you are entitled.

Sean Fenske, Editor-in-Chief
sfenske@rodmanmedia.com