Risky business: The tariff evasion tactics that can create a ton of trouble for Aussie exporters

Attempts to avoid paying your dues to the US government could have serious repercussions.

It's been a few months now since the United States began imposing tariffs on its trade partners around the world. Here in Australia, we've gotten off relatively lightly: most of our exports are subject to a 10 per cent tariff, with the notable exception of steel and aluminium.  

It is, however, an impost some local businesses have been unwilling to cop. A small proportion are channelling their convict ancestry and adopting some decidedly 'creative' tactics to avoid adding the extra 10 per cent onto their invoices and remitting it to Uncle Sam. 

Here are some of the tax and tariff evasion tricks exporters have tried to play on the US Customs and Border Protection Service this year.

Starting from scratch

Some US states have sales tax thresholds for suppliers. Until they reach them, overseas suppliers aren't required to collect and remit taxes. In California for example, up to the first $500,000 in sales are tax exempt. It's a system which can provide a few months' grace for new players – and that's exactly what some seasoned suppliers have reinvented themselves as. Setting up new business entities and passing themselves off as freshly launched start-ups is helping them shore up US sales by keeping their retail prices lower.

Passing orders off as stock transfers

The sums sellers are required to collect and remit can be considerably less if US tariffs are applied to the cost price, rather than the sale price, of their goods. Processing customer orders here at home, batching and dispatching them as a 'stock transfer' then splitting them up again once they've cleared US Customs is another way sharp operators are attempting to slash their tax liabilities.

Marking the value down down down

And then there's the good old value declaration ruse. It's the one which sees businesses declaring the goods they've dispatched as bits and bobs worth a modest five or 10 bucks, say, rather than the $200 they've charged their customers. 

Made in uh uh… Australia!

In the big picture, manufacturing accounts for less than 6 per cent of the country's GDP according to the Reserve Bank – but some shifty sellers would like the US authorities to believe that we manufacture more than we do. So much so that they're changing the declared country of origin of their directly shipped stock from China or Vietnam to the Land Down Under.

And they're shipping that stock to the US via non-traditional routes to add credence to the lie and lessen the likelihood of Customs officers subjecting their shipments to closer examination.

Paying the price of tariff evasion

Tempted to pull any of these swifties on our pals across the Pacific? If the answer is yes, it's worth considering the extraordinary risks doing so will create for your business.

Like their counterparts here in Australia, US Customs and tax authorities tend to have low tolerance for overseas suppliers that don't comply with their tax regimes. 

Rogue exporters that come under their gaze are likely find themselves mired in time consuming and expensive rectification exercises and slapped with stiff fines into the bargain.

And if your business is deemed a deliberate or particularly egregious offender, there's a chance they'll call time on your export adventures by banning your shipments from the US – permanently.

Doing things by the book

You'll mitigate these risks, and perhaps sleep better at night, if you play by the rules. 

That's where automated tax compliance software has a powerful part to play. Designed to help Australian businesses sell into the US, it simplifies and streamlines all the tasks associated with tax compliance including registration, licensing, sales tax calculation and returns preparation, document management, reporting, cross-border compliance and e-invoicing.

Once it's deployed in your back office, you'll be able to apply the appropriate fees, charges, sales and use taxes in every US jurisdiction, accurately and in real time.

Setting yourself up for long term success

The US is a big, bountiful market for Australian businesses that have quality offerings, smart marketing strategies and slick logistics to back them up. Building a presence there can supercharge your sales and enable you to grow your operations and profits, provided you do things properly.

Adding an automated tax compliance platform to your tech stack will help you calculate the taxes and charges that can be imposed on your shipments and mitigate the risks associated with getting things wrong. 

If safe, sustainable export success is your goal, it's mission critical technology that's well worth the investment.