What Happens If You Can’t Pay Your Tariff?

Many U.S. small-business owners who import goods now face an unsettling reality: not knowing precisely what tariffs they’ll owe when their shipment hits U.S. soil, or if they’ll be able to pay it.

Tariffs are calculated by the U.S. Customs and Border Protection (CBP) when shipments reach the U.S. border. This means that tariff rates can change between the time when your business places its order and when your shipment arrives — potentially leaving you with a larger-than-expected tax bill.

Changes and pauses to tariff rates over the past several months have made it increasingly difficult for business owners to anticipate and plan for these added costs.

So, what happens if you can’t (or don’t) pay your tariff bill? In part, the answer depends on whether or not you have a customs bond.

Any imported shipment valued over $2,500 must have a customs bond. A customs bond is a legal contract between you, the CBP and a third-party surety company.

Think of this bond as a sort of insurance for U.S. Customs. It guarantees that they’ll get paid the full tariff amount and other fees by the surety company in the event that you fail to pay your bill. Businesses pay a premium for a customs bond, which you can get directly from a surety company or through a customs broker or logistics provider.

As long as you have a customs bond, you can get your shipment — even if you don’t pay your tariff right away. But if you don’t pay within 10 days, the CBP may begin the process of collecting payment on the bond from the surety company. If that happens, you’ll be legally responsible for reimbursing the surety company.

But that’s not all. You may also be on the hook to pay:

• Interest. The CBP doesn’t like being paid late. That’s why it charges interest on unpaid or underpaid duties. If you don’t fully pay your tariff within 30 days from the date you’re billed, interest is charged retroactively and continues to accrue every 30 days at a hefty rate of 7%. 

• Penalties. The CBP also doesn’t like it when importers are negligent in their paperwork or try to skirt the system. It has financial and legal repercussions in place for importers who mistakenly (or purposefully) misclassify imported products, its value or country of origin — all of which can affect how much you pay in tariffs.

• Legal fees. If the surety company has to sue you to collect missed or unpaid tariffs, you may be responsible to foot the bill for its legal fees.

On top of these added costs, you may also lose any collateral used to secure the bond.

What may start as a missed or delayed payment can quickly snowball into a much more expensive problem.

If your shipment is valued below $2,500 or requires a customs bond that hasn’t been posted, your goods won’t be released until you’ve paid all tariffs, submitted entry paperwork or obtained the required bond.

If you don’t pay your tariffs within 15 days of arrival, your goods will be moved to a customs warehouse, where they can be held for up to six months. It’s still possible for you to get your shipment at this point, but first you’ll have to pay the duties owed, plus transportation, storage fees and any penalties or fines.

After six months of sitting in the customs warehouse, the government will either auction off or destroy your goods. Certain perishable items may be sold or destroyed sooner. If sold at auction, the proceeds go toward covering unpaid tariffs, storage fees and other outstanding debts. You may be able to claim any money left over from a sale after all costs are paid.

Failure to pay a tariff can lead to more than just fees or delayed shipments. It can have ripple effects across your entire business.

When you don’t pay your tariff, the CBP may seize future shipments or blacklist your company, potentially barring or delaying future imports. Having a prior claim on a customs bond may also make it harder to secure a new one in the future, which could also hinder your ability to import.

If you have a record of not paying import duties and other costs, your relationships with suppliers, logistics partners and customs brokers may be tarnished. And if unpaid tariffs result in delayed shipments, customers may be reluctant to do business with you again.

Consider these options if you’re facing a steep tariff you may not be able to afford.

The last thing you want is to be blindsided by a hefty tariff bill.

Start by estimating what you might owe by using the Harmonized Tariff Schedule search tool. Or, for best results, work with a licensed customs broker to help identify the correct tariff classification and associated fees for your order. Just keep in mind that the final amount will be determined by U.S. Customs when your goods arrive at a port of entry.

Business lines of credit are flexible sources of funding that you can use to cover cash flow gaps or as an emergency fund. Having access to a business line of credit can come in handy when you need to cover a high tariff (or any other unexpected bill).

If you don’t already have one and you need fast access to money, look to online lenders for quicker approval.

If you have a good relationship with your supplier, consider negotiating terms that can help offset high tariff costs. It may agree to absorb some (or all) of the tariff and related fees, or agree to ship smaller quantities to minimize your upfront tariff exposure.

Another potential option is to arrange a trade credit agreement, allowing you to defer payment to your supplier until you’ve sold some or all of the goods, which can help free up cash flow.

If you can’t absorb the tariff costs and your supplier won’t budge on negotiations, consider sourcing from countries with reduced rates.

Alternatively, you may need to raise your prices to offset the additional expense. If you go this route, be transparent with your customers about the reason behind the increase to help preserve their loyalty.

Instead of receiving your shipment and paying the tariff right away, you may be able to store it in a CBP-authorized bonded warehouse. This allows you to defer duty payments for up to five years, paying the current tariff rate only when goods are withdrawn.

This can provide flexibility by giving you time to secure the necessary funds, wait for potentially lower tariff rates or even sell the goods before you pay the tariff. You can also re-export goods to another country without paying U.S. import duties.