Tariffs have taken over business conversations the last few weeks. It’s obvious many do not actually understand how they work. As a co-owner of a company that imports and exports many items, I thought it would be helpful to many if I explained them clearly and simply so farmers, greenhouse operators and growers of all types could understand and prepare for how they might impact their businesses.
Simply put, a tariff is a tax (also called a duty) paid on imports or exports of goods coming in or out of a country.
To be clear, the exporting country does NOT pay the tariff.
The tariff is either paid by the company selling or the company buying the goods.
Payment is determined by the contract signed between the seller and the buyer.
When two companies negotiate the terms and conditions associated with the sale of goods, they make decisions on factors such as price, payment terms, warranties, guarantees, etc. They also discuss how the goods will be shipped. If the goods are manufactured in one country and shipped to another country, the two companies need to determine who takes responsibility for the goods and at what time in the process that happens. These terms are referred to as “incoterms.”
The International Commercial Terms (commonly referred to as Incoterms) are a set of 11 internationally recognized rules that define the responsibilities of sellers and buyers. Incoterms specify who is responsible for paying for and managing the shipment, insurance, documentation, customs clearance, and other logistical activities.
The below chart outlines the terms and who is responsible for activities tied to the sales and logistics transactions.
The tariff is paid at the time of customs clearance at the port of entry. This means that if a tariff is announced while goods are in transit, the company responsible for paying the tariff still needs to pay.
The tariff amount depends on the way the tariff was applied by the local authority or government. In the current situation (as of Apr 18, 2025), the new tariffs are flat percentages based on the country of origin with little to no exemptions.
In other cases, you refer to the Harmonized System (HS) code. The HS code is a globally standardized system for classifying products used in international trade. It’s a six-digit code created by the World Customs Organization (WCO) that is used by customs authorities to identify and classify goods for purposes such as calculating tariffs and monitoring trade flows. Every product you buy can be tied back to an HS Code.
A tariff exemption or exclusion is a temporary or permanent exception, granted by a government, that exempts certain imported goods from tariffs, which, as we already said, are taxes on imported goods. Simply put, this means importers are not required to pay the usual tariff on specific products.
Historically, many products used in production agriculture and commercial horticulture were exempt. The same goes for many imported foods. Again, as of 4/18/2025, the new “reciprocal” tariffs do not allow for any exemptions on any agricultural/horticultural goods, products, equipment or structures (such as greenhouses).
Tariff exclusion requests are processed through the Office of the U.S. Trade Representative (USTR) or the U.S. Department of Commerce.
This is not as easy to answer. There are too many industries, companies and products to provide a definite answer. But, it’s safe to say that in commercial horticulture and production agriculture, the answer is yes. Regardless of the products you sell, agriculture has historically been a high-volume, low-margin industry. And because of these low profit margins, it’s hard for companies to absorb additional costs without passing them on to customers in full or in partial, depending on the situation.
If a company fails or refuses to pay its tariffs, their goods may not be released from customs. The company can face several consequences, ranging from penalties to potential seizure of goods to (and including) legal action. Penalties depend on the country’s customs laws and the extent of non-payment.
Using the wrong HS code can cause several costly issues. This includes increased duties and taxes, delays in customs clearance, financial penalties, and seizure of goods. Incorrect classification also triggers audits and increased scrutiny from customs authorities.
It’s important to state that this article makes no political points, statements or opinions — just facts on how tariffs work.
Over the coming weeks or months, you will likely see increased prices. It is important you understand why and understand that if tariffs are removed, why these increased prices would get reduced. (If they are not reduced, then the companies simply increase their profit margins. The same goes for companies making products domestically. They are raising prices because they can, not because of tariffs.)
Remember, tariffs are a tax paid by companies, not by governments.
Chris Higgins
Chris Higgins is the Founder and Editor of Urban Ag News. Chris is also the co-Founder of both Hort Americas and the Functional Plant Company. Learn more about Chris Higgins by visiting and connecting with him on LinkedIN.
What is a tariff?
Simply put, a tariff is a tax (also called a duty) paid on imports or exports of goods coming in or out of a country.
Who pays the tariff?
To be clear, the exporting country does NOT pay the tariff.
The tariff is either paid by the company selling or the company buying the goods.
Who determines who pays the tariff?
Payment is determined by the contract signed between the seller and the buyer.
When two companies negotiate the terms and conditions associated with the sale of goods, they make decisions on factors such as price, payment terms, warranties, guarantees, etc. They also discuss how the goods will be shipped. If the goods are manufactured in one country and shipped to another country, the two companies need to determine who takes responsibility for the goods and at what time in the process that happens. These terms are referred to as “incoterms.”
What are “incoterms”?
The International Commercial Terms (commonly referred to as Incoterms) are a set of 11 internationally recognized rules that define the responsibilities of sellers and buyers. Incoterms specify who is responsible for paying for and managing the shipment, insurance, documentation, customs clearance, and other logistical activities.
The below chart outlines the terms and who is responsible for activities tied to the sales and logistics transactions.
When is the tariff paid?
The tariff is paid at the time of customs clearance at the port of entry. This means that if a tariff is announced while goods are in transit, the company responsible for paying the tariff still needs to pay.
How do you know the tariff amount?
The tariff amount depends on the way the tariff was applied by the local authority or government. In the current situation (as of Apr 18, 2025), the new tariffs are flat percentages based on the country of origin with little to no exemptions.
In other cases, you refer to the Harmonized System (HS) code. The HS code is a globally standardized system for classifying products used in international trade. It’s a six-digit code created by the World Customs Organization (WCO) that is used by customs authorities to identify and classify goods for purposes such as calculating tariffs and monitoring trade flows. Every product you buy can be tied back to an HS Code.
What is a tariff exemption or a tariff exclusion?
A tariff exemption or exclusion is a temporary or permanent exception, granted by a government, that exempts certain imported goods from tariffs, which, as we already said, are taxes on imported goods. Simply put, this means importers are not required to pay the usual tariff on specific products.
Historically, many products used in production agriculture and commercial horticulture were exempt. The same goes for many imported foods. Again, as of 4/18/2025, the new “reciprocal” tariffs do not allow for any exemptions on any agricultural/horticultural goods, products, equipment or structures (such as greenhouses).
Tariff exclusion requests are processed through the Office of the U.S. Trade Representative (USTR) or the U.S. Department of Commerce.
Will the tariff be passed on?
This is not as easy to answer. There are too many industries, companies and products to provide a definite answer. But, it’s safe to say that in commercial horticulture and production agriculture, the answer is yes. Regardless of the products you sell, agriculture has historically been a high-volume, low-margin industry. And because of these low profit margins, it’s hard for companies to absorb additional costs without passing them on to customers in full or in partial, depending on the situation.
What happens if a company does not pay its tariffs?
If a company fails or refuses to pay its tariffs, their goods may not be released from customs. The company can face several consequences, ranging from penalties to potential seizure of goods to (and including) legal action. Penalties depend on the country’s customs laws and the extent of non-payment.
What happens if one falsifies the HS tariff code?
Using the wrong HS code can cause several costly issues. This includes increased duties and taxes, delays in customs clearance, financial penalties, and seizure of goods. Incorrect classification also triggers audits and increased scrutiny from customs authorities.
Why read or why write this article?
It’s important to state that this article makes no political points, statements or opinions — just facts on how tariffs work.
Over the coming weeks or months, you will likely see increased prices. It is important you understand why and understand that if tariffs are removed, why these increased prices would get reduced. (If they are not reduced, then the companies simply increase their profit margins. The same goes for companies making products domestically. They are raising prices because they can, not because of tariffs.)
Remember, tariffs are a tax paid by companies, not by governments.
Chris Higgins
Chris Higgins is the Founder and Editor of Urban Ag News. Chris is also the co-Founder of both Hort Americas and the Functional Plant Company. Learn more about Chris Higgins by visiting and connecting with him on LinkedIN.