Performance-focused cycling company creates a smooth path for cross-border tax transactions

As athletes, the company founders set out to create a leading line of cycling footwear, made for aggressive mountain biking. They began designing and manufacturing their first line of cycling shoes driven by specific technical and performance demands of the sport.

As items arrived in the United States from manufacturing facilities in China, misclassifications of the company’s inbound shipments not only caused disruption in their receipt of goods, but also significant overcharging of duties and tariffs that had to be recovered.

Classifying items for duty calculations is highly complex. There are no universal standards from country to country, and the rules within any given country can be mazelike. In the case of footwear, the content and construction of the various parts of a shoe are key elements and can significantly impact the tariff and duty rates.

In 2019, with close to 20,000 units inbound, the company discovered their product was held up by wrong classifications. The duty rate went from 5% to upwards of 20%, resulting in a significant impact to margins. It was clear having a resource that understood the product and how it was manufactured would be key to proper classification.

The company’s freight forwarding service recommended they use Avalara for Managed Tariff Code Classification. The Avalara Managed Tariff Code Classification team invested time to understand the various products and manufacturing processes. The solution covered not only the codes for import into the U.S., but also for export to Canada, which was quickly becoming a new priority.

After the initial work was done, Avalara reviewed the full rationale of the codes they had assigned with the client. With confidence, the codes were loaded directly into the ERP system.