MODE Global Advisory Understanding Your Tariff Risk Universe

MODE GLOBAL ADVISORY: UNDERSTANDING YOUR TARIFF RISK UNIVERSE: A STRATEGIC GUIDE FOR LOGISTICS TEAMS PREPARED BY SHARON JOHNSON, CHIEF LEGAL OFFICER, MODE GLOBAL

©2025 MODE Global, LLC MODE Public

WHERE WE ARE Tariff volatility is reshaping how logistics teams manage risk and resilience. Escalating U.S.–China tensions, shifting alliances and a return to protectionist trade policies have led to reciprocal tariffs of 125% on most Chinese goods and 25% on goods from Mexico and Canada that fall outside the United States-Mexico-Canada Agreement (USMCA) requirements. Duty impact on Chinese goods is especially high as the 125% reciprocal tariffs apply in addition to ordinary duties, Section 301 duties and the 20% duty applied pursuant to the synthetic opioid duty regime.

The impact of these actions is that near-term margin has disappeared overnight, and the landed cost of Chinese-origin goods is now far higher, with the possibility of further increases as the showdown between the U.S. and China continues to escalate. There are additional secondary considerations arising from regulatory enforcement risk and supply chain interruptions or rerouting, including increased transit costs. If businesses are unable to mitigate these additional costs (such as by negotiating with suppliers and customers) then the risk of business downturns, including bankruptcies, greatly increases.

In this climate, temporary workarounds aren’t enough—you need durable strategies shaped by a clear view of tariff risk and response options designed to adjust as trade winds shift.

WHAT IS A TARIFF RISK UNIVERSE? A tariff risk universe is a structured framework for identifying, assessing, and prioritizing tariff-related vulnerabilities across your supply chain. It connects geopolitical shifts to operational decisions, enabling teams to respond quickly to evolving trade policy. Without such a framework, you’re essentially flying blind.

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PRACTICAL STEPS FOR LOGISTICS MANAGERS STEP 1: MAP EXPOSURE Identify Critical Lanes and Products Focus on your highest-value, most tariff-sensitive movements, especially cross-border shipments.

Capacity through U.S.-Mexico corridors, for example, is increasingly strained by tariff-triggered surges.

Evaluate Supplier Geography Catalog supplier locations and flag those in high-tariff jurisdictions (e.g., China). It is important to quantify both the volume and value of goods originating from these areas.

Assess USMCA Compliance Companies need to determine which products qualify for duty-free treatment under USMCA and where gaps exist. One of the most complex challenges is verifying origin at the component level.

STEP 2: IMPLEMENT TARIFF MITIGATION STRATEGIES Leverage Foreign Trade Zones (FTZs) and Bonded Warehouses FTZs and bonded warehouses allow you to defer or eliminate duties on goods that are re-exported or not formally entered into U.S. commerce. These are especially valuable for U.S. operations acting as distribution hubs serving the Americas.

Optimize Multimodal Transport Flexibility in how and where goods move is essential for mitigating interruption. Multimodal transportation enables rapid rerouting in response to new duties, delays or route constraints.

Partnering with a third-party logistics provider (3PL) that offers integrated multimodal capabilities enhances the ability to coordinate across truckload, LTL, intermodal and international shipments. As a non-asset-based 3PL with end-to-end visibility, MODE Global brings the scale, speed and flexibility needed to manage tariff volatility while maintaining service levels and cost control.

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Use In-Bond Transportation Strategically In-bond movements allow goods to move through the U.S. without being formally entered, deferring duties until goods are entered or avoiding duties when goods are re-exported. This is particularly useful if you are importing goods for processing or redistribution. Work closely with customs brokers and carriers to maximize compliant in-bond use.

USMCA Certification Management Implement rigorous processes for obtaining and validating USMCA Certificates of Origin. To qualify, goods must be wholly obtained in a USMCA country, produced from originating materials, or meet specific regional value content thresholds for the particular item.

Contract Review and Adjustment In light of evolving tariff dynamics, consider working with your legal team to review how your supplier agreements address trade-related risk. Evaluate whether future contracts should include tariff escalation clauses or pricing and volume review mechanisms. Even if standard terms don’t specifically identify tariff responsibility, revisiting contract language may reveal opportunities to improve flexibility and responsiveness across your supply base.

STEP 3: DEVELOP MONITORING AND RESPONSE SYSTEMS Tariff Tracking Dashboard Create a central repository of current tariff rates, exemptions and pending changes. Update it weekly, at minimum, in effort to stay ahead of rapid developments.

Transportation Cost Monitoring Track changes in transportation costs by lane to identify tariff-related shifts, with particular attention to cross-border movements. Spot rates in lanes from Canada to the U.S. have already begun rising in response to new policy actions.

Supplier Risk Assessment Evaluate your supplier network's tariff exposure, especially those in high-risk geographies or with limited sourcing flexibility.

Scenario Planning Develop contingency plans for a range of trade scenarios, including suppliers in different countries, alternative routings, inventory positioning and mode shifts.

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WHAT CAN YOU DO NOW? FOR CROSS-BORDER SHIPMENTS Document USMCA Compliance Ensure all qualifying shipments have valid Certificates of Origin. Goods with non-North American content may still qualify if sufficient processing occurs within a USMCA country to achieve tariffshift.

Evaluate Opportunities to Delay Duties If U.S. facilities serve as distribution centers for Mexico or Canada, consider using an FTZ or customs bonded warehouse. For new FTZ zones or subzones, the first-year setup costs may reach ~$100,000, but long-term duty management value can be substantial.

Implement In-Bond Transportation Coordinate with brokers and carriers to expand in-bond usage—especially for goods destined for reexport. This can defer or eliminate tariff payments since duty drawback is severely limited under new tariff programs.

FOR INTERNATIONAL SHIPMENTS Diversify Carrier and Port Options Develop alternate routing plans, including backup ports and modes, to reduce exposure to high-risk corridors and mitigate congestion.

Review Incoterms Ensure your shipping terms clearly assign tariff responsibilities. Where you have leverage, consider renegotiating terms for high-value or high-volume movements. Some buyers are negotiating Delivered Duty Paid (DDP) Incoterms so that foreign sellers bear the risk of customs formalities and duty burden.

Use Strategic Buffer Stock For critical components from high-tariff countries, buffer inventory can help stabilize operations during disruptions or policy changes despite the inventory carrying cost.

FOR ALL SHIPMENTS Develop Tariff Surcharge Protocols Establish standardized processes to assess, apply and communicate tariff surcharges to customers.

Implement Transportation Spend Analytics Track costs by lane, mode and carrier to identify tariff impacts and uncover optimization opportunities.

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Collaborate Across Functions Build standing communication between your logistics, procurement, finance and legal teams to enable a coordinated response to policy shifts.

NEXT STEPS The USMCA is scheduled for review in July 2026, with renegotiations expected ahead of that date. If you’ve already mapped your tariff risk universe you’ll be positioned to respond quickly to protect margins and avoid costly disruptions.

In today's trade environment, it's not a matter of if disruption will strike—but when. What sets leading logistics teams apart is their ability to anticipate see risk clearly, respond early and adapt without hesitation.

You can’t control the wind—but a well-constructed risk universe helps you adjust your sails when conditions shift.

NEED HELP NAVIGATING THE CHANGES? If you are a current MODE customer, please reach out to your dedicated MODE family of brands representative. If you are not a customer and need help with your supply chain, please reach out to our Solutions Experts.

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NOTE: This document provides information about MODE Global's international shipping capabilities and is intended for informational purposes only. This guide does not constitute a binding offer of services or legal advice.

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