Answer extracted from The FreightFA Brief Podcast — listen to the full episode below.
How do you validate tariff classifications to avoid penalties and unnecessary costs?
Companies must ensure their HTS codes are accurate and all shipping descriptions and labeling are correct, since incorrect tariff information directly increases costs and customs penalties. As part of due diligence, auditing confirms proper billing and validates classification codes between customers and brokers. Examining importer of record responsibilities and evaluating whether INCO term changes could shift tariff obligations are also critical validation steps.
Tariff validation begins with the fundamentals: verifying that your HTS (Harmonized Tariff Schedule) codes match your actual product descriptions. When shipping documentation fails to reflect accurate classifications, carriers and customs authorities can assess higher duties, and companies face unexpected cost spikes or formal penalties.
The most common source of tariff leakage, according to ICC Logistics auditing work, is poor communication between customers and freight brokers. When classification codes are not communicated correctly or consistently, tariffs either climb or trigger compliance issues at the port of entry. This is where Oliver Najumi emphasizes the importance of forensic auditing—treating each shipment's documentation as a legal and financial checkpoint.
Four pillars of tariff validation
Accurate HTS code assignment is the first line of defense. Every product category carries specific duty rates, and misclassification—even by a single digit—can land you in a higher tax bracket. Your team or broker must verify codes against current tariff schedules before any shipment leaves your warehouse.
Complete and truthful labeling and descriptions form the second pillar. Customs officers cross-reference your shipping labels with declared values and product details. Vague, incomplete, or misleading descriptions invite audits and penalties. As part of this, ensure that weights, dimensions, and material composition are stated exactly as they appear on official documentation.
The third pillar involves reviewing importer of record (IOR) responsibilities. Depending on your trade terms and who bears liability, tariff obligations can shift. If you have not formally assigned IOR status, you may be unknowingly liable for duties you assumed the buyer would cover. A conversation with your legal and customs compliance team can clarify where that responsibility truly lies.
Finally, INCO term selection directly affects tariff exposure. Terms like FOB, CIF, and DDP determine who pays duties and when. Switching from one term to another—say, from FOB (buyer pays) to DDP (seller covers all costs)—can fundamentally alter your tariff liability. This is not always a cost-saving move, but it is a critical variable to audit and test.
As detailed in this episode of The FreightFA Brief Podcast, ICC Logistics regularly uncovers substantial tariff overages simply by validating code accuracy and bridging communication gaps between shippers and customs brokers—sometimes recovering tens of thousands of dollars per customer annually.
"There is no Bloomberg for freight, so it teaches you to be forensic in how you audit shipping operations."
Oliver Najumi — Executive Vice President, ICC Logistics. Najumi has led freight auditing and logistics optimization since 2014 at ICC Logistics, a firm founded in 1975 by Tony Muzio to act as an impartial extension of logistics teams. Najumi specializes in identifying hidden freight costs through data-driven auditing and works closely with CFOs and supply chain leaders to deliver measurable savings.
If you want to discover how ICC's forensic approach has helped one customer recover $200,000 in annual accessorial overcharges, the full episode contains concrete case studies and step-by-step audit checklists.
Key takeaways
- Verify HTS codes are accurate, current, and aligned with actual product descriptions before shipment to prevent duty rate misclassification.
- Ensure complete and truthful labeling—customs officers cross-reference shipping labels against declared values and material details.
- Clarify importer of record responsibilities with your legal team, as IOR liability determines who owes tariffs and when.
- Review INCO terms (FOB, CIF, DDP) to understand how your selected trade term affects tariff and duty exposure.
- Conduct regular audits between customers and brokers to catch classification code misalignment before customs penalties occur.
See also
Why do shipping cost increases consistently outpace inflation rates year over year?
Shipping rates increase at a much higher rate than inflation, averaging 6% a year across the board. Even when inflation is low, shipping costs consistently rise due to carrier strategies, peak season surcharges, and accessorial fees that compound annually.