Best Practice: Customs Tariff Clauses in Contracts

Arne Mielken
May 2, 2025
6 min read

Updated: May 20, 2025

Customs Tariffs can disrupt your international trade. We offer best practices for modifying your cross-border contracts, along with sample language.

Man in suit reads documents at a desk with a globe. Soft light from large windows. Thoughtful mood, blurred cityscape outside. — Navigating International Trade: A professional reviews strategies to modify cross-border contracts amidst fluctuating customs tariffs.

In the world of Customs, Trade Compliance, and Import Regulations, contracts are more than just legal formalities—they are safeguards.

With the USA continually adjusting tariff regimes, it's crucial for businesses to build tariff-related resilience directly into their contracts.

Whether you're a Customs Consultant, compliance officer, or trade lawyer, your contracts must reflect today's volatile tariff landscape.

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Key Questions Covered in This Blog

Why should tariffs take precedence in your MSA?
Who pays the taxes and tariffs?
How should you handle tariff price increases?
Can you terminate a contract because of new tariffs?
Should force majeure include tariff impositions?
When does a tariff change qualify as a hardship?

"Modern trade agreements must act like shock absorbers—ready to flex under tariff pressure while protecting both parties."Arne Mielken, Managing Director, Customs Manager

Abbreviations Used In This Blog

MSA: Master Services Agreement
SaaS: Software as a Service

Why should tariffs take precedence in your MSA?

In contracts involving services or goods across borders, there is always a risk that a regulatory change will render part of the agreement outdated. That's why your MSA must clearly state that filed tariffs or price lists take precedence over any conflicting contract language. This clause prevents ambiguity and legal tussles.

Imagine your pricing terms were negotiated pre-Brexit or before the latest round of U.S. tariffs. Without a supremacy clause, you’re left vulnerable when regulatory changes hit. With it, you gain a legal foothold.

⇉ Tariff Supremacy Clause

To avoid inconsistencies, the contract should clearly state that applicable tariffs or published price lists shall prevail over any conflicting contractual terms.

⇉ Example Clause:The Customer acknowledges and agrees that the Services may be subject, in whole or in part, to applicable state or federal tariffs, rate schedules, or Vendor-issued price lists. In the event of any conflict or inconsistency between the terms of this Agreement and the provisions of any such tariff or price list, the terms of the applicable tariff or price list shall take precedence and govern.

Who pays the taxes and tariffs?

One of the most contested areas in international contracts is tax liability. Your MSA should unequivocally assign responsibility for all tariffs, duties, sales, and use taxes.

In most cases, the client assumes responsibility unless exempt. However, excluding withholding taxes related to your employees and subcontractors avoids unfair burdening. Getting this wrong could leave you footing a bill you never budgeted for.

⇉ Tax Responsibility Clause Tip

Define the allocation of tax obligations to avoid ambiguity. This clause should clearly state which taxes the customer must bear and which remain the responsibility of the service provider.

⇉ Example Clause:The Client shall be solely responsible for all applicable sales, use, excise, import duties, tariffs, and other taxes or governmental charges arising from or related to the Client’s use of the Services and the Application Platform, excluding any taxes based on the SaaS Provider’s income, employees, agents, or subcontractors. If the Client is exempt from such taxes, it must provide the SaaS Provider with valid and current documentation supporting the exemption.

How should you handle tariff price increases?

Tariffs rise, and so should your price—or at least your right to renegotiate. Smart MSAs include Tariff Price Adjustment clauses that trigger when tariff costs spike.

Take the 2025 U.S. tariff hike on EU aerospace parts—many sellers relied on these clauses to pass cost increases to customers or renegotiate terms. This isn't just a protective measure—it's a financial strategy.

⇉ Tariff Price Adjustment Clause

It is advisable to include provisions that allow for price adjustments in the event of tariff changes. Such clauses enable the parties to renegotiate pricing terms when tariffs increase, helping to ensure that any resulting financial impact is equitably managed between the parties.

⇉ Example Clause:The Seller reserves the right to apply a Tariff Price Adjustment in the event that any new or increased tariff, duty, or similar governmental charge is imposed that directly or indirectly affects the cost of the [product] or any raw materials used in the manufacture of the Tool. The adjustment shall take effect from the date the Seller first incurs the increased cost and shall reflect the actual impact of the tariff on the Seller’s pricing.

Can you terminate a contract because of new tariffs?

Yes—but only if you’ve prepared for it. Your MSA should contain termination clauses for hardship and legal changes, including the sudden imposition of tariffs.

These clauses recognise the business reality that tariffs can make deals economically unviable. Whether you're importing steel or delivering SaaS, being trapped in a loss-making contract is a disaster.

⇉ Enhanced Termination Rights: Addressing Tariff-Driven Hardship

To protect against unforeseen trade disruptions, it is prudent to incorporate termination provisions that empower parties to exit contracts when newly imposed tariffs or regulatory changes make performance economically unviable.

⇉ Termination Due to Hardship:If the performance of this Agreement is prevented, hindered, or delayed due to unforeseen events beyond the reasonable control of either party—including, but not limited to, the imposition of tariffs or trade barriers—either party may suspend performance or terminate this Agreement without liability.

⇉ Termination Due to Change in Law:In the event that a change in applicable law, regulation, or government policy—such as the enactment of new tariffs—materially affects the commercial viability or legality of this Agreement, the affected party may terminate the Agreement upon providing written notice to the other party.

Should force majeure include tariff impositions?

Absolutely. Force majeure clauses should explicitly include tariff-related events like executive orders or trade embargoes.

When Howmet Aerospace invoked force majeure due to new tariffs in 2025, they paused deliveries with legal backing. Companies without this foresight had no choice but to honour economically damaging contracts. That’s a cautionary tale—one you don’t want to live through.

⇉ Expanded Force Majeure: Include Tariffs as Excusable Events

Consider explicitly expanding your force majeure clause to encompass the imposition of tariffs or similar trade measures as events that may excuse non-performance. This adjustment offers a clear legal foundation for delaying or terminating contractual obligations when sudden tariff changes render performance impracticable or impossible.

⇉ Example Clause:The Vendor shall not be liable for any delay or failure in performance resulting from causes beyond its reasonable control, including but not limited to acts of God, government restrictions, national emergencies, or the imposition of tariffs or trade sanctions that materially affect the supply or cost of goods or services.

⇉ Case in Point:In April 2025, Howmet Aerospace invoked a force majeure clause following the sudden implementation of a 20% U.S. tariff on European Union imports. The declaration allowed the company to suspend affected shipments, prompting many in the aerospace sector to reassess their contract language to ensure similar protections.

When does a tariff change qualify as a hardship?

This is where force majeure meets commercial reality. Sudden or significant tariff hikes can qualify as hardship events, allowing parties to suspend or terminate obligations.

Your contract should define thresholds—say, tariffs increasing over 50%—to reduce ambiguity. Without this, you may face drawn-out legal debates or strained client relationships.

⇉ Force Majeure & Hardship Clause

Include a provision stating that sudden, unexpected, or substantial changes in tariffs may constitute a force majeure or hardship event. This allows the affected party to seek relief—such as suspension, renegotiation, or termination—if the new tariffs materially alter the ability to perform or the agreed pricing structure.

⇉ Example Clause:Neither Party shall be held liable for any failure or delay in performing its obligations under this Agreement to the extent such failure or delay is caused by events beyond its reasonable control. Such events may include, but are not limited to, acts of God, war, government actions, or extraordinary and unforeseen increases in tariffs, duties, or taxes imposed by governmental authorities exceeding [50]% of the applicable rate at the time of contract execution.

Arne’s Takeaway

In today's fast-moving trade environment, contracts must be tariff-proof. By updating your MSAs with clear supremacy, tax responsibility, and force majeure clauses, you build resilience. Protect yourself from economic shocks, renegotiate when needed, and walk away when you must.

Expert Recommendations

Audit all active MSAs for tariff vulnerability.
Add or update force majeure clauses to include tariff events.
Train your legal and compliance teams on tariff change protocols.

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Disclaimer

This blog is for educational purposes only and does not constitute legal advice. Always consult with qualified professionals for tailored legal support. Book a free consultation with us via www.customsmanager.org.