Why Contracts Are the First Line of Defense Against Tariff Exposure

To stay protected under the evolving U.S. tariff regime, Asia-based businesses must review and often revise their existing and future agreements. Here are the five most critical areas to look at.

The U.S. uses a “substantial transformation” test to determine a product’s origin. Even if final assembly happens in Vietnam, Cambodia, or Malaysia, if key components come from China, the U.S. Customs and Border Protection (CBP) may still classify it as Chinese.

One of the most important decisions in any cross-border sale is the Incoterm you choose. Many Asia exporters agree to DDP terms, meaning the seller pays all duties and tariffs.

Consider switching to DAP, where the buyer takes responsibility for customs clearance and duties but include language to handle disputes over reclassification or delays.

This is your safety net. A well-drafted change in law clause allows you to adjust pricing, renegotiate, or even terminate the agreement if government policies significantly increase your costs.

But here’s the catch: these clauses must be specific, not vague.

Many exporters rely on force majeure clauses to excuse performance in extreme situations. But courts don’t usually recognize tariffs or increased costs as valid reasons to break a contract—unless your clause is crystal clear.

Even then, be aware that you must follow notice requirements and proof of impact to rely on this clause.

The choice of governing law will affect how your contract is interpreted.

To protect yourself, use clear pricing and renegotiation clauses and consider expert determination for disputes over origin or duties instead of lengthy arbitration.

Now is not the time to take a “wait and see” approach. The U.S. tariff regime could change again at any time, and your business must be ready.

1.  Review all active U.S. sales contracts

Check for DDP terms, fixed pricing, and lack of tariff clauses.

2.  Amend or renegotiate vulnerable contracts

Add change in law and force majeure protections now, before tariffs take effect.

3.  Work with legal counsel to create a contract template

Future-proof agreements for new customers and distributors.

4.  Track your supply chain and document substantial transformation

Keep certificates of origin, BOMs (bills of materials), and manufacturing records.

5.  Train your sales and logistics teams

Make sure they understand how tariff risks can be managed contractually, not just commercially.

Trade wars may come and go, but contractual clarity lasts. With the U.S. leaning toward more aggressive trade policies—and countries like Vietnam facing their own crackdowns—it’s never been more important for Asia-based exporters to adopt a legally sound approach to contract negotiation and drafting.

Whether you’re a manufacturer, trading company, or OEM supplier, the time to act is now.

At Themis Partner, we specialize in helping businesses across Asia navigate the legal complexities of cross-border trade. From tailored contract templates to real-time legal support, we help you stay protected in an unpredictable regulatory landscape.