New Section 301 Tariffs Could Raise Kentucky Contract Costs
Federal officials set the duties. Kentucky procurement officers decide whether taxpayers reimburse vendors for them.
Kentucky’s Tariff Justification Form asks a vendor seeking reimbursement to produce more than a notice that prices have increased. The vendor must identify the country of origin and tariff rate, submit an invoice showing the charge, and provide a completed Customs and Border Protection Form 7501. The form warns that submitting the documents does not guarantee approval.
Those requirements acquired new importance on July 24. The day before, President Donald Trump directed the Office of the United States Trade Representative to impose tariffs on imports from 60 investigated economies. Most covered imports now face a 10 percent or 12.5 percent duty, although country-specific calculations and extensive product exemptions determine what an importer actually pays.
The charge is collected from the importer when merchandise enters the United States. If the importer or a supplier later sells the goods to the Kentucky government, the customs expense may return as a request for a higher contract price.
Kentucky cannot waive the federal duty, but it can refuse to reimburse a claim that the records do not support.
The tariffs cover more than forced-labor goods
The administration describes the new duties as a response to governments that have failed to prohibit or effectively block imports produced with forced labor. USTR argues that those failures allow goods linked to forced labor to enter international supply chains, lower production costs, and disadvantage companies operating under stronger labor standards.
The tariffs, however, are not limited to shipments suspected of containing forced-labor goods. The final USTR notice relies on a Section 301 provision that permits action against goods and economic sectors regardless of whether they were involved in the foreign practice under investigation. An ordinary chemical, machine part, or electronic component can be taxed because of the exporting economy’s policies even when no one alleges that the product itself was made with forced labor.
That approach differs from Customs and Border Protection’s existing forced-labor enforcement, which can detain or exclude particular shipments when evidence links them to forced labor. The Section 301 action instead uses broad import taxes to pressure foreign governments to adopt and enforce their own import prohibitions.
The president selected that remedy. His July 23 memorandum says negotiations without tariffs, lower rates, and other statutory approaches would be less effective. USTR then issued the country rates, customs classifications, and exemption tables that Customs and Border Protection uses to collect the duties.
Importers had only hours to review the final instructions. Customs and Border Protection released its filing guidance at 5:50 p.m. Eastern on July 23, and the tariffs took effect at 12:01 a.m. July 24. The notice told importers and customs brokers which Harmonized Tariff Schedule classifications to report when filing entries.
USTR had conducted investigations, received more than 1,600 written comments and heard testimony from more than 100 witnesses. It declined to establish a general exclusion procedure for companies that later demonstrate that a particular input is unavailable in the United States. USTR said expanding exemptions that way would conflict with the president’s direction.
Kentucky’s form creates a paper trail
The Kentucky Finance and Administration Cabinet adopted its tariff reimbursement procedure in June 2025, before the latest duties were imposed. Its Tariffs Process memorandum explains what executive-branch agencies should review when a vendor asks to recover tariff charges.
The memorandum directs agencies to look for the federal tariff notice, the product’s Harmonized Tariff Schedule number, a commercial invoice and shipping records showing international sourcing. It calls CBP Form 7501 the best proof that the supplier actually paid the tariff. Management in the purchasing cabinet must review the justification, with Finance Cabinet approval when required.
A vendor’s claim that tariffs raised its costs is only the beginning of the review.
The manufacturer, foreign seller, importer of record, customs broker, distributor and state contractor may be different companies. The vendor requesting reimbursement may have experienced a genuine increase without having paid Customs and Border Protection directly.
The agency therefore has to trace the charge through the transaction. Procurement staff can compare customs records with the invoice, confirm the country of origin and classification, check whether an exemption applies, and review the contract language governing price adjustments. The state form also asks for the tariff amount when the contract was awarded and the amount at the time of the request, providing a way to identify costs that were already reflected in the original price.
The Office of Procurement Services is the central purchasing agency for Kentucky’s executive branch. It purchases commodities and nonprofessional services above agencies’ small-purchase authority and oversees compliance with the Kentucky Model Procurement Code. Its staff cannot alter the federal tariff, but the office helps determine whether public money covers a vendor’s request.
Calvert City shows why the calculation is difficult
Arkema’s chemical plant in Calvert City provides a documented Kentucky example of how the policy reaches a domestic manufacturer.
At USTR’s July 7 hearing, an Arkema representative described a chemical input used at the Calvert City facility that must be imported from the Czech Republic. The company said it had spent more than a decade trying to redevelop a U.S. supplier, but no domestic production remained. Arkema reported a recent investment of approximately $60 million at the Kentucky plant.
Arkema identified another raw material used in Calvert City to make high-performance polymers for batteries, semiconductor piping, wire and cable coatings and other products. U.S. production of that material was limited and declining, according to the company, leaving a European source as the likely replacement if domestic production ceased.
The testimony documents a Kentucky supply-chain concern, but it does not establish the final cost. The public record reviewed for this article does not confirm the customs classifications Arkema uses for every shipment, whether the final exemption schedules cover those industrial uses, the annual value of the imports, or the amount the company expects to pay.
It also does not show whether Arkema will absorb the expense, change suppliers, alter production, or pass the charge to customers. The company’s $60 million investment cannot be used as the base for a tariff calculation. It describes investment in the facility, not the customs value of imported materials.
The same limitation applies to Kentucky’s statewide import total. Census Bureau figures show that Kentucky was the reported destination for approximately $96.5 billion in imported goods in 2025, including about $91.5 billion in manufactured products. The data do not identify which goods are covered by the new duties, which qualify for exemptions, who imported them, or where they were ultimately used.
Multiplying the statewide total by 10 percent or 12.5 percent would not produce a defensible Kentucky tariff estimate.
Frankfort decides whether the Commonwealth pays
The president directed USTR to impose the tariffs. USTR established the rates and exemptions. Customs and Border Protection collects the money at the border.
The cost can then pass from the importer to a supplier and from a supplier to a government contractor. A purchasing cabinet reviews the documentation, and Kentucky decides whether the contract price should change.
The federal government collects the tariff; Kentucky procurement officers decide whether the Commonwealth absorbs it through a contract adjustment.
A supported request should identify the imported product, country of origin, customs classification, importer or broker, amount paid, and contract provision authorizing the increase. Reviewers should also determine whether the vendor is seeking only the documented tariff expense or adding an unrelated markup.
That decision is narrower than the national argument over tariff policy, but it controls the use of Kentucky tax dollars. A federal action made by one office becomes a series of less visible decisions by companies, contracting agencies and procurement staff.
The first claims are not yet visible
Kentucky publishes its reimbursement form and review memorandum, but the Finance Cabinet does not appear to maintain a public running report of claims, approvals, denials or payments. The new tariffs have also been in effect for only a short time, so the number and value of vendor requests remain unknown.
The records should eventually answer basic questions. Which vendors requested adjustments? Which agencies approved them? Did the companies produce customs documentation, and how much did the Commonwealth pay?
The tariffs also face two new legal challenges. Complaints filed July 24 in the U.S. Court of International Trade argue that USTR did not make sufficiently individualized findings for each investigated economy or adequately connect the broad tariffs to the foreign practices it identified. Those are allegations by the plaintiffs, and no court had ruled on the merits as of July 25.
Companies and public agencies must apply the tariffs while those cases proceed. A later ruling could create additional disputes over refunds and contract costs incurred before the court acts.
Request the records behind the reimbursement
Kentucky residents can request all Tariff Justification Forms submitted to the Finance and Administration Cabinet or an individual purchasing cabinet after July 24, 2026. The request should also seek vendor letters, invoices, CBP Form 7501 records, approval or denial decisions, and resulting contract amendments.
For a school district, city, or fiscal court, ask whether any contractor has requested a price adjustment attributed to the new Section 301 tariffs. Request the original contract, the proposed amendment, and the documentation used to verify the charge. Comparing those records will show whether the tariff arose after the price was established and whether the public body required proof comparable to the state form.
Arkema can be asked which Calvert City inputs remain subject to the final action, whether any received an exemption, and what annual duty the company expects. The company can also clarify whether it anticipates changes to production, employment, sourcing or investment at the plant.
The paper trail begins with a customs entry and ends with a contract decision. Those records will show whether a federal tariff became a private expense, a state expense or both.