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The Quiet Comeback of Tariff Engineering in the Global Trade Arena

As trade tensions escalate and import duties surge, global companies are dusting off an old playbook: tariff engineering. This legal, highly strategic practice allows businesses to redesign products — sometimes with minimal changes — to fit into more favorable customs classifications, significantly reducing their duty liabilities. In a world where a single percentage point can translate into millions of dollars saved, tariff engineering is quickly regaining prominence across multiple industries.

What Exactly Is Tariff Engineering?

Tariff engineering involves altering a product’s material composition, size, shape, or functionality to qualify for a different classification under the Harmonized Tariff Schedule (HTS), which governs import duties. The U.S. customs system alone contains over 5,000 classification codes, offering plenty of room for strategic adjustments.

For example, a coat might be redesigned just enough to be classified as a windbreaker instead of a heavy jacket, instantly lowering the applicable tariff rate. The practice is perfectly legal, as long as the modifications are genuine and not fraudulent misrepresentations.

“There’s nothing inherently illegal or unethical about using smart design choices to qualify for a different tariff rate,” said John Foote, customs lawyer at Kelley Drye & Warren. “Tariff engineering is one of the few proactive levers companies can pull to protect margins without violating the law.”

Trump-Era Tariffs Revive the Practice

Although tariff engineering has existed for well over a century, recent trade policies have injected new urgency into the practice. Under former President Donald Trump, sweeping tariffs were levied across a broad spectrum of imports, triggering a resurgence in companies exploring creative design tweaks.

David Forgue, a partner at Barnes, Richardson & Colburn, cited how manufacturers bundled steel and aluminum components into finished goods to initially bypass Trump’s steep 25% steel tariffs under Section 232. But when Trump doubled those tariffs to 50% on some products, many firms quickly reversed course, removing those components to once again shift their classification.

Aneel Salman, chair of economic security at Islamabad Policy Research Institute, called tariff engineering the “clever art of outsmarting customs,” emphasizing how even minor design changes can lead to substantial tariff reductions.

Real-World Examples: From Apparel to Automobiles

Numerous well-known companies have mastered tariff engineering:

• Columbia Sportswear repositions zippers and adds pockets to its garments, allowing certain shirts to avoid higher apparel tariffs by being classified under more favorable codes.
• Converse incorporates fuzzy felt on the soles of its iconic All Stars, qualifying them as slippers rather than athletic shoes, slashing tariffs significantly.
• Snuggies, the wearable blanket with sleeves, saved millions after a 2017 court ruling reclassified it as a blanket rather than apparel, cutting its tariff obligation nearly in half.
• Lapel Pins with Cubic Zirconia: One company avoided a 14% festive articles duty by embedding cubic zirconia into its lapel pins, successfully having them reclassified as jewelry instead.

The roots of tariff engineering trace back as far as 1882, when a sugar importer coated light-colored sugar with molasses to avoid higher tariffs. The U.S. Supreme Court ultimately ruled the move legal as long as the invoices were truthful and no fraud occurred.

Challenges in Heavily-Regulated Industries

While apparel, footwear, and consumer goods can often implement changes quickly, industries like automotive, aerospace, medical devices, and electronics face greater hurdles. “Even minor changes may require 12 to 24 months of testing, certification, and regulatory approvals,” explained Andrew Wilson of supply chain consultancy Supplino Inc. The complexity stems from safety, performance, and legal standards that demand exhaustive cross-departmental collaboration.

Where Legal Strategy Meets Risk: The Ford Example

Companies navigating tariff engineering must balance legal creativity with compliance. Ford Motor Co.’s case demonstrates the risks. For years, Ford imported Transit Connect vans as passenger vehicles to take advantage of a 2.5% tariff, then removed the second-row seats to sell them as cargo vans, which normally carry a 25% tariff.

The U.S. Department of Justice ultimately ruled Ford’s practice as misclassification, arguing the seats were never intended for passenger use. “If customs finds that changes don’t alter a product’s fundamental commercial reality, the company could be charged with fraud,” cautioned Forgue.

Preemptive Rulings: Navigating the Gray Areas

To avoid legal landmines, many firms seek “binding rulings” from U.S. Customs and Border Protection (CBP), which provide official product classifications before shipments arrive. These rulings offer legal certainty but come with a trade-off.

“If CBP rules against you, you're stuck,” said Derek Scarbrough of Global Logistical Connections. “Some companies prefer to take calculated risks and operate under the radar rather than risk an unfavorable binding ruling.”

The High Stakes of Global Trade Strategy

In today’s complex trade environment, tariff engineering has evolved into a sophisticated, multidisciplinary strategy involving legal teams, designers, engineers, and supply chain experts. With billions of dollars on the line, companies will likely continue pushing the limits of lawful design tweaks to remain competitive in an increasingly protectionist world.

Whether viewed as clever strategy or legal brinkmanship, tariff engineering is proving to be one of the most effective — and enduring — tools in the global trade playbook.