Tariff Engineering Makes a Comeback: How Businesses Are Legally Avoiding Higher Import Duties

1. What Is Tariff Engineering?

Tariff engineering is a legal strategy used by businesses to redesign, reconfigure, or modify products in a way that qualifies them for lower import duties under specific customs classifications. It often involves subtle changes to a product’s materials, dimensions, or functionalities to shift it into a more favorable category under the Harmonized System (HS) code.

Unlike smuggling or fraud, tariff engineering is a legitimate practice as long as the declared products truly match the characteristics needed for the new classification and are transparently reported to customs officials.

“As long as the goods are truly invoiced and freely and honestly exposed to the officers of customs for their examination, no fraud is committed.” – U.S. Supreme Court, 1882

2. Why Is Tariff Engineering Trending Again?

With former President Donald Trump’s second-term trade agenda reintroducing steep tariffs on a wide range of imports — including metals, electronics, textiles, and automobiles — companies are now turning to tariff engineering as a cost-saving tool.

Although many new tariffs are broad-based, certain product categories enjoy partial or full exemptions, opening up opportunities for smart classification plays.

Real-life Examples:

Converse adds a fuzzy felt lining to the bottom of their sneakers, enabling the shoes to be classified as slippers instead of athletic footwear, saving over 20% in tariffs.

Columbia Sportswear adds small zippered pockets on women’s shirts so they can be considered “outerwear” with a lower duty rate.

The Snuggie won a legal battle in 2017 to be categorized as a blanket — not apparel — effectively cutting its duty rate in half.

3. How Do Companies Use Tariff Engineering?

Tariff engineering isn’t about deception; it’s about strategic product design that aligns with customs law. Many global manufacturers have dedicated teams working across R&D, legal, and supply chain departments to find ways to classify products more favorably.

Common tactics include:

Material substitution: Replacing synthetic materials with cotton to lower apparel duty rates.

Dimensional tweaks: Slight adjustments to size, shape, or design to meet alternative classification standards.

Component separation: Shipping parts separately (like steel or aluminum) instead of as a finished good.

HS code optimization: Exploiting ambiguities in the HS system that allow for different interpretations of similar products.

4. The Role of HS Codes in Tariff Classification

The U.S. Customs and Border Protection (CBP) relies on more than 5,000 different HS codes to classify imported goods. These codes determine the duty rate based on product characteristics such as composition, use, and commercial identity.

Businesses can request a binding ruling letter from CBP, which offers a formal decision on how a product will be classified — but the process carries risk. If the ruling is unfavorable, the company must comply and loses the flexibility to “fly under the radar.”

“It’s a way for companies to get CBP’s official blessing,” says Adam Lees, an attorney at Harris Sliwoski.

5. The Legal Grey Area: When Engineering Becomes Evasion

There’s a fine line between legal tariff engineering and unlawful misclassification. If a product’s design changes are seen as superficial or misleading, customs authorities may accuse the importer of fraud or manipulation.

Case in point: Ford Motor

For years, Ford imported its Transit Connect vans as passenger vehicles (2.5% duty) and then removed the back seats to sell them as cargo vans (25% duty). In 2024, the U.S. Department of Justice ruled this practice as misclassification because the seats were never intended for real use — a move that led to substantial penalties.

“If you add a feature that doesn’t change the fundamental nature of the product, customs may reject it,” warns Derek Scarbrough, founder of Global Logistical Connections.

6. Which Industries Can Use Tariff Engineering Effectively?

Easier to implement:

Apparel and footwear

Consumer electronics accessories

Home goods and furnishings

Promotional items and gifts

More difficult to implement:

Automotive and EVs

Medical devices

Aerospace and defense

High-tech electronics

Heavily regulated industries often require months or years of product validation before even minor changes can be approved — making tariff engineering harder to apply.

7. The Future of Tariff Engineering

In a world of trade volatility, tariff engineering is evolving from a fringe tactic into a mainstream supply chain strategy. Companies are integrating customs considerations directly into product development cycles — not just reacting at the shipping stage.

“It’s one of the few proactive ways companies can reduce duty liability while staying fully compliant with the law,” says John Foote, a customs attorney at Kelley Drye & Warren.

Whether through fabric swaps, design tweaks, or HS code optimization, businesses are playing legal chess with customs systems — and winning.

Gain a competitive edge with up-to-date market intelligence from InfoFinance – follow us for the latest insights.