“Tariff Engineering” is in fashion when businesses are trying to fulfill their duties

Would you worry if your coat were officially classified as a windmill, or shoes as slippers? Enterprises do not care as classifications in accordance with the preferred category can help them pay low tariff rates.

As US President Donald Trump trusts both friends and enemies, manufacturers are increasingly rethinking the classification of their products and resorting to “tariff engineering” to perform lower responsibilities, deliveries and delivery experts reported.

Tariff engineering – a practice that precedes Trump – provides changes in the materials of the item, change its size or compositions so that the finished products can be justified to fit in another “Harmonized system code”, “” Legal experts said.

Although most new tariffs added during Trump’s second term are wide, the US government has cut out release for certain productsLeaving the door open to companies to benefit with tariff technology, the lawyers note.

Once in April, Trump submitted a sweeping “mutual” tariffs, several foreign manufacturers moved to a set of steel and aluminum items into their final products to get lower 25% on duty according to Section 232said David, who forgot, a partner at the Chicago Law Barnes, Richardson & Colburn.

However, in June things changed rapidly when Trump rose to tariffs for all steel, aluminum products and derivatives to 50%, except from the UK “now that the duties are canceled, we now see that the companies are removing these elements and send them separately,” he said.

There is “nothing in its essence, is not illegal and not even resistant to the use of strategic design choice that lead to the creation of different products that are subject to different classification of tariffs and duty,” said John Foot, customs lawyer Kelley & Warren in Washington DC “Tariffs reduce responsibility for your duty. “

There are more 5000 different products classification codes What the US customs authority uses when evaluating tariffs. These tariff classifications were determined after decades of negotiations between governments and industry bodies, often varying in the category of products.

Winnebago Industries, an American car manufacturer, or a recreational vehicle, said in a quarterly salary in March, plans to “work with external experts on the development and implementation of effective (tariff) strategies, including tariff engineering and deferral.”

Aniel Salman, Chairman of the Economic Security of the Islamabad Policy Research Institute, called this act “reasonable customs output” as importers and manufacturers set up products “enough” to claim lower responsibilities.

The practice of tariff engineering can be traced by 1882, when the importer covered the sugar with a molasse to avoid higher duties imposed on sugar more light color. In symbolic rulingThe Supreme Court ruled that the law is quite legal: “As long as the goods are truly billed and freely and honestly exposed to the customs service officers for their examination, no fraud is being carried out.”

Since then, companies, large and small, have been continuing to play chess with the US tariff classification system, with several names of household farms successfully implementing strategic products to save on tariff costs.

For example, Columbia Sportswear is never shy about using tariff technology. “I have a whole team of people working with designers and developers and merchandisers, and with customs, and to make sure that during the development process we are considering the impact of tariffs,” said Global Complet Vice President and Trade Jeff and Trade The market in time Trump’s first term.

Among its changes the company added small pockets with lightning under the waist US Customs Rules.

Similarly, the shoe manufacturer Converse adds fuzzy fabric On the signature sole, all the sneakers of the star, not a typical full band that should be attributed to the category of slippers, not sports shoes, helping it dramatically reduce the tariff.

Snugggies, a fluffy sleeve blanket, imported mainly from China, almost halved its tariff costs, winning the lawsuit in 2017, classifying it as a blanket rather than a piece of clothing.

Fast moving consumer good and clothing, clothing and shoes, can find relatively easy in the sale of tariff engineering, said Andrew Wilson, a supply chain strategist at Consultancy Supplina Inc.

For more sophisticated and “strong” sectors such as car, aerospace, electronics and medical devices, “it is especially difficult … Because even minor changes can require widespread and approval,” Wilson said.

“You can see another 12 to 24 months of testing, certification and checks to do this,” Wilson added, as we need extensive cooperation in various departments, including design, engineering and legal team.

The fact that illustrates the problems with the tariff engineering is Ford Motor. For years, the carmaker imported his transit van as a passenger minibus, and then removed the place in the second row to sell them as freight minibuses. By doing this, Ford bypassing hefty 25% tariff And he paid only 2.5% of import duty.

The US Justice Department said in his ruling last year This Ford was “the wrong classification of freight minibuses” and that the rear line seats were never supposed to be and were never used to carry passengers. “

“The article should be” commercial reality “when imported. The risk is that the customs (can) consider changes in” fraud or thing “(in this case) tariff engineering can be declined,” he said.

“In some cases, the change in certain things about the product does not change a significant nature of what is good,” said Derek Scarb, founder of global logistics ties. “If you add something to the basket, it’s still shopping,” he added.

Customs in the US and Border Management developed the so -called “Bind” system Where companies can get official decisions on the classification of products and HTS code before importing.

Adam Lis, Prosecutor of Law Firm Harris Slivoski, who helped customers prepare such management requests, called it “a way to get the official blessing of CBP before sending.

Even “small interest savings can be significant for enterprises,” the fox said, as the volumes that are sent may be significant.