‘Tariff engineering’ is prevalent as businesses are trying to skirt duties

Will you bother you if you officially classify your coat as a windbreaker or raincoat or your shoes as slippers? Businesses are concerned, as classifications under the preferred class help to pay the lower tariff rate.

Several customs lawyers, supply chain and shipping experts told CNBC that as US President Donald Trump imposes duty on friends and enemies, manufacturers are more rethinking their classification of their products and resorting to “tariff engineering” to achieve less duties.

Tariff Engineering – Practice Prior to Trump – Changing the objects of the item, involving changing its dimensions or combinations so that the finished products are justified to fit differently “Harmonized System Code,” Legal experts said.

While most new tariffs were added to Trump’s second period, the US government has Engraved exceptions to some productsBusiness lawyers pointed out that the door will open the door to take advantage of the companies through tariff engineering.

After Trump unveiled a wide range of “each other” tariffs in April, several overseas manufacturers went to assemble steel and aluminum elements to their final products. Section 232Chicago Law Agency Barns, Richardson and Kolburn’s partner David Legu.

However, as Trump has increased all the tariffs on all steel, aluminum products and products to 50%, the UK said, “Now the duties are contrasted, we are now looking at the companies removing those elements and passing them separately.”

“There is nothing inherent or unpleasant about the use of strategic design options that lead to different tariffs and duty rates,” said Washington DC’s Kelly Dry and Warren’s Customs Advocate John Foote, “Turf Engineering is one of the few things you can do.”

Are over 5,000 different product classification codes The US Customs Authority uses when assessing tariffs. These tariff classes are determined by decades of negotiations between governments and industrial agencies, which are usually changed from the product category.

In its quarterly earnings call in March, the US motorholm or entertainment automaker said, “Plans to work with outside experts to develop and implement effective (tariffs), including tariff engineering and postponement.”

Anil Salman, president of the Islamabad Policy Research Institute’s Economic Security Institute, described the act as “the clever art of putting out customs”, twisting “enough” products to qualify for less duties.

Tariff engineering practice can be found until 1882 when importers apply sugar with molasses to avoid more duties on lightweight colored sugar. Inside A landmark judgment.

Since then, large and small companies have been playing chess with the US tariff classification system, and many home names have successfully implemented strategic product tweaks to save the cost of tariffs.

For example, Columbia sports dresses have never been ashamed of the use of tariff engineering. “I have a team of entire people working together with designers and developers and traders and customs, and to ensure that we are considering the impact of tariffs in the design process,” said Jeff Toz, the company’s global customs and trade vice president, Jeff Toz said Market in time Trump’s first period.

Amidst its changes, the company added small IPPPard pockets below the waist on women’s shirts, allowing them to be exempted from more duties US Customs Terms.

Likewise, the manufacturer of footwear Converse adds fuzzy-felt fabric All Stars Sneakers to its signature soles, rather than a typical full-rubber one, are classified as slippers than athletic shoes, which helps to drastically cut the tariff.

A fluffy blanket with the arms imported mainly from China, winning the lawsuit in 2017 reduced its tariffs in half, classify it as a blanket, but not the object of the fabric.

The fast -moving consumer is better and the fields of dresses, clothing and footwear can be seen as easy to execute tariff engineering, said Andrew Wilson, a supply chain of Consultancy Saplino Ink.

Wilson said that for more sophisticated and “high-regulated” sectors such as automotive, aerospace, electronics and medical equipment, this is especially challenging … because minor changes may require extensive auction and approval. “

“You may still be looking for a 12 to 24 -month test, certification and auction to do it,” Wilson added, as it requires a wide range of collaboration in departments, including design, engineering and legal team.

The Ford is a case that describes the challenges with tariff engineering. The vehicle manufacturer imported his transit connect van as a passenger van, then removed the second row of seats as cargo vans. When doing so, Ford A huge 25% missed tariffs And only 2.5% paid import tariffs.

The US Justice Department said Its judgment last year Those Ford “misleading the goods vans” and the previous row seats “never used to carry passengers and never used.”

“The article should be a ‘commercial reality’ in importing. The risk of finding customs (May) changes as” fraud or artwork “, (in that case) can be rejected by tariff engineering,” Ridvu said.

“In some cases, changing certain things about the product does not change the essential role of what is good,” said Derek Scarborough, founder of global management contacts. “If you add something to a shopping cart, it is still a shopping cart,” he said.

Has developed the so -called US Customs and Border Control The “binding administration” system Where companies can get official decisions on product classifications and HTS code before importing.

Adam Lees, a law firm Harris Slivoski’s lawyer, who helped customers to prepare such administrative letter requests, described it as “a way to get the official blessing of the CBP for companies.”

For transactions, “small percentage savings can also be meaningful,” the Lease said, because the transmitted volumes may be substantial.