Tariff Engineering

Tariff engineering refers to the practice that some manufacturers use to classify merchandise under a more favorable customs classification and pay the lowest possible duty rate. 

For manufacturers and shippers, customs duties and tariffs can add up to a significant amount depending on where shipments are imported from. Because the distinction between merchandise classifications can be virtually arbitrary in some cases, making a few minor changes to a product so it can be classified under a different umbrella means easy savings, and it’s a technique many large manufacturers employ. 

An Example of Tariff Engineering

Tariff engineering is completely legal so long as the changes made to a product are not removed after being imported. A good example is the brand Converse, which would cover over 50% of the sole of their shoes with felt to reclassify and import their footwear as slippers instead. Although the duty rates for importing shoes at the time sat at approximately 37.5%, the rates for importing slippers were only 3%, significantly reducing the amount paid per pair. 

Large manufacturers like Converse will often first research the relevant category options relating to their import. With a clear direction in mind, they can then make minor adjustments to the merchandise so that it complies with the requirements of the desired category.