Disclaimer: this blog post is not legal advice and is for informational purposes only. Please seek guidance from your own legal counsel before utilizing any information you see here.
Did you know that adjusting your product’s classification could significantly reduce the tariffs you pay? By shifting a product from a high-tariff category to a lower-tariff one, brands can unlock major cost savings - legally and strategically.
With the latest tariff increases, ecommerce and DTC brands are searching for ways to minimize expenses. Tariff engineering might be the solution.
Tariff engineering is a strategic approach where importers legally minimize duty costs by designing or modifying products to qualify for lower-duty Harmonized Tariff Schedule (HTS) codes. It’s not about evading tariffs - it’s about understanding the system and optimizing within it.
The concept was validated in the 1881 U.S. Supreme Court case Merritt v. Welsh, which involved imported sugar. An importer added molasses to refined sugar, darkening its color to qualify for a lower tariff under the Dutch Standard Color test. Though customs argued the modification was manipulative, the Court ruled only Congress' specified test (color, not chemical analysis) could determine classification – validating strategic product modifications.
Key Takeaway: If a product is legally classified under a lower-tariff code due to a design choice, it’s compliant - even if the modification seems minor.
Let’s say you sell garbage cans:
Result: A small design change could save thousands in duties per shipment.
How to Leverage Tariff Engineering?
Start by carefully reviewing your product classifications to determine if minor modifications to materials, features, or assembly methods could shift your product into a lower-tariff category. For example, if your product currently uses steel (subject to a 25% tariff), switching to plastic or composite materials might significantly reduce your import costs.
Diversifying your supply chain by sourcing from countries with free trade agreements (FTAs) or lower tariff rates can provide substantial cost savings. For instance, relocating production from China to Vietnam might reduce your expenses under trade agreements. Right now, Vietnam has a significantly lower tariff rate than China.
We built Portless fulfillment centers in China and Vietnam for one reason: so that our customers can automatically gain access to lower tariffs and reduced operational costs - without having to change suppliers.
If you’re an eCommerce or DTC brand importing goods, recent tariff hikes likely hurt your margins. Tariff engineering could be a game-changer.
✔ Audit your HTS codes – Are there better classifications?
✔ Explore small design modifications – Could a tweak lower your duty rate?
✔ Consult a trade expert – Ensure compliance while maximizing savings.
One small change could save you thousands.
We understand how scary the new tariff landscape is and how high the stakes are for your business. But with the right strategy, you can save money and scale faster. We help hundreds of ecommerce and DTC brands leverage tariff engineering to reduce costs and grow with confidence.
Schedule a risk-free assessment today and start turning tariffs into an advantage.
