"Tariff engineering" is back as businesses maneuver to avoid paying higher duties. The practice, which is legal in the U.S., involves altering items enough to justify reclassifying them under a trade exemption. Converse, for example, adds fuzzy fabric to the soles of its All Star sneakers so they can be considered slippers, not athletic shoes. The practice gets trickier for sectors that are more heavily regulated, like autos and aerospace, one expert tells CNBC, "because even minor changes may require extensive validation and approval."
Tariff rate quotas seem to be the get-out-of-jail card for sectoral Section 232 tariffs. First used in the US-Uk deal on autos, the FT reports that the EU may be resigned to this approach. Canada and Mexico, looking for a respite from high steel and aluminum tariffs, may also negotiate TRQs.
If TRQs becomes the trend, coupled with other country and product-specific tariffs, not to mention more restrictive rules of origin, US businesses and customs officials will have their work cut out for them in navigating this complex terrain.
It would be a good idea for Congress to increase the funding for our hard-working customs officials, whose jobs are becoming even more demanding.
With global trade policies in flux, tariffs are now a strategic lever, not just a cost. DC Velocity’s June 8, 2025, analysis highlights seven smart, tech-powered tactics to future‑proof your supply chains:
1️⃣ Continuous Monitoring & Scenario Modeling
Leverage advanced analytics, AI/ML, and digital twins to model tariff scenarios and stress-test your supply chain.
2️⃣ Tariff Engineering & Classification Optimization
Use product redesign and reclassification tools, plus automated compliance systems, to reduce duties and avoid manual errors.
3️⃣ Strategic Sourcing & Free Trade Agreements
Shift sourcing toward regions aligned with favorable trade agreements or geopolitically stable locations.
4️⃣ Flexible, Agile Supply Chain Structuring
Build in contract flexibility and modular supplier networks so you can pivot production rapidly as tariffs shift.
5️⃣ Duty Drawbacks & Special Trade Programs
Maximize government programs like foreign‑trade zones, duty drawbacks, and other preferential schemes.
6️⃣ Collaborative Pricing & Cost‑Sharing
Renegotiate contracts and collaborate with suppliers to share tariff burdens and maintain margins.
7️⃣ Holistic Cost-to-Price Management
Use price elasticity modeling and willingness-to-pay insights to preserve competitiveness while protecting margin.
🔍Which of these tactics is delivering results in your organization, and how are you scaling them?