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'Tariff engineering' is making a comeback as businesses employ creative ways to skirt higher duties

The article from CNBC, published on June 18, 2025, titled "Businesses Tweak Products to Qualify for Lower-Tariffed Categories," delves into the strategic maneuvers companies are employing to navigate the complex landscape of international trade tariffs. The piece highlights how businesses are adjusting their product designs, materials, and manufacturing processes to fit into categories that attract lower tariffs, thereby reducing costs and maintaining competitive pricing in global markets.

The article begins by discussing the broader context of global trade tensions, which have led to an increase in tariffs on various goods. These tariffs, often imposed as a result of trade disputes or protectionist policies, have significantly impacted the cost structures of many businesses. In response, companies are finding innovative ways to adapt their products to fall within tariff categories that are less burdensome financially.

One of the key strategies mentioned is product reclassification. Companies are meticulously analyzing the Harmonized System (HS) codes, which are used internationally to classify traded products, to identify categories with lower tariffs. By making slight modifications to their products, such as altering the composition of materials or the way products are packaged, businesses can shift their goods into these more favorable categories. For instance, a company manufacturing electronic devices might switch from using a certain type of plastic to another that qualifies for a lower tariff rate.

The article provides several case studies to illustrate these strategies in action. One example is a furniture manufacturer that redesigned its chairs to use a different type of wood, which allowed the product to be classified under a category with a significantly lower tariff. This change not only reduced the company's costs but also enabled it to offer more competitive prices to its customers, thereby increasing its market share.

Another case study focuses on the automotive industry, where manufacturers are tweaking the design of car parts to fit into lower-tariff categories. For example, by altering the composition of alloy wheels or the type of glass used in windshields, automakers can reduce the tariffs they pay, which in turn lowers the overall cost of the vehicle. This approach is particularly crucial in an industry where profit margins are often thin, and any cost savings can have a substantial impact on the bottom line.

The article also explores the role of technology in facilitating these adjustments. Advanced data analytics and artificial intelligence are being used to predict how changes in product design or materials will affect tariff classifications. Companies are investing in software that can quickly analyze vast amounts of data to identify the most cost-effective strategies for reclassifying their products. This technological edge is becoming a critical factor in the ability of businesses to adapt to the ever-changing landscape of international trade regulations.

Furthermore, the article discusses the challenges and risks associated with these strategies. One significant challenge is the complexity of the tariff system itself. With thousands of HS codes and frequent changes to trade policies, staying compliant requires a deep understanding of the regulations and constant vigilance. Companies must also be cautious about the potential for unintended consequences, such as inadvertently triggering higher tariffs in other markets or facing scrutiny from customs authorities.

The piece also touches on the ethical considerations of these practices. While reclassifying products to take advantage of lower tariffs is legal, some critics argue that it undermines the spirit of trade agreements and can lead to unfair competition. Companies must balance the need to reduce costs with maintaining a reputation for integrity and transparency in their business practices.

In addition to product reclassification, the article highlights other strategies businesses are using to mitigate the impact of tariffs. One such strategy is nearshoring, where companies move their manufacturing operations closer to their primary markets to reduce transportation costs and avoid tariffs altogether. Another approach is to negotiate with suppliers to source materials from countries with favorable trade agreements, thereby lowering the overall cost of production.

The article concludes by emphasizing the importance of adaptability in today's global trade environment. As tariffs and trade policies continue to evolve, businesses must remain agile and proactive in finding ways to minimize their impact. The ability to quickly adjust product designs and manufacturing processes to fit into lower-tariff categories is becoming an essential skill for companies looking to thrive in the international marketplace.

Overall, the CNBC article provides a comprehensive overview of how businesses are navigating the challenges posed by tariffs through strategic product adjustments. It underscores the importance of understanding and leveraging the complexities of the international trade system to maintain competitiveness and profitability. As trade tensions persist and regulations continue to change, the strategies outlined in the article will likely remain relevant for companies seeking to optimize their operations in a globalized economy.

Read the Full CNBC Article at:
[ https://www.cnbc.com/2025/06/18/businesses-tweak-products-to-qualify-for-lowter-tariffed-categories-.html ]