Close-up of white t-shirts hanging neatly on black hangers in a minimalist indoor storage setting.
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The average tariff the U.S. charges on imports has nearly tripled since the start of 2025, from about 2.3% to 6.7%. For a brand that makes its products overseas and sells them in the U.S., that’s money coming straight out of every sale. In response to this tariff dilemma, 92% of U.S. e-commerce brands raised prices according to Portless’s 2026 Tariffs Benchmark Report, while others have moved production to a lower-tariff country, simply eaten the margins or tried a combination of all three. But there’s a fourth option that many brands don’t even know is on the table. It’s called tariff engineering, and it means changing the product itself so it legally falls into a cheaper duty category.
What Decides Your Tariff Rate
A product’s duty rate starts with its HS code, short for Harmonized System code. Think of it as the product’s ID number at customs. More than 200 countries use the same basic six-digit system, and each adds its own digits on the end. In the U.S., the full code is 10 digits long, and it decides how much duty a product owes. Two products that look alike can land in different codes. A plain steel garbage can is classified as a metal product, but the same can with a motion sensor can count as a mechanical device, with a different rate.
Tariff engineering means changing a product so it lands in a cheaper code. It’s legal because U.S. Customs and Border Protection judges a product by what it is when it shows up at the border, not why you designed it that way. The Supreme Court settled that in 1882, in a fight over sugar. At the time, imported sugar was taxed by its color, and darker sugar paid less. When customs tried to charge an importer the higher rate on sugar it said had been darkened on purpose, the court sided with the importer, asking, “Has not a manufacturer a right to make his goods as he pleases?” The rule has held since.
The catch is that the product has to really be what the code says. You can’t call a plain garbage can a mechanical device. It needs the motion sensor.
How Brands You Know Have Used Tariff Engineering
Some brands you know already do this, either by changing the product or by winning an argument over what it is.
- Converse puts a layer of fuzzy felt on the bottom of its Chuck Taylors. Footwear is classified largely by what the sole is made of, and that felt lets the shoe count as a slipper, dutied at 6% instead of the 20% for athletic shoes.
- Marvel won a court case arguing its X-Men figures should be classified as toys rather than dolls. The tariff schedule had separate lines for the two, dolls for human figures at 12% and toys for non-human creatures at 6.8%, so Marvel argued its mutants weren’t human. (The schedule has since merged the two.)
- The company behind the Snuggie won a 2017 case arguing its sleeved blanket is a blanket, not clothing. That cut the duty from 14.9% to 8.5%.
- Columbia Sportswear adds pockets below the waistline on certain women’s shirts so they aren’t classified as blouses, which drops the duty from 26.9% to 16%.
Apparel is the clearest everyday case, because a garment’s duty is often based on its fabric. Take a basic T-shirt. In cotton, its duty rate is 16.5%. The identical shirt in polyester or another synthetic fiber has nearly double the rate, at 32%, because it falls under a different HS code. And those are just starting rates. A shirt made in China also pays Section 301 tariffs on top of that, but the gap between cotton and polyester is still there. So apparel brands should check the duty rate on a fabric before they commit to it, the same way they check the feel and the cost.
What Tariff Engineering Costs
If tariff engineering works, why doesn’t every brand do it? Because it’s expensive, which is also why the examples above are all giants. Redesigning a product can mean anything from re-tooling a sole to re-sourcing a fabric. Then there’s lab testing and paying a trade lawyer to prepare a binding ruling request so Customs can make the new code official. All of that costs money up front, and it only pays back if a few points of duty add up to real money. If your annual duty bill is in the thousands, it usually isn’t worth it. If it’s six or seven figures, it’s time to hire a trade lawyer because it probably is.
Start By Checking Your HS Codes
There’s a step every brand can take, though, regardless of size. Find your HS codes and check them. They’re on your customs paperwork, or your freight forwarder or broker can pull them. In my experience, classifications tend to get set once, often by whoever handled the first shipment, and never looked at again. Having a licensed customs broker review them is a modest cost next to a duty bill. A review might show you’ve been overpaying, which you can stop, or underpaying, which you’d rather find before Customs bills you for the difference. Either way, you want to know. Re-engineering the product is the step you graduate to once your duty bill justifies it.
Tariffs aren’t getting cheaper anytime soon. The code your product ships under is one of the few parts of that bill you actually control.
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