Understanding the Distinction

Tariff engineering and tariff evasion are often confused, but they are
not the same.
Tariff engineering is a lawful practice that involves designing or
modifying a product so that, when imported, it qualifies for a lower
duty rate under the Harmonized Tariff Schedule (HTS).
Tariff evasion is illegal because it involves concealing,
falsifying, or misrepresenting information to avoid paying the correct
duty.

The difference is about truthfulness at the border.
If your product, as imported, truly meets the classification you
declare, that is tariff engineering.
If you manipulate data, labels, or descriptions to make it appear
compliant, that becomes evasion.

How Customs Defines Each Practice

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Concept Legal Status Example Key Principle

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Tariff Legal Designing a Classification must
Engineering shirt with a reflect the product's
specific fiber actual condition at
composition import
that falls
under a lower
duty rate

Tariff Illegal Misdeclaring False or misleading
Evasion fiber declarations violate
composition, U.S. Customs law
undervaluing
invoices, or
mislabeling
country of
origin

U.S. Customs and Border Protection (CBP) recognizes tariff engineering
as a legitimate planning tool, as long as the importer exercises
reasonable care and maintains documentation to support the
classification.
Evasion, however, is treated as a violation under 19 U.S.C. §1592,
which covers false statements or omissions during entry.

Where Companies Go Wrong

Even experienced compliance teams can blur the line between strategy and
risk when optimizing for tariff outcomes. Common pitfalls include:

1. Incomplete Product Transformation

If a product is only partially modified but still retains the essential
character of the higher-duty version, Customs may challenge the
classification.

2. Unsubstantiated Descriptions

Descriptions that omit critical details, such as materials or use, can
lead to incorrect classification and allegations of negligence or fraud.

3. Origin Masking

Altering documentation or routing goods through intermediate countries
to hide the true origin is not tariff engineering. It is evasion.

4. Post-Import Changes

Adjusting or transforming goods after entry to meet a desired
classification undermines the basis for the declared duty treatment.

Enforcement and Consequences

CBP's Enforce and Protect Act (EAPA) expanded its ability to
investigate and penalize duty evasion.
If Customs determines that an importer engaged in evasion such as
undervaluing goods, misclassifying products, or altering documentation,
it can impose:

• Duty recovery with interest\
• Civil penalties or seizure of goods\
• Suspension of preferential duty programs\
• Referral for criminal investigation in severe cases

Even unintentional errors can trigger prior disclosure obligations that
require careful handling and fast response.

Building a Defensible Strategy

To keep your duty-saving initiatives compliant:

1. Document Every Design Decision
   Keep technical drawings, bills of materials, and notes that explain
   how a product's design influences its classification.

2. Cross-Reference CBP Rulings
   Use publicly available CROSS rulings to validate your position or
   find similar precedents.

3. Apply Reasonable Care Standards
   Implement internal controls, classification reviews, and periodic
   audits to ensure accuracy.

4. Leverage AI Tools for Legal Consistency
   Use Trade Insight AI to evaluate multiple HTS options, review GRI
   logic, and ensure that your reasoning aligns with Customs
   interpretations.

Why It Matters More Than Ever

In a complex trade environment filled with changing tariffs,
origin-based duties, and increasing enforcement, importers cannot afford
to take shortcuts.
The best compliance programs focus on transparency and
defensibility.
Tariff engineering can deliver a competitive advantage when supported by
clear documentation and accurate classification data.

Explore Compliance With Confidence

Trade Insight AI helps importers and compliance teams classify products with audit-ready documentation.
Each classification result is supported by legal reasoning, GRIs, and precedent so your strategies remain both effective and compliant.
Start building a defensible classification strategy today with Trade Insight AI.