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Insights from trade attorney Lindsay Wardlaw have been drawn from a recent webinar in collaboration with Z2, "New Tariff Policies to Track & How to Find and Reduce Your Exposure."
Article Highlights:
- Since early 2025, the federal government has layered Section 232, Section 301, and even the long-dormant Section 338 authorities onto goods ranging from steel and semiconductors to furniture and trucks, with more changes expected through 2026 and beyond.
- Importers can sometimes facilitate significant changes to their tariff responsibilities without having to make drastic adjustments to their supply chain. They can do this by tweaking the final stage or stages of the manufacturing process.
- Companies can also change the types of parts and goods they're importing into the U.S. to trigger a different—and ideally lower—duty rate.
- All varieties of trade modifications and tariff engineering must be approached with caution and vigilance, however, given the current administration and its increasingly strict enforcement practices.
Since the Trump administration assumed office in early 2025, U.S. trade policy has gone through one of its most volatile stretches in decades. New tariff policies are arriving faster than most procurement and compliance teams can track them. Since early 2025, the federal government has layered Section 232, Section 301, and even the long-dormant Section 338 authorities onto goods ranging from steel and semiconductors to furniture and trucks, with more changes expected through 2026 and beyond. For companies sourcing globally, understanding the current U.S. tariff policy is both an ever-evolving challenge and a strategic imperative.
The Current Tariff Landscape
Today's tariff policy environment is built from several overlapping legal authorities, each with its own triggers and timelines. Section 232 tariffs, tied to national security investigations, now cover a number of different product categories:
- Steel
- Aluminum
- Copper
- Automobiles, trucks, and auto parts
- Lumber and wood products
- Semiconductors
- Pharmaceuticals
The tariff rates imposed on these goods generally range between 10% and 50% (U.S. businesses attempting to import Russian aluminum will owe a hefty 200% tariff).
Implementation of Section 301 Tariffs
Lindsay Wardlaw, a licensed trade attorney and founder of Wardlaw Trade Law, recently led a webinar with supply chain risk management (SCRM) firm Z2. During the webinar, Wardlaw emphasized the fact that U.S. businesses should not expect the Trump administration to offer relief from its aggressive trade regime any time soon. "As more time has gone by for investigations to be conducted by the Trump administration, we anticipate significantly more Section 232 and Section 301 tariffs," she said.
As Wardlaw alluded to, one of the most significant changes over the past few weeks is the utilization of Section 301 tariffs, which are tied to the Trump administration's forced labor investigations. Section 301 tariffs now cover 60 countries, affecting over 99% of all goods imported into the U.S. The Section 301 tariffs have been split into two tiers: a 10% tariff rate and a 12.5% rate.
In addition to active tariffs, a long list of Section 232 and 301 investigations are pending for a number of product categories, including robotics, wind turbines, unmanned aircraft systems, processed critical minerals, and personal protective equipment (PPE). Any of these investigations could yield new tariff policies in the months to come, potentially with minimal warning.
The Return of Section 338 Tariffs
Section 338 is also emerging as an increasingly relevant tariff authority being leveraged by the U.S. government. Dating back to the Smoot-Hawley Act of 1930, Section 338 allows the president to impose tariffs of up to 50% on goods from a country found to be discriminating against U.S. commerce. It also permits the U.S. to implement additional tariffs on a third country simply for benefiting from that discrimination. Canada will be one of the first real-world test cases of the viability of this legal framework in modern times: the U.S. is imposing Section 338 tariffs on a broad swath of Canadian goods in response to the nation's tariffs on U.S. automobiles, alcohol, and dairy products.
Whether Section 338 becomes a standard tool for striking back against retaliatory tariffs—as Canada's duties were—or simply a one-time maneuver by the Trump administration remains to be seen.
How Can Companies Secure Lower Tariff Rates?
Despite how much tariff policy remains in flux, companies still have a few levers they can draw on to lower their import costs.
Source From Nations With Lower Tariffs
U.S. tariff policy is not distributed equally, and the Trump administration's tariff regime makes sourcing from some countries far more favorable than others. From Wardlaw's perspective, identifying nations to source from with lower tariff rates remains the most straightforward approach to reducing import costs. "To whatever degree you can find a country that has the capacity, the infrastructure, the people to make what you want quickly and cost-effectively and it has a lower tariff rate, you should do that," she said. "This is actually what U.S. policy is trying to incentivize by imposing tariffs that are lower on some countries and higher on others."
But while moving sourcing to nations with lower tariff rates would appear to be intuitive enough, American importers need to pay careful attention to how the tariff rate is applied. U.S. customs determine the country of origin (COO) based on where a good was wholly produced or where the last substantial transformation occurred, rather than simply where it was shipped to the U.S. from.
Modify Your Supply Chain
Country of origin is defined as the last country where a substantial transformation occurred. That means that importers may be able to trigger significant changes to their tariff responsibilities without having to make drastic changes to their supply chain. Instead, they simply need to tweak the final stage or stages of the manufacturing process so that the country where the final substantial transformation took place has a lower tariff rate.
This isn't always possible, however, and for some high-tech products additional manufacturing steps seldom alter the "essential character" of the good—the definition CBP is using to determine the final location of substantial transformation and COO. In these cases, Wardlaw said, "You may have to look to move the processing of these key steps that are being evaluated" under the tariff frameworks, rather than minor changes tacked on at the end.
Further, businesses should always be aware of the risks involved in these kinds of maneuvers. "If you are wrong in determining what the country of origin for your procured good is, that can have significant effects on both the tariff rate you owe and on whether or not you're accused of customs fraud," Wardlaw pointed out.
Key Exceptions
When engaging in these kinds of trade tactics, it's important to remember that some tariffs—including those imposed on foreign steel, aluminum, copper, automobiles, and trucks—still determine COO based on the origin of specific materials, rather than the finished product. In these cases, shifting the location of a later manufacturing stage won't impact the tariff rate. A broad exception, however, is generally made for electronics, where the COO is determined based on the origin of the component that gives the product its essential character, typically a printed circuit board assembly.
Change What You Import
This might seem obvious, but companies can also simply change the types of parts and goods they're importing into the U.S. to trigger a different—and ideally lower—duty rate. For example, organizations can import a component or semi-finished good with a lower tariff rate than the final product, and then complete the manufacturing here in the U.S. Alternatively, importers might want to consider changing the manufacturing process of an imported item just enough to qualify it for a new product category with a lower tariff rate. "This may mean reconsidering your product's characteristics or specifications so that you import a different type of finished good than you previously sold in the U.S. market, one that's very similar but happens to meet the criteria for a different tariff code with a different tariff rate," Wardlaw said. "That's tariff engineering."
Alternatively, if the cost difference in U.S. labor and manufacturing is lower than the tariff rate you would be paying to import the good from a foreign country, then producing the good here in the U.S. makes financial sense.
Tariff Engineering the Right—and Wrong—Way
While tariff engineering might seem like a relatively straightforward concept—implement modifications to manufacturing, COO, and other dimensions of production in order to secure lower tariff rates—there's a fine but critical line between effective trade strategy and deceptive practices. This is a line that the Trump administration has been increasingly focused on, and businesses need to be aware of what tactics are and are not acceptable right now.
Tariff engineering has a long legal history. In Merritt v. Welsh (1881) and United States v. Irwin (1897), U.S. courts affirmed that importers may legitimately manufacture and configure goods to achieve the lowest possible duty rate, so long as no fraud or deception is involved. Customs and Border Protection (CBP) has upheld this principle in modern rulings as well, approving cases where a permanent, genuine design change shifted the tariff classification to a lower rate.
CBP and the Artifice Problem
CBP draws a firm line, however, at what it characterizes as artifice. Wardlaw provided several examples of instances in which CBP found a specific U.S. importer to be engaging in artifice, rather than legitimate tariff engineering. One was Ford. "Ford was importing these vans for use as cargo vans, but it brought them in with all the features that are legally required to be present in a passenger van," she said. Passenger vans have a significantly lower tariff rate than their cargo counterparts, and Ford was trying to secure lower import costs for their vehicles. After a long and complex legal battle, the U.S. automaker was eventually forced to pay $365 million in fees to the federal government.
Wardlaw also worked with a plastics company that found itself under serious CBP scrutiny. "We had a resin distributor and its subsidiaries who paid $6.8 million to resolve civil and criminal charges concerning falsified COO declarations to avoid Section 301 tariffs," she said.
Stepping Up Tariff Enforcement
In addition to Ford, other rulings have rejected instances of tariff engineering in which a modification served no genuine commercial purpose, including applying decorative cuts to lumber that doesn't match how the product is actually used by the customer. CBP evaluates the rationale behind the manufacturing changes to determine if artifice was involved, weighing whether the changes track with who's buying the product and why.
Enforcement around these distinctions is intensifying. CBP is expanding its resources, including through a Trade Fraud Task Force led jointly by the Department of Justice and the Department of Homeland Security. In addition, companies now face heightened scrutiny under the False Claims Act, Enforce and Protect Act (EAPA) reporting, and a new Corporate Whistleblower Awards Pilot Program. All these programs are intended to discourage import fraud, including fraudulent COO declarations, inaccurate HTS classifications, and other acts of duty evasion.
Tariff Engineering Done in Good Faith
Ultimately, companies should feel comfortable modifying the design and manufacturing of their parts and seeking financial relief as a result of those changes—so long as they're not done with the express purpose of deceiving the federal government. "You should have autonomy to design your product however you want and manufacture it however you want, even if that means designing it to achieve lower duties," Wardlaw said. "The key is that you can't practice any deception or fraud."
Building a Tariff Mitigation Strategy
Given the pace of change, companies need a durable approach to tariff policy. One-time responses may appear advantageous in the moment, but the long-term nature of the current U.S. tariff regime means that quick, temporary fixes won't be sustainable. Instead, companies should strive to embody three key principles:
- Plan for longevity. Tariffs on at least some of these countries and goods are likely to outlast the current presidential administration.
- Take a proactive approach by keeping your COO and HTS data clean on every component you source.
- Treat tariff mitigation and engineering as a whole-company effort. Procurement, engineering, legal, and finance can all contribute to a company's overarching tariff-reduction goals.
In addition to these principles, the most tariff-resilient companies often excel in five practices.
- Multi-source components wherever feasible
- Maintain a solid data foundation capable of quickly responding to tariff changes
- Diligently document supplier manufacturing locations
- Keep data readily accessible at the point of decision
- Leverage all teams toward the goal of reducing tariff costs
One final thing to remember about managing tariffs is the importance of an expansive, accurate "data layer." For businesses importing foreign parts, this includes accurate MPNs, HTS codes, COO information, active tariff rates by country and program, and the manufacturing process that produced the part. All these data points should be validated by trade documentation, including mill certificates, CBP rulings, and independent lab tests where applicable.
So much of effectively managing and mitigating tariff costs starts—and ends—with this data layer. The more insights and intelligence companies have on their supply chain, suppliers, and manufacturing steps, the more avenues they'll have to apply strategic changes that benefit their bottom line.
How Z2 Supports Trade Strategies
Tracking tariff policy manually, part by part and supplier by supplier, isn't sustainable at scale. Z2's part risk and compliance tools map tariff exposure directly to your bill of materials, surfacing HTS classifications, COO data, and BOM risk evaluations that allow your team to see how new tariff policies are actually impacting your product portfolio and bottom line.
Ready to see your tariff exposure mapped to your own parts and BOMs? Start a free trial of Z2 and get the data layer your tariff strategy needs.
