Here in the New Year, the sound and fury over new tariffs from the U.S., and their use as a geopolitical tool, has not quieted down but instead risen to a fever pitch. Regardless of the surrounding machinations, new and higher tariffs continue to have a significant impact on global trade. The costs are real, and companies are looking for any edge they can use to shave off tariff-related expenses.
As everyone waits for the political dust to settle and a new baseline of tariff schedules to emerge – or change again if political winds shift – here are 5 ways that shippers can work to mitigate the profit-draining effect of tariffs on their businesses.
Tariff mitigation starts with getting product classification right. As tariff enforcement has intensified, inaccurate Harmonized Tariff Schedule (HS) codes have become a major source of financial exposure for importers. When a product is misclassified in a way that understates duties, the risk is immediate and costly: backdated tariffs, penalties, and fines can quickly add up once customs authorities identify the error. Regularly reviewing classifications is one of the most effective ways shippers can reduce this risk before it turns into an enforcement issue.
Tariff exposure varies significantly by trade lane, making classification accuracy even more important in the current environment. Some goods remain exempt from tariffs, depending on origin and HS code – although the list is shrinking – while others are subject to minimum tariff thresholds. For example, EU-origin cargo may be assessed at 15% or the Customs and Border Protection (CBP) duty rate, whichever is higher, while UK-origin goods may incur a 10% tariff in addition to standard duties. Without the correct HS code, importers may misjudge whether a shipment is even subject to tariffs, or even apply the wrong rate altogether.
Andrew Rozek, president of global freight forwarder I.C.E. Transport, based in New Jersey, provides this example of importing windows with aluminum content from the EU. “If you say, ‘My shipment of aluminum windows is worth $40,000, but the aluminum content is worth $10,000,’ you pay the 50% aluminum/steel/copper tariff on the $10,000 portion. On the $30,000, there’s no breaking out anything, because you're going to pay the 15% EU reciprocal tariff regardless.”
Although the CBP tariff schedule is publicly accessible, interpreting it correctly is increasingly complex. To truly mitigate tariff risk, importers should work closely with a freight forwarder that has a track record of handling thousands of cross-border shipments. Proactive classification reviews and expert guidance help ensure tariffs are applied accurately, exposure is minimized, and compliance risks are kept under control.
Another important tariff mitigation lever is strategic sourcing. In some cases, shifting production or sourcing to countries subject to lower tariff rates can meaningfully reduce landed costs, but only if the full cost equation is carefully evaluated. This approach requires weighing not just the unit price of a product, but also the tariff exposure tied to its country of origin. A country with higher labor costs may still be the more economical option once lower tariffs are factored in.
For example, under current trade structures, sourcing from North America can be advantageous. If a product can be sourced from Canada or Mexico instead of the UK or EU, the tariff outcome may be more favorable depending on the applicable trade agreements and duty structures. When tariffs differ materially, even modest shifts in sourcing can reduce overall exposure and stabilize costs.
That said, not all tariff differences justify a change. Smaller gaps — such as a 5% difference between UK and EU tariffs — often aren’t enough to offset the disruption, qualification challenges, or supplier changes required to move production. In those cases, most importers are wise to stay put. Where sourcing shifts become more compelling is when the tariff spread is significant. For instance, a product imported from a country like South Africa that is subject to a 30% tariff may become dramatically more cost-effective if it can be sourced from a country facing a 10% tariff, like the UK, even after standard duties are applied.
However, tariff mitigation through sourcing is highly trade lane dependent. Regions like Asia-Pac often carry higher tariff exposure but benefit from lower labor costs, which can offset duties. Because of these tradeoffs, sourcing decisions should be grounded in detailed landed-cost modeling rather than tariff rates alone. When used selectively and strategically, sourcing diversification can be a powerful tool for managing long-term tariff risk.
Another effective tariff mitigation strategy is leveraging established customs programs such as the First Sale Rule and the Customs Trade Partnership Against Terrorism (CTPAT). When applied correctly, both can help importers reduce duty exposure while strengthening compliance and lowering the likelihood of costly delays.
The First Sale Rule, part of CBP’s import regulations, allows companies to declare the customs value of goods based on the first sale in a multi-tier transaction, rather than the final sale price. In practice, this means duties are assessed on the price paid by the intermediary to the manufacturer, not the marked-up price charged to the end customer. When tariffs are applied as a percentage of declared value, this distinction can materially reduce duty and tariff liability. These scenarios commonly appear in three-party transactions involving an overseas manufacturer, a U.S. importer, and a downstream buyer. As long as the first sale is a bona fide, arm’s-length transaction and properly documented, importers can legally lower their dutiable value and reduce exposure.
While the First Sale Rule does not eliminate tariffs, it softens their impact by ensuring importers are not paying duties on profit margins or downstream costs unrelated to manufacturing. Given heightened tariff enforcement, proper documentation and broker oversight are essential to avoid compliance risk.
CTPAT plays a different but complementary role in tariff mitigation. By participating, companies demonstrate a commitment to securing their portion of the supply chain. Although hard data on reduced inspection rates doesn’t exist, CTPAT participation is widely viewed as lowering perceived risk in the eyes of Customs. Fewer inspections and smoother clearances reduce the likelihood of delays that can compound costs through demurrage, detention, and disrupted delivery timelines. Together, these tools help importers manage tariff exposure through both cost control and risk reduction.
Tariff engineering is another strategy importers can use to mitigate tariff risk, but it must be approached carefully and within strict compliance boundaries. At its core, tariff engineering involves designing or manufacturing products in a way that legitimately changes their tariff classification or reduces the portion of a product subject to higher duties. The goal is not to exploit loopholes, but to structure products so they are classified as accurately and advantageously as possible under customs rules.
Here’s a well-known example from Columbia Sportswear. Since women’s garments with “pockets below the waist” have a lower duty than a normal shirt, Columbia added tiny pockets near the waist line — called a “nurse pocket” — and lowered its duty rate significantly. This relatively small product change had a large payback.
Over time, Customs authorities have tightened enforcement of tariff engineering and closed many perceived loopholes. For instance, CBP now classifies many items as finished goods that only require minimal assembly after being shipped separately to qualify for lower tariff rates; furniture and appliances are classic examples.
Where tariff engineering can still be effective is in properly breaking out material content when classifications are based on composition. For products made from multiple materials — such as items that are part steel and part plastic — it is advisable to separately classify the components. Since steel content is subject to a much higher Section 232 tariff and the other components will only be subject to a reciprocal tariff and possible duty, accurately identifying and documenting each component can reduce overall tariff/duty exposure. The important thing is that the breakdown must reflect the true composition and value of the product.
Packaging is another area where legitimate tariff mitigation may apply. Items such as pallets used strictly as packing materials are generally not dutiable. If properly listed on the commercial invoice, their value may be excluded from the dutiable amount. However, this must reflect actual costs and standard trade practices, not artificial reductions.
“People sometimes break out $1,000 for pallets to reduce the commercial invoice value,” Rozek explained. “In reality, the cost of those pallets is usually already built into the price quoted to the buyer, because the seller knows the goods will need to be palletized. What’s changed is that, with higher tariffs, some shippers now want to separate that pallet cost on the invoice so it isn’t subject to the tariffs.”
Ultimately, tariff engineering requires careful planning, accurate documentation, and coordination with your freight forwarder, Non-Vessel-Operating Common Carrier (NVOCC), or customs broker. When done correctly, it can reduce tariff exposure while maintaining full compliance, helping importers manage risk in a tightening enforcement environment.
Bonded warehouses, duty drawback programs, and Foreign Trade Zones (FTZs) offer importers additional tariff mitigation tools by improving cash flow, reducing duty exposure, and increasing flexibility in how and when tariffs are paid. While these options do not eliminate tariffs outright, they can significantly soften their financial impact when used strategically.
Bonded warehouses allow imported goods to be stored in the country of import without paying duties or tariffs until products are withdrawn for domestic consumption. This can be especially valuable for companies that import large volumes but sell in smaller increments. Instead of paying tariffs on an entire shipment upfront, duties are paid only on the portion released from the warehouse. This spreads tariff costs over time and functions much like a line of credit. The tradeoff is cost: moving goods into a bonded facility, storing them, and handling inbound and outbound shipments all add expense. As a result, bonded warehousing tends to make the most sense for high-value cargo, where deferred duty payments outweigh storage and handling fees.
Duty drawback programs are another powerful option, particularly for exporters. When imported goods are later exported, either in the same form or as part of a finished product, importers may be eligible to recover a significant portion of the duties and tariffs paid. Brokers that specialize in duty drawback can help navigate the documentation and filing requirements, which are often complex but financially rewarding.
FTZs are especially useful for goods that are processed, assembled, or refined before entering the U.S. market. Duties are deferred while products remain in the zone, and in some cases, the finished product may be assessed at a lower duty rate than its individual components. Together, these tools allow importers to better manage tariff exposure through timing, recovery, and strategic control of when duties are incurred.
The imposition of new tariffs by the Trump administration, and the retaliatory efforts by trading partners, has certainly complicated the cross-border trade picture. Proper HS classification becomes doubly important, and tactics such as FTZs, tariff engineering and new sourcing strategies can help mitigate the impact.
Working with an experienced freight forwarder well versed in US-Europe trade routes can also help you sort out the nuances and lower your overall shipping costs. I.C.E. Transport has handled tens of thousands of shipments in its nearly 40-year history, helping companies access lower freight rates by taking advantage of I.C.E.’s committed volume with ocean carriers. We can also help you find the right trucking firm at a fair rate, including specialist carriers, and navigate the ins and outs of import logistics. Get in touch with I.C.E. Transport today to learn more.