The traditional design approach involves analyzing market and consumer needs and designing products to best meet those needs, and today, consumer demands are indeed the primary drivers of design.

On the other hand, we also know that a design based on consumer demands is not always innovative. iPhones are a great example of this. Steve Jobs famously said, "Some people say, 'Give the customers what they want. Our job as consumers is to figure out what they will want before they do.' Henry Ford once said, 'If I had asked people what they wanted, they would have said, "Faster horses!"'

In this article, I will discuss a design approach that is not often talked about and does not rely on consumer demands: Customs tariffs. International trade is complex, and to reduce this complexity, a universal common coding system for traded goods has been developed. These codes are created at the 6-digit level within the World Customs Organization and are known as the Harmonized System. In other words, the basis of every country's tariff schedule worldwide is the Harmonized System. The Harmonized System is an international trade classification system used for all goods subject to international trade. Within the Harmonized System, all products traded are classified according to a specific logic and systematic framework.

The Harmonized System consists of 96 chapters, which are divided into 2-digit, 4-digit, and 6-digit subpositions. These codes represent the same product worldwide. Customs duties are also determined based on these tariff codes and can vary for each product. Customs duties are an important component of the cost of traded products. Even a small saving in these duties can help differentiate your product in terms of pricing in the market.

Especially for consumer products, the tariff schedule contains numerous detailed codes, and even small features can result in the product being classified under a different code. The need for detailed classification aims more at creating more detailed international trade statistics rather than imposing different taxes.

Can designs be based on customs tariff definitions rather than market needs?

Yes, such design work is referred to as tariff engineering. Tariff engineering involves designing a product in such a way that it falls under a lower-tariff customs code (HS Code) based on the definitions in the customs tariff. If managed correctly, it can provide significant savings and enhance competitiveness.

In tariff engineering, it is important to consider and review the impact of tariffs on material, content, structure, design features, and the intended use of the product before starting the design process. Sometimes, a small adjustment or change in a new or existing product (such as adding a specific component or placing a feature) is all that is needed to positively affect the classification. Two products may look very similar, but with closer examination, their customs codes may differ, and one might be subject to a potentially lower customs duty.

There are many examples of tariff engineering, but I would like to mention a few that have been covered in publicly available news and articles.

Why do Columbia shirts have a small pocket at the waist?

In our opinion, Columbia Sportswear provides one of the most creative examples of tariff engineering. Columbia Sportswear, known for its sportswear, backpacks, and hiking boots, designs its products with attention to customs tariffs in the U.S. Many of its products are produced and sold globally, and global companies pay attention to customs tariffs to remain competitive.

For example, some women's shirts with "waist pockets" are subject to lower tax rates than those without them. Therefore, many of Columbia Sportswear’s women's shirts are intentionally designed with small pockets near the waist, reducing their import costs. Synthetic fiber blouses, shirts, and shirt-blouses imported for women and girls from other countries are classified under the 6206.40.30 subheading in the tariff schedule and can be subject to tariffs of up to 26.9% in the U.S. However, there is a small loophole: If the garments have “pockets below the waist, a ribbed waistband, or another tightening method at the lower part of the garment,” they are excluded from this category. Thus, adding one or two pockets below the waist could reduce the tariff from 26.9% to 16% (according to subheading 6211.43.1060).

Why are Converse shoe soles like felt?

Another example of tariff engineering is Converse shoes. Nike-owned Converse created an excellent example of tariff engineering by designing their shoes with a felt layer covering more than 50% of the shoe's sole. Since the classification of shoes is based primarily on the composition of the outer soles and uppers, they were able to import the shoes into the U.S. as slippers with a lower tariff rate.

While the import duty on shoes to the United States is up to 48%, slippers have a much more advantageous tax rate of 6%. This may seem like taking advantage of tariff loopholes, but it is not. In 2011, the U.S. International Trade Commission ruled that such classifications were legal.

Is tariff engineering risky?

Yes, absolutely. Such work should not be conducted without the support of tariff experts to ensure compliance with laws and regulations. Furthermore, it must be ensured that tariff engineering is done with the end consumer in mind. If tariff engineering is solely aimed at altering the appearance of a product to pass customs, it could lead to investigations by customs authorities. Even if the import is completed under the correct tariff code, modifying the product post-import could be subject to sanctions by customs authorities.