May 23, 2025 — In this interview, regulatory compliance specialist Steven Lehat explains how rising tariffs-especially under the Trump administration-are reshaping global supply chains. He introduces the concept of tariff engineering, a compliance strategy that allows importers to reduce costs by changing how goods are classified or valued. Lehat details how companies can take advantage of existing laws to minimize their tariff exposure, avoid legal pitfalls, and protect their profit margins. He also explains why timing, structuring, and expert guidance are essential in this highly technical area.
Interviewer: Let’s start from the top. Is President Trump mandating that every foreign import pay a tariff?
Steven: Essentially, yes, though the rates vary. It’s not a one-size-fits-all situation. Some countries have recently faced Trump tariffs as high as 100%+, others 46%, and still others closer to 25%. Lately, these have been lowered to 30% and 10% over the base tariff rate. I expect President Trump will continue pushing tariffs to the limit as leverage until he gets concessions. If there’s no movement, he’ll raise them further.
Interviewer: Do you expect importers to change their business practices in response? Will they import less?
Steven: Probably. Foreign companies that don’t engage in tariff engineering may shift their manufacturing to countries with lower tariff rates. Many will likely move away from China, where tariffs are approaching 50% and could go back higher.
Interviewer: Do you think U.S. consumer demand for foreign goods will drop?
Steven: Eventually, yes. Let’s say people are used to inexpensive Chinese products and suddenly those prices double. Consumers might then start considering alternatives-products from other countries, or even domestic ones. People may not prefer these alternatives, but they’ll adjust because the cheaper options won’t be available anymore.
Interviewer: What kind of decline in imports are you anticipating? For example, do you think imports from high-tariff countries like China could drop by 20% or 30%?
Steven: It’s hard to give a precise figure, but imports will decline. Think of it this way: a company still has inventory bought at the old prices, so they’re making some profit. But once that runs out and they’re buying new inventory at higher tariff rates, the profit shrinks. Eventually, margins disappear altogether, and they’re forced to act.
If tariffs stay in place for six months, imports might drop 5-10% or even more for China. But if they last a year or more, the decline could be 15% or more. Companies are already shifting to adapt.
Interviewer: What is tariff engineering, and how can it help importers lower their costs?
Steven: Each product has a code in a classification system, and each code carries a specific tariff rate. And, there are potentially 6 values applicable to these goods. Tariff engineering is the practice of adjusting how a product is classified and/or valued to reduce the applicable tariff.
Interviewer: Can you give an example of this?
Steven: Sure. Let’s say you’re importing a widget. If you alter the materials used in the widget or partially assemble it before import, it may fall into a different classification with a lower tariff. This is completely legitimate if done properly and transparently.
The same logic applies to food. For example, a frozen dinner may have a higher tariff rate than its individual ingredients imported separately. If you break up the components or slightly alter how they’re packaged or processed, they may fall under a more favorable classification.
Interviewer: But doesn’t that require a company to change its product?
Steven: Sometimes. But changes can be minimal. It could be about how the product is packaged, processed, or shipped. You might ship components separately instead of as a single set. You can also structure the transaction in different ways-how it’s invoiced, and who owns the goods at different points-which can affect tariff obligations.
Interviewer: So you’re saying it’s not just what you ship, it’s how you ship it?
Steven: Exactly. Sometimes you need to change the product and sometimes just the structure of the deal. Remember, there are six accepted ways to calculate the value of imported merchandise. Choosing a transactional structure to get the right one can lead to significant savings-but you have to plan before the shipment occurs.
Interviewer: Do importers need a lawyer to do this, or can a customs broker handle it?
Steven: Most customs brokers don’t deal with valuation. They can somewhat help with classification, but the tariff engineer goes deeper. You need someone with specialized knowledge in both classification and valuation strategies – whether that’s a lawyer or a very experienced consultant.
Interviewer: How much could an importer realistically save using your tariff engineering services?
Steven: It depends, but typically around 20% of their total tariff exposure.
Interviewer: Do you think the Trump administration would prosecute importers for undervaluing their goods or violating tariff rules?
Steven: Definitely. I recently spoke with a small importer who openly admitted to underreporting value-he literally said, “We cheat.” He explained how his suppliers set up shell companies to submit false invoices with artificially low values. That way, they pay less in tariffs.
But if Customs finds out, both the importer and the consignee can be held criminally liable. I’ve seen people face jail time for this. Once the government cracks down, the shell companies disappear, and U.S. authorities go after anyone and everyone listed on the paperwork.
Interviewer: Could the fines be greater than the value of the goods themselves?
Steven: Yes. Penalties can be extremely harsh-often equivalent to or greater than the full value of the merchandise. We’re talking about penalties, asset seizures, and even imprisonment.
Interviewer: Do you think smaller importers are also at risk of enforcement?
Steven: Absolutely. I’ve had clients lose tens of thousands over undeclared transactions. One person didn’t declare $10,000; another case involved $300,000. The government tracks even small infractions.
Steven Lehat is a regulatory compliance expert with over 35 years of experience. He has guided some of the world’s largest companies-including the government of Jordan-through the complexities of tariff regulations. His specialty lies in helping clients minimize their exposure to tariffs through legitimate strategic methods.
About Ken Lehat & Associates:
Ken Lehat & Associates (KLA) is a full-service Customs Brokerage and tariff consultancy firm committed to providing an exceptional customer experience.
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Ken Lehat
Ken Lehat & Associates
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