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mattas • today at 4:19 AM • 4 replies • view on HN

Reminds me of this.

There's a whole industry around reverse engineering tariff classifications to find ways to minimize all-in manufacturing cost.

For example, let's say you sell air purifiers.

Option 1 is to import an air purifier and pay the 25% tariff (or whatever the actual duty rate is) on air purifiers.

Option 2 is to import a widget that gets classified as a fan (with 5% duty) and import a widget that gets classified as an air filter (with 10% duty), then put them in the same box somewhere in the US.

Both are sold to consumers as an air purifier. But one of the options minimizes total cost to the manufacturer.

Replies

3eb7988a1663 • today at 5:56 AM

Radiolab[0] had a story about this involving "toys" vs "dolls".

  "Dolls," which represent human beings, are taxed at almost twice the rate of "toys," which represent something not human - such as robots, monsters, or demons. As soon as they read that, Sherry and Indie saw dollar signs. it just so happened that one of their clients, Marvel Comics, was importing its action figures as dolls. And one set of action figures really piqued Sherry and Indie's interest: The XMEN, normal humans who, at around puberty, start to change in ways that give them strange powers.

  So Sherry and Indie went down to the customs office with a bag of XMEN action figures to convince the US government that these mutants are NOT human. That argument eventually became a court case that went on for years.
[0] https://radiolab.org/podcast/177199-mutant-rights
netfortius • today at 9:04 AM

Putting the parts in the same box, in the US, may cost more than the tariff for the whole thing being built in China or India.

ifwinterco • today at 5:19 AM

The solution is to tax the capital account instead (tobin tax) or at the very least put the same tariff on everything.

But politicians can never resist exceptions and carve outs and then the game starts again

➕ show 1 reply
mopsi • today at 4:31 AM

To add to this, sneakers with a barely visible fuzzy fabric bottom are one of the best examples of tariff engineering: https://www.gazetc.com/blog/2010/08/sneaking-through-us-cust...