How Companies Design Products To Avoid Tariffs - Cheddar Explains 

In Indonesia, a car with 10 seats are taxed cheaper compared with a 7 seats. Because of that, Ford Indonesia imported the Ford Everest from Thailand in a 10 seater format and converted them into 7 seater in Indonesia between 2007 and 2014. This loophole avoided the 40% tax and got the 10% tax instead.

I worked as an international shipper/receiver at a guitar company. They had a line of guitar effects pedals that were mostly made in China. By mostly I mean, the whole thing was made there. Only the actual pedal was not mounted on the electronics part, but it was otherwise assembled. That one bolt assembly allowed the company to save a ton on tariffs, but also allowed them to proclaim the pedals as being Made In America. International trade is a trip.

A central theme of X-men comics is, at the end of the day, they are human, just like anyone else. Marvel successfully argued in court that they are not human. Placing them in the non human toy category, cutting the terif in half.

The snuggie looks like a cloak, is worn like a cloak, and can be used as a cloak. And in my humble opinion, i believe that it should be classified as a cloak.

7:06 "So they dont have to lay off workers" Lol, more like so they can increase shareholdervalue

“You can’t lie about the product……. Unless you’re converse trying to pass off your shoes as slippers…..”

It would be nice if modern goods were engineered for quality sometimes, but I guess that's off the table.

I was a bit confused when I watched this because I was sure that Chucks didn't have a fuzzy sole. Then I realized that it has probably been 20 years since the last time I bough Chucks. I like Chucks (or maybe we should say that I liked Chucks) but they only seem to last 6 months or so if you wear them all of the time. Come to think of it, maybe they really are slippers.

"Have you ever had the grand-standing debate of wether or not a hotdog is a sandwich? Spoiler alert: it's not." _multiple "A Hot Dog Is A Sandwich" podcast fans are typing..._

My favorite ridiculous tariff engineering item is the Ford Transit van - a VERY common "small delivery van" here in the United States. And while Ford is an American company - the Transit van isn't built in America. And I don't mean "The United States of America", I mean "The American continents." It is built in Turkey, in Europe. The United States has a *VERY* high tariff on cargo vans being imported from Europe. But a _much_ lower tariff on passenger vans. Only Ford Transit sized passenger vans aren't popular in the United States. But that same size cargo van? *SUPER* popular. So what is Ford to do? Start up an assembly line for it within the NAFTA trade zone? Of course not, that would cost too much money. Make the van cost more by paying the cargo van tariff? Of course not! So they do the obviously logical thing - they build the vans as passenger vans, import them, then rip out all the "passenger" bits, slap on solid metal "windows", and call it a passenger van. But now they have hundreds of thousands of "small passenger van" seats and windows lying around spare. Sure, I'm sure they keep some as spares for the few Transit vans that are actually sold as passenger vans, but there would still be way too many. So they send them back to Turkey. Even stranger? Because of the combination of tariff and shipping costs - it is cost-prohibitive to send them back intact. SO THEY SHRED THE SEATS AND SHATTER THE GLASS AND SEND BACK THE READY-FOR-RECYCLING MATERIALS! Yep, they build seats and glass - solely to destroy it and send it back to be recycled into new seats and glass. Ford sells over 100,000 Transits a year in the USA. That is a mind-blowing amount of fabric, metal, and glass. Also, the vehicles have to pass US safety standards to be imported, so they can't just slap in "wouldn't even qualify as a seat to most people" seat. It has to be a real US-passenger-worthy rear seat. (I can't find any specific references to how many seats it has to have when being imported - and obviously even the cargo variants keep the front seats, so I'm assuming it is imported with just a standard second-row three-passenger-bench rear seat., not a full three rows, or bucket seats or anything fancy. Just what you'd find in a "commuter van".

Years ago, during the height of the US/Canada softwood lumber dispute, I worked for a roof/floor truss manufacturer in Canada. We had arrangements with several truss manufacturers in the US. They would send us their cut sheets and we’d pre-cut all their lumber and ship the pieces to them. Apparently, if the lumber had square cut ends, it was “lumber” and charged the appropriate tariff, but if it had non-square cut ends, the pieces were classified as “parts” and charged a much lower tariff.

You forgot the best example of a smoke detector being classified as an instrument

Ironically for a video about taxation from a company located in New York, starting with the statement that a hotdog wasn't a sandwich when it is considered such by the New York tax code.

I'm pretty sure I remember hearing the PS3 allowed you to install your own operating system so it could be considered a computer instead of a gaming system for tax purposes in specific countries (EU I think)

Converse website advertises and sells their shoes as "shoes" so how does the "iTs A sLiPpEr" argument work

Best argument against tariffs I've ever seen. Imagine all the hours of human effort squandered by companies trying to get around tariffs, and governments trying to enforce them, all in an attempt to artificially "protect" certain special interests at the expense of the consumer.

"had a dispute, slapped on a tariff and forgot all about it" 1964 CHICKEN TAX also, how the US missed out on a whole generation of cool light trucks

In the early days of Scrabble, the tiles were manufactured outside the US. If they were delivered as sets, they were taxed as complete games, so they vowels were sent separately from the consonants to avoid the tariff.

Cheddar: You can't lie. Also Cheddar: Says Converse gets Chuck Taylors classified as slippers because fuzzy bottoms.

I'd say an Apple Watch IS legitimately more of a telecommunications device than a watch. Because despite having "watch" in the name, telling time isn't really a central use. Converse are definitely slippers though...

Appreciate these vids, very informative. Keep it up!

I wonder if this has anything to do with why women’s pants sometimes have those fake pockets. Maybe pockets translate to higher tax?

fuzzy sole sounds like a great album name

Most consumers in a general sense are more brand conscious than tariff savvy, and that determines how much they are willing to pay for a product. The Columbia apparel example made me chuckle because it is one of the more expensive sport apparel brands on the market. I doubt they, and other upmarket brands, pass along much savings from their tariff costs.

I know now why my Converse have Felt on the soles! Fascinating, would never have guessed this, what a great episode, for that fact, and so much more. Thanks again for an enlightening and really informative episode!

Less finished products like raw sugar and blankets tend to have lower tariffs on the assumption that domestic industry will use them as feedstock. Products with more value added are seen as taking more employment away from workers in country.

DSLR cameras have a 30min max video recording time to prevent from being classified as a video camera and not a DSLR so they won't pay a higher tariff.

That was literally my job, but I never considered cheating the classification. If you got caught the goods would be delayed and that is a bigger problem. It's so frustrating how huge and detailed that list is, I always thought they could simplified things.

I love how China is included as a tariffed item

A Snuggie is a bathrobe worn backwards. NOW what??

The Subaru BRAT was a cool little four-wheel drive pickup truck imported from Japan. For the first few years that the BRAT was sold in the US, it had two plastic seats in the cargo bed. The seats were included so the vehicle could be imported as a car rather than a truck.

Haven't seen the whole video yet, so I don't know if it touches on this, but the age-old debate of "is a tomato a fruit or vegetable" is important for the same reason. Learned this in college. Now I'm in law school figuring out how to stop companies from doing this.

Nicely done presenting, kudos to the presenter

This is kind of fascinating

In 10 years from now we're probably back to "you wouldn't download a car would you" because it's cheaper to just download the design of the thing you need and print it rather than buying it

A hot dog is a sandwich. Sandwich: “two or more slices of bread or a split roll having a filling in between” ~ Merriam-Webster Dictionary

yeah, I don't consider Converse as a shoe too. they're so uncomfortable that it's illegal to consider those as shoes.

This was soooo interesting I never knew about this, thank you

In 1893 the US supreme court ruled whether Tomatoes are considered a vegetable by usage, or a fruit by botanical classification. This was a major lawsuit because there were alternate tariffs on the different classes of plant. This case also set precedent on common usage of terms, and if you could just point to a dictionary to define something legally.

"The U.S. Department of Agriculture (USDA) describes a sandwich as “a meat or poultry filling between two slices of bread, a bun, or a biscuit.” By that definition a hot dog is a sandwich."

In the UK we know this as the jaffa cake debate

Loved it. Easily digestible information without the inflection and high talk. Nice work. 👍🏻

Wait, what? Converse belongs to Nike? I didn't know that!

The classic examples that comes to mind of this are in the automotive industry. Like the "chicken tax" that charges extra duties on imported trucks. Some companies have gotten around this by including seats in the truck bed when importing and removing them once in the country.

I have been a fan of Cheddar for a while, but this video produced and presented by Natalia Ryzak pushed me to finally hitting the Subscribe button. There was just something in the way she presented the information; most of the videos I have watched from Cheddar are always informative; but Ms. Ryzak's video was truly outstanding. I will admit; I have never had an interest in International Tariffs, but Natalia's way of giving the information had me glued to this video. I am now a 100% fan of Natalia and looking forward to future videos presented and produced by her.

There should be a tax on convolution; making systems and things within those systems way more unnecessarily complicated than they need to be.

0:02 spoiler alert... it is a sandwich. A piece of meat between bread. Just like a hogie is a sandwich, or a pastrami, or a hamburger. Sure, you can get more specific with the names, like hamburger, but that's a type of sandwich.

This is my first Natalia video! What a wonderful presenter! Very charming! Hope to see her in more videos soon!

In 1964 G I Joe was "not a doll" but a toy soldier or an action figure and since G I Joe was made in Japan (and then in China) the lower import tariff was very attractive. Now you know why G I Joe was "not a doll."

That pocket looked tight 6:49

2:34 - LOL the _CoD Zombies_ rebuild sound 🤣

Sometimes tariff engineering works in reverse, where customs will purposefully missclassify a good to be able to charge higher tariffs. I once tried to import an stethoscope into Brazil and was told there would be a 60% import tariff because it would be classified as a comercial use device, even though there are models specifically made for students.

I'm crying in Brazilian with the "crazy high duty rate of 60%". For private citizen, every import here is taxed in federal level at 60%...

I'm just going to start printing my own shoes.

Really liked this video 😙

A company in Moscow sent me their product to review on RU-vid. This was a very expensive item so I had to return it when I was done. The return shipping was a nightmare due to those tariff codes.

Yet more litigation on the definition of the word "is".

"Is a Snuggie a blanket or a sweater?" "Yes"

I imported trigger locks for guns as "Rifle Parts" once .. cut the duty from 20% down to 1%

all of my chucks have all-rubber bottoms, and I've bought some in Canada, Jamaica, Mexico, and the Philippines. Am I missing something or are felt-bottoms unique to the USA?

"Tariff engineering". So, this is the fabled 'capitalist innovation' I keep hearing about.

so someone removed the molasses from the sugar... then someone added molasses back to the sugar and it's still considered white sugar?

It's kind of like Mazda with the Rx7 having "back seats," same with the Subaru Brat. Also the Rx8 having rear doors for a cheaper insurance bracket

The comparison with accounting doesn't hold IMHO, because this causes the final product to be altered, which is a very significant difference.

I knew it. Snuggles are not apparel people!

The second she said "a hot dog isn't a sandwich", I disregarded any further information she wanted to tell me.

Here cameras are categorized into photo cameras and video cameras. The former have a lower tariff. There is now a limit of 30 minutes on photo cameras.

Good content. Thank you.

Just know that when she was like "they pass that cost saving onto the customer, and let's the company not lay off workers" is complete bullshit. 90% of the companies can afford to pay all their workers (including the children in sweatshops over seas) 5x or 10x the amount they do. Sure we get a shitty Chinese product for 2$ dollars less but it certainly is not to the benefit of the worker.

“We’ll get to that later...” you gotta stoop that low and make me watch to find out the answer? Well jokes on you, I’ll just fast forward.

Spoiler alert: a hotdog is just the meat. The combination of a hotdog and a hotdog bun is a hotdog sub, which is a type of sandwich.

This is fantastic

In the 1970s Subaru wanted to bring a pickup truck to the US, but at the time there was a 25% chicken tax on light trucks so Subaru installed 2 rearward facing seats in the bed and classified it as a family car to avoid the tax.

The USA has cheap , prison workers in jail to compete with prices from some goods overseas

The music that comes in at 5:24 is BANGER!

Great video

A tariff has never benefitted an end purchaser. Ever.

The more I learn about taxes the more it sounds like organized crime

This is the best TIL I've learned today.

Great fact!

Mixing white refined sugar with molasses literally makes it brown sugar though lol (like, culinarily speaking)

tariffs aren't costs to the company, they're really costs to the consumer. Protectionism is an absolute joke.

The Snuggie is literally a robe that you wear backwards. I’d rather wear a Oodie because at least it covers the back and neck areas too.

The automotive parallel is the PT Cruiser, which is classified as a truck, thus getting al sorts of tax breaks.

One doesn’t experience self-transcendence, the illusion of self only dissipates.🎈

Classification should use how the product is marketed as a big part of the decision.Chuck Taylors are not marketed as slippers!

We’re covering trade in one of my economics classes..YT’s recommended is very accurate 😂

If subway sandwiches are sandwiches, so are hotdogs. By every term of the definition it is a sandwich

"but aren't lower prices for the consumer good??" Nope. Not always. If you took manufacturing jobs out of the USA, relocated them to a country that we're now in debt to, created horrific working conditions in those overseas workshops, suppressed wages at home and abroad, shipped the goods back to the USA, where Americans have lost their jobs and are making less money, all while contributing to pollution every step of the way... I'm gonna say NO, that's not good at all.

Natalia Ewa Ryzak is very beautiful and has a pleasant sounding voice.

OMG, i had a Columbia jacket, and I loved everything about it... ... except those damn tiny pockets. Well, that one got replaced and I'm much happier with what I have now.

7:19 all of those "can nots" can be lumped into "don't lie."

Another role of governments: Pile up bureaucracy so (unnecessary) jobs are created. Humanity’s brightest minds are wasted.

Anything shipped should be taxed at a rate proportional to how far it is traveling so the green house gases from fuel used to move becomes an economic consideration encouraging people to buy local and use less fuel.

Interesting, makes sense why some items are partially assembled overseas.

Tariffs aren't only about international trade. Tariffs also include how much is paid for a product or service paid by the government.

They say to pass on the savings to consumers. But every time I hear that, I think of the CEOs just giving themselves a bigger bonus.....

Immediate dislike for the hot dog comment

And like with the example given as the video's hook, since it is classified as a blanket and *NOT* as a garment, you *SHOULD* be detained for indecent exposure if you wear only a Snuggie out in public.

Nissan used to send 'kits' to the UK that where essentially complete cars made in china, they just needed a few bits bolted back on. These then counted as being built in the UK, allowing Nissian to import to the entire EU without paying import tariffs.