Navigating Tariff Turbulence: Board Strategies for Supply Chain Optimization

By Purvee Kondal, NACD.DC, Chief Operating Officer in Residence at American Luxury Portfolio Group, Publisher of the Smart Supply Dispatch & an Athena Alliance Executive Member

In today’s volatile global trade landscape, boards must provide strategic oversight to ensure supply chain strategies align with governance responsibilities, including cost control, risk mitigation, and compliance, while also meeting investor expectations.

This guide outlines nine actionable strategies boards can use to challenge and support management in deploying tariff optimization strategies under the Harmonized Tariff Schedule (HTS), which can reduce some duties by up to 99%. These strategies could help unlock capital for innovation, enhance financial performance, and strengthen supply chain resilience—especially critical amid the 2025 tariff disruptions. 

Nine Board Strategies for Tariff Optimization

1. Leverage the First Sale Rule

• What It Is: The First Sale Rule allows duties to be calculated based on the initial sale price between a foreign manufacturer and a middleman, reducing tariffs by 5-10%. It targets multi-tiered supply chains to lower the dutiable value.
• How It Works: Management should have a process to document the first sale (e.g., factory invoice) and submit it to U.S. Customs and Border Protection (CBP) to ensure compliance and avoid audits. For example, Walmart and Gap have consistently used the First Sale Rule to save millions on apparel imports by valuing goods at factory prices.
• Board Action: Instruct management to assess first sale eligibility, implement an audit-ready documentation process, and report compliance risks.

2. Optimize Product Design for Lower Tariffs

• What It Is: Modifying product components to qualify for lower HTS classifications can help reduce duties by up to 15%. It aligns innovation with cost savings.
• How It Works: R&D teams evaluate and re-engineer materials or components to shift to lower-tariff HTS codes. For example, Ford reclassified truck components and saved $15 million on $100 million in imports by adjusting materials to lower-tariff HTS codes.
• Board Action: Request management’s analysis of design-driven tariff savings, R&D tradeoffs, and HTS compliance.

3. Expand ‘Made in USA’ Manufacturing

• What It Is: 48% of U.S. consumers prefer American-made goods. Domestic production avoids import tariffs and boosts consumer trust. It supports cost savings and job creation in the local economies where we live, work, and sell.
• How It Works: Management relocates production to U.S. facilities, balancing higher labor costs with tariff savings. Over the years, several enterprises have reshored their manufacturing capabilities. For example, Stanley Black & Decker reshored tool production to Texas and South Carolina and have since continued with the strategy.
• Board Action: Direct annual feasibility studies on reshoring, assess job creation, and ensure Federal Trade Commission (FTC) compliance.

4. Utilize Free Trade Agreements (FTAs)

• What It Is: FTAs reduce or eliminate duties on goods that meet rules of origin, saving up to 12% on tariffs. They encourage sourcing from partner countries.
• How It Works: Management certifies product origin and submits documentation. For example,  Magna International has leveraged the United States-Mexico-Canada Agreement (UMSCA) to include Mexican auto parts under the program.
• Board Action: Consider requiring annual trade agreement compliance reports and monitor exposure to trade policy changes.

5. Optimize Tariff Classifications

• What It Is: Tariff classification optimization assigns accurate HTS codes to goods to secure lower duty rates. It minimizes overpayment due to misclassification.
• How It Works: Management engages customs brokers to analyze product specifications and assign optimal HTS codes. Reclassifying components and stacking strategies can help companies reduce costs.
• Board Action: Direct management to engage customs brokers for classification reviews and report misclassification risks biannually. Review stacking strategies for maximum savings.

6. Implement Duty Drawback Programs

• What It Is: Duty drawbacks refund 5-8% of costs on imported goods that are re-exported or used in exports. They support export-driven companies.
• How It Works: Management tracks imports, files claims with CBP, and maintains audit-ready records. For example, by importing parts like avionics and titanium fittings for 737 and 787 aircrafts, paying initial duties, and reclaiming them upon exporting finished planes to global customers, Boeing has leveraged the strategy to mitigate tariff costs in re-exported parts with the Duty Drawback program.
• Board Action: Evaluate cost-benefit tradeoffs and request analysis of drawback feasibility, administrative costs, and CBP compliance.

7. Use Foreign Trade Zones (FTZs) and Temporary Importation Under Bond (TIB)

• What It Is: FTZs defer duties on goods stored, processed, or assembled in the U.S. until they enter commerce, saving 5–10%. TIB allows duty-free imports for temporary use (e.g., prototypes and trade shows) for up to three years.
• How It Works: Management adjusts operations to leverage FTZs and uses TIB to temporarily import goods under a bond (equal to twice the duties), re-exporting them to avoid tariffs. For example, in 2024, Tesla requested and received approval to designate the Gigafactory as an FTZ in 2020 to leverage the FTZ strategy to save millions and it is a strategy all automakers have been deploying for a cost-effective supply chain strategy. So, an organization spending $5M in prototype chips, they stand to save $750,000 by using TIB as a strategy.
• Board Action: Direct management to evaluate FTZ-TIB integration for temporary imports and monitor compliance through regular CBP audits.

8. Support Nearshoring to USMCA Regions

• What It Is: Nearshoring production to Mexico or Canada reduces tariffs and enhances supply chain resilience, saving up to 15%. It leverages regional trade benefits.
• How It Works: Management invests in regional facilities to qualify for USMCA benefits. For example, in the automotive industry, companies like General Motors who have built an 80% USMCA compliant supply chain by leveraging this strategy to save millions in imports over the years plans to put a rigor around ensuring compliance to USMCA and plans to reshore some assembly to the U.S. as announced in 2025 to mitigate the exposure from the non USMCA sourcing efforts.
• Board Action: Request annual assessments of nearshoring strategies and oversee investments while considering economic impacts and geopolitical risks.

9. Diversify Supply Chains

• What It Is: Sourcing from low-tariff regions like Vietnam or India reduces costs by 5-10% by mitigating tariff exposure moving from a higher cost tariff country to a lower cost one. It enhances resilience against trade disruptions.
• How It Works: Management vets new suppliers and shifts sourcing away from high-tariff regions. For example, Apple saved $20 million on $200 million in components by diversifying iPhone production to India in 2024.
• Board Action: Guide management in assessing supplier diversification and monitor key performance indicators.

Looking Ahead: Optimization as a Strategic Imperative

When tariff escalations occur, these strategies can help drive multi-million-dollar savings and market leadership. Historical examples, like the 1960s “Chicken Tax” with Europe, are still in effect and underscore the need to operationalize long-term tariff strategies with urgency. With global trade projected to grow 2.5% in 2025, tariff optimization is no longer an optional tactical advantage—it is a strategic imperative for resilience, cost efficiency, and long-term value creation.

Boards should evaluate each of these strategies and prioritize them with a short-term, mid-term, and long-term outlook, while keeping a pulse of the geopolitical risks. Boards will also need to consider upskilling and digitizing the procurement function and how AI can help with tariff optimization and compliance activities, which may require additional administrative management. AI tools can help companies anticipate disruptions, model cost scenarios, and build more agile, future-ready supply chains. 

In an increasingly complex trade environment, the boards that succeed will be those that treat disruption not as a setback but as a signal to adapt, evolve, and lead with purpose.

To explore these strategies further and learn how you could leverage them for your organization, register your interest to be notified for an upcoming Tariff Optimization Workshop.

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc. or American Luxury Portfolio Group.