Baltimore, on the dock. Ford workers pull brand-new seats out of vans that have just crossed the Atlantic, then toss them straight into a shredder. The seats were never used. Neither were the seatbelts. The rear windows go the same way, swapped for solid metal panels. These vehicles were designed, assembled and shipped with parts meant to be destroyed on arrival. Welcome to one of the strangest customs workarounds in American industrial history.
Why the organized waste? Because of a chicken. In the 1960s, several European countries slapped heavy tariffs on chicken imported from the United States. In retaliation, President Lyndon Johnson imposed a 25% duty on a handful of products: potato starch, dextrin, brandy and light commercial vehicles. The other tariffs eventually vanished. The “Chicken Tax” on trucks and cargo vans stayed on the books for more than sixty years (Wikipedia).
A cargo van dressed up as a passenger car
When Ford decided to import the Transit Connect from its plant in Turkey, Customs had a say. A cargo van pays 25%. A passenger vehicle pays 2.5%. Ten times less. On a van sold at scale, that gap wipes out the margin in one stroke.
So Ford’s engineers designed a trick worthy of a magic act. In Turkey, workers installed rear seats, seatbelts and windows on vehicles that everyone at Ford knew would end up as delivery vans. The vans crossed the Atlantic, presented themselves to U.S. Customs as passenger vehicles and dutifully paid the 2.5%. Once on American soil, they were driven to a facility where the illusion was taken apart: seats unbolted, belts removed, all of it shredded for recycling, rear windows replaced with sheet metal. The van became a van again. Savings: thousands of dollars per vehicle.
It is clever. It is even impressive in its nerve. But is it innovation?
Creativity, invention, or just a workaround?
In my book, chapter 3, I spend several pages getting everyone aligned on a confusion that costs companies dearly: the one that blurs creativity, invention and innovation. Three words, three different realities, and plenty of executives who call “innovation” what is only a clever idea never turned into lasting value (Book).
Creativity imagines an original solution to a problem. Invention creates something genuinely new and protectable. Innovation, in the OECD definition I quote in that same chapter, is the implementation of a new or significantly improved product, process, marketing method or organizational method. Pricing is part of it. Working around a rule is not.
I also explain in that chapter a well-documented practice: “designing around a patent”, meaning you exploit the gaps in a protection to reach the same result by another route. A former executive of a large Dutch group once summed up their doctrine with a phrase I never forgot: “proudly stolen elsewhere”. Customs workarounds belong to the same family. In the United States it has a name, “tariff engineering”: designing the product so it falls into the cheapest box of the customs schedule (Wikipedia).
2025: the great return of the workaround
With the new wave of tariffs from the Trump administration, this old sport becomes a reflex again. The examples are piling up, and some are delicious.
Columbia Sportswear designs clothing with Customs in mind before the customer. The brand added a tiny pocket below the waistline of certain women’s blouses, just big enough for a lip balm. That pocket shifts the garment from a category taxed around 26.9% into an “other garments” category taxed around 16% (Marketplace).
Converse glued a felt sole under its All-Star sneakers. The result: in the eyes of Customs, the shoe moves closer to a house slipper, with a much lower duty attached. Estimated savings: 15 to 20 million dollars a year (Wikipedia).
Others play on declared value rather than the product itself. The first-sale rule, back in fashion since high tariffs returned, lets companies base duties on the price of the first sale (factory to intermediary) rather than the final price paid by the U.S. importer. The taxable base drops, and so does the customs bill (CNBC).
Others move the problem in space and time. Foreign trade zones and bonded warehouses let companies import, store without paying, and settle duties only when goods are actually sold into the U.S. market. Since the massive tariff announcements in spring 2025, interest in these zones has quadrupled according to the logistics firms that run them (CNN). A reworked sourcing report, a well-negotiated exemption, a tariff reclassification: the levers are plenty, and companies of every size are rushing in (NPR).
The hack always comes due
Here is where the story turns. Ford got caught.
In 2013, U.S. Customs ruled that Transit Connects imported as passenger configurations and then converted into cargo vans fell under the 25% cargo duty, not the 2.5% for passenger cars. In 2024, Ford agreed to pay 365 million dollars to settle the case, one of the largest customs penalty settlements in recent years according to the U.S. Department of Justice (DOJ). The seats shredded in Baltimore cost far more than the seats left in place.
And the wind is shifting. In early 2025, U.S. Customs rejected a tariff-engineering claim where the change was deemed trivial, treating the “modified” product as essentially the original one. A workaround built on a definition holds only as long as the administration accepts that definition. The day it reads things differently, the bill arrives with interest, penalties and legal fees.
That is exactly my warning as a leader: an assumption is dangerous until it has been killed by experimentation. Betting that the loophole will hold for ten years is an assumption. A beautiful, comfortable, very well-dressed one. It can cost you a plant.
Working around a rule, reinventing a value chain
So should we condemn these setups? No. They are often legal, sometimes brilliant, and I understand the leader protecting margins against a regulatory shock they did not choose. But I refuse to call them an “innovation strategy”, because that shift in vocabulary lulls teams to sleep.
A workaround optimizes the present. It builds no durable advantage. It depends on a rule written by someone else, who can rewrite it overnight. Real innovation, the OECD kind, touches process, marketing and organization: relocating part of production, rethinking sourcing, redesigning the product so it is better and less dependent on a border, revisiting the distribution model. That work, no one can forbid with a stroke of the pen.
And that work follows my three non-negotiables. It is human-centered: your teams, from the warehouse to the head of purchasing, spot the real pockets of value, not a consultancy selling a diagram. It is verifiable: measure before, during and after, never settle for a promise of savings. It is transversal: customs, design, R&D, finance and production sit at the same table, or one department’s gain becomes another’s penalty.
The van stripped bare in Baltimore is a lesson in ingenuity. It is also a lesson about what ingenuity does not replace.
The essentials
- Working around a tax is often legal and sometimes brilliant, but a workaround is not an innovation: it optimizes a rule instead of creating value.
- Creativity, invention and innovation are three different things. Blurring them lulls teams to sleep and hides the absence of a strategy.
- The hack depends on an administrative definition. The day the administration reads it differently, the bill returns with penalties: Ford paid 365 million dollars.
- An assumption (“the loophole will hold”) must be killed by experimentation before it kills your margin.
- The only durable answer is process, marketing and organizational innovation: human-centered, verifiable, transversal. No one can take it from you with a stroke of the pen.
Hand this piece to your head of purchasing and your customs manager on the same morning. Then ask them one question: of everything we do to dodge these duties, what would still stand if the rule changed tomorrow? You will know at once what is duct tape and what is strategy.
References
- (Book) https://philippeboulanger.com/book/
- (Wikipedia) https://en.wikipedia.org/wiki/Tariff_engineering
- (Marketplace) https://www.marketplace.org/story/2019/05/29/theres-a-reason-your-columbia-shirt-has-a-tiny-pocket-near-your-waistline
- (CNBC) https://www.cnbc.com/2025/05/26/businesses-are-finding-a-tariff-workaround-the-first-sale-rule.html
- (CNN) https://www.cnn.com/2025/07/07/economy/foreign-trade-zones-tariffs-trump
- (NPR) https://www.npr.org/2025/03/07/nx-s1-5318785/tariff-dodging-companies-exemptions-engineering
- (DOJ) https://www.justice.gov/archives/opa/pr/ford-motor-company-agrees-pay-365m-settle-customs-civil-penalty-claims-relating
