This year, the make-or-break holiday shopping season comes during a new era of upheaval for fashion companies — one that is upending the economics of apparel sourcing and e-commerce. 

Brands that once relied on low-duty imports must now navigate an environment where duties can shift drastically overnight, and even long-term supplier relationships can expose companies to trade-fraud risks. 

In the coming months, tariff-induced price hikes are expected to increase the strain on household budgets. That means U.S. importers must balance margin pressure and regulatory scrutiny at a time when authorities are stepping up enforcement of trade and customs fraud. 

Adding to the complexity, the U.S. Supreme Court is set to review the legality of the Trump administration’s global tariffs this fall. The oral arguments in Trump v. VOS Selections and Learning Resources, Inc. v. Trump held on November 5, 2025, indicate that the Supreme Court justices may be skeptical that the President’s authority to “regulate” under the International Emergency Economic Powers Act (IEEPA) does not include the authority to impose the wide-sweeping tariffs imposed this year. But whether the Supreme Court ultimately invalidates the tariffs, the scope of any relief and the methodology for tariff refunds remains very much up in the air. 

But even in a challenging trade environment, fashion companies have several options to manage risk, from rethinking how transactions are structured to adjusting where and how they source materials and products. 

The sweeping “Liberation Day” tariffs announced in April — and the whipsawing trade deals and levies that followed — have fashion companies overhauling their business models in real time. This includes narrowing product mixes, reintroducing old inventory into stores, and broadening and diversifying the countries from which products are sourced. 

At the same time, e-commerce brands are grappling with the consequences of the suspension of the de minimis exemption that for decades had allowed low-value shipments to enter the U.S. tariff-free. The impacts are already being felt. After Trump ended the exemption for goods from China in May,  U.S. shoppers scaled back spending at retailers like Temu, which sell Chinese-made products directly to consumers. 

Tariff Mitigation in Practice 

Despite ongoing turbulence, fashion companies have several potential tools at their disposal to limit tariff exposure and remain competitive as prices increase: 

First sale rule. Brands often buy from trading companies instead of directly from manufacturers. If set up properly, multi-tiered transactions structured so that duties are assessed on the earliest bona fide sale can in some cases lower the dutiable value of goods. 

Buying agents. Non-production related activities and corresponding costs may be shifted to a buying agent. Commissions aren’t dutiable if properly implemented.   

Tariff classification reviews. Some companies are overpaying tariffs because they declare the wrong tariff classification. By confirming that a tariff classification is accurate, companies can help ensure that the correct duties are paid. 

Tariff engineering. Product design changes, such as using a different fabric or adding pockets in certain garment locations, can result in a different tariff classification with a lower duty rate. 

Country-of-origin reviews. Reciprocal tariffs apply on an individual country basis. Small changes in the manufacturing scenario may change the country of origin to a more beneficial rate. 

Free trade agreements (FTAs). Consider adjusting sourcing so goods qualify for preferential treatment. Goods from Mexico and Canada that are eligible under the United States-Mexico-Canada Agreement are exempt from International Emergency Economic Powers Act (IEEPA) duties. FTA-eligible goods may also be exempt from standard duties. 

Each of the above tactics comes with its own set of legal requirements, so it's important for businesses to carefully assess which options best fit their goals and operations. Additionally, strategies can shift with new developments. 

Tariff workarounds can also present pitfalls in an era where federal regulators are ramping up efforts to target importers who are evading tariffs, duties and import restrictions. Case in point is the cross-agency Trade Fraud Task Force announced in August. Solutions that seem good to be true — such as products purchased at very low prices with Delivered Duty Paid (DDP) terms of sale, meaning suppliers assume import responsibility — may rely on an undervaluation or misclassification of the goods to achieve the low prices. While brands may believe the risk lies entirely with the supplier, in some cases the importer can also be liable. 

Transshipping, where suppliers route goods through third countries to disguise the products’ true country of origin, is another major point of risk. Even if the brand is unaware of the practice, they could still be found liable because importers are responsible for the accuracy of customs declarations. If they fail to verify the origin or ignore red flags, they may be deemed complicit. This issue may be further complicated by possible forthcoming regional value thresholds or requirements. 

What Companies Can Do Now 

As fashion companies navigate ongoing tariff uncertainty, it is important to continue taking proactive steps to protect their businesses, including: 

Auditing suppliers and contracts for accurate classification, valuation, and origin declarations.

Modeling different tariff scenarios to understand financial exposure and make sourcing decisions accordingly.

Integrating customs compliance into design and sourcing cycles to identify tariff engineering opportunities early.

Ensuring you have access to your import data in order to track tariffs paid, make strategic decisions, and facilitate the process of obtaining refunds should the Supreme Court invalidate IEEPA tariffs. 

Mitigation isn’t only about saving costs but also preventing enforcement risks. Brands that combine legal compliance with diversified sourcing will be better positioned to weather tariffs, while mitigating the risk of margin erosion and enforcement actions. 

Angela M. Santos, partner, co-leads the Customs & import compliance practice and fashion & retail law group at ArentFox Schiff.