Sourcing strategy · country of origin
Moving production out of China: what changes under US trade rules
Moving assembly from China to Vietnam, Mexico or India takes a product out of the China Section 301 duties only if the work done there changes the product's country of origin. Some duties follow the new country anyway, the forced-labor import ban follows the inputs, and the battery tax-credit test follows the owner. This page goes through what a move changes and what it does not.
The test: substantial transformation
The China Section 301 duties apply to products of China. CBP's Section 301 page says the duties are based on country of origin, not country of export (CBP). For goods made from materials of more than one country, origin is the last country where the goods underwent a "substantial transformation" (19 CFR 134.1(b)), meaning they became "a new and different article of commerce with a name, character, or use distinct" from what went in (19 CFR 177.22(a)).
CBP has said in terms that this is the test for Section 301: "When determining the country of origin for purposes of applying trade remedies under Section 301, the substantial transformation analysis is applicable" (rulings H313087 and H339851). Textiles and apparel are different: their origin is set by the rules in 19 CFR 102.21.
How CBP has decided real cases
| Ruling | Facts | Origin |
|---|---|---|
| N320280 (2021) | All-terrain vehicles: all 1,375 parts made in China, assembled in Thailand over about four hours across 22 stations | Thailand |
| N303710 (2019) | Vacuum cleaners: about 30% of components from China; sub-assemblies and final assembly in Vietnam | Vietnam |
| H339851 (2025) | Consumer drones: protest granted because the importer documented that final assembly and core sub-assemblies were done in Malaysia | Malaysia |
| H313087 (2021) | Golf clubs: Chinese shafts and grips; heads machined in Mexico from Chinese castings, then assembled there | China |
| H304677 (2023) | Printers: main mechanism assembled in China; circuit-board assemblies made and installed in Mexico | China |
The pattern is not "how much was done abroad" but whether the work abroad made the product what it is. Each ruling binds only on its own facts (19 CFR 177.9), so a company planning a move can ask CBP for a ruling on its own product before committing. The drone case also shows that the outcome can turn on the paperwork: records of where each step was done.
What a move changes, and what it does not
| Rule | If origin moves out of China |
|---|---|
| China Section 301 duties (7.5% to 100%) | Fall away, because they apply only to products of China |
| Section 301 forced-labor duty | Usually still applies, at the new country's rate (below) |
| Section 232 duties (metals, auto parts, semiconductors) | Still apply; they are product-based |
| UFLPA forced-labor presumption | Still applies to Xinjiang inputs wherever the product is finished |
| Battery tax-credit entity rules | Unchanged if the plant is owned or controlled from China |
| Antidumping and countervailing orders | Can follow the product if Commerce finds circumvention |
The forced-labor duty by destination
The 2026 Section 301 forced-labor tariff covers 60 economies, and every common alternative to China is one of them:
| Country | Rate | Heading |
|---|---|---|
| Vietnam, Thailand, Philippines | +12.5% | 9903.05.84, .77, .64 |
| Malaysia, India, Indonesia, Mexico | +10% | 9903.05.54, .44, .45, .55 |
| Taiwan | Total of at least 10%, including the normal duty | 9903.05.75, .76 |
| South Korea, Japan | Total of at least 12.5%, including the normal duty | 9903.05.70, .71; 9903.05.48, .49 |
Products of Mexico and Canada that enter duty-free under the USMCA are exempt (U.S. note 52(g) and (h), heading 9903.05.94). USMCA qualification has its own rules of origin, including regional value content paths, set out in General Note 11 to the tariff schedule and 19 CFR part 182. Neither the USTR notice nor note 52 says how origin is decided for the forced-labor duty itself; we would expect the same substantial-transformation test, but have not found that stated.
What does not work
- Transshipment. Routing Chinese goods through another country without transforming them leaves them Chinese. Declaring a false origin exposes the importer to penalties under 19 U.S.C. 1592 of up to the domestic value of the goods for fraud, four times the lost duty for gross negligence and twice for negligence, and goods must be marked with their true origin (19 U.S.C. 1304).
- Light assembly of goods under an AD/CVD order. Commerce can extend an antidumping or countervailing order to goods completed in a third country from the covered country's parts when the work there is "minor or insignificant" (19 U.S.C. 1677j). It did so for certain solar cells and modules completed in Cambodia, Malaysia, Thailand and Vietnam (88 FR 57419, 2023). CBP's evasion investigations under the Enforce and Protect Act cover AD/CVD orders only, not Section 301.
The 40% "transshipment" duty announced in 2025 was imposed under IEEPA (Executive Order 14326) and ended with the other IEEPA tariffs on February 24, 2026. The tariff schedule still prints its heading; CBP says such headings are inactive.
What China restricts on its side
- Technology export catalog. China's Catalog of Technologies Prohibited or Restricted from Export was last revised by MOFCOM and the Ministry of Science and Technology in Announcement No. 28 of 2025 (July 15, 2025, in Chinese). It added battery cathode material preparation technology (LFP and LMFP above stated performance thresholds) and lithium extraction and processing technologies as restricted items. Moving a production process that depends on a Chinese partner's know-how in these areas can need a Chinese technology export license.
- Rare-earth know-how. MOFCOM Announcement No. 62 of 2025 would bar Chinese persons from giving substantive help to overseas rare-earth activities without a license; it is suspended until November 10, 2026. See China's export controls.
Inputs and owners still count
- UFLPA. CBP's importer guidance says the presumption "also applies to goods made in, or shipped through, the PRC and other countries that include inputs made in Xinjiang" (CBP guidance, June 2022). See the UFLPA page.
- Battery tax credits. A plant in Southeast Asia or Mexico owned or controlled from China is still a prohibited foreign entity for the 2025 credit rules. See battery storage tax credits and Chinese-owned suppliers.
Sources: 19 CFR 102.21, 134.1, 177.9, 177.22 and part 182; CBP rulings as linked; USITC HTS 2026 Revision 21 (General Note 11; chapter 99 U.S. note 52); 91 FR 47318; 19 U.S.C. 1304, 1517, 1592 and 1677j; 88 FR 57419; MOFCOM/MOST Announcement No. 28 of 2025; CBP UFLPA guidance. Last checked October 14, 2026. General information, not legal or customs advice; origin is decided on the facts of each product.
Last checked 2026-10-14