Country of Origin and Transshipment Rules for China

By ChinaManufacturers.com Editorial Desk · Updated 30 October 2026 · How this page was researched

What country of origin means under US customs law

For US customs purposes, the country of origin of an imported article is the country where it was manufactured, produced or grown. If the article was further worked in a second country, origin moves to that second country only if the work there substantially transformed it (19 CFR 134.1(b), read 30 October 2026).

That definition settles the question most importers are really asking. A product made in China and shipped from Vietnam, Malaysia or Mexico is still Chinese-origin unless the processing in the third country turned it into a different article. The port of export, the nationality of the exporter, the address on the invoice and the certificate of origin a supplier hands over do not decide origin. US law does, applied by US Customs and Border Protection (CBP).

This is the non-preferential origin rule, the one used for marking and for most country-specific duties. Goods claimed under the US-Mexico-Canada Agreement use a separate set of origin rules in 19 CFR Part 102, and antidumping and countervailing duty (AD/CVD) orders carry their own scope language, administered by the Commerce Department. A product can therefore have one origin for marking and face a different analysis under an AD/CVD order.

The substantial transformation test

The test comes from case law. In Anheuser-Busch Brewing Ass'n v. United States, 207 U.S. 556 (1908), the Supreme Court framed it as processing that produces a new and different article of commerce, with a distinctive name, character or use. CBP applies that test case by case in its rulings, which are searchable in its CROSS rulings database.

Applied to China supply chains, the pattern is consistent. The following operations in a third country generally do not change origin from China, although each case turns on its facts:

simple assembly of Chinese components;
packaging, repackaging or kitting;
labeling and tagging;
cutting to length; and
minor finishing.

Work that changes what the article is, and what it is called and used for, is more likely to confer origin. Because the line is fact-specific, an importer can request an advance binding origin ruling from CBP under 19 CFR Part 177. A ruling settles the question before goods are entered, rather than in a dispute afterward.

Chinese content also reaches the United States through supply chains that are not transshipment at all. The USTR's 2026 USMCA Autos Report to Congress found that China's share of value-added content in Mexico's transport-equipment imports rose from 4.5% in 2017 to 7.1% in 2024, and in Canada's from 3.3% to 4.2%. That is a value-added measure, not a direct import share, but it shows why origin analysis has to look at components as well as the finished good.

Origin marking: what "Made in China" has to look like

Separate from duty, 19 U.S.C. 1304 requires every imported article of foreign origin, or its container where the article itself is excepted, to be marked with the English name of its country of origin. Under 19 CFR 134.11 and 134.41, the mark must be:

legible;
indelible and permanent;
in a conspicuous place; and
visible to the ultimate purchaser.

The ultimate purchaser is generally the last person in the United States to receive the article in the form in which it was imported. If a US processor substantially transforms the article, that processor becomes the ultimate purchaser (19 CFR 134.1(d), 134.35), and the marking obligation runs to it rather than to the retail customer.

There are exceptions. Articles incapable of being marked and other cases listed in 19 CFR 134.32, and the articles on the so-called "J-list" in 134.33, need not be marked individually, although their containers still must be. Assembled articles may use "Assembled in" wording (134.43(e)). Where a US place name on the article or package could mislead a buyer about origin, "Made in" or "Product of" must appear near it (134.46). Country names must be in English and in a form CBP accepts; abbreviations and non-English names not on the approved list do not qualify (134.45).

The cost of getting it wrong is set by regulation. Unmarked or improperly marked articles are assessed an additional duty of 10% of the final appraised value, unless they are exported, destroyed or properly marked under CBP supervision before liquidation (19 CFR 134.2). Intentionally removing, obscuring or defacing a required mark carries criminal penalties (134.4).

Why origin drives the duty bill in 2026

Country-specific duties make origin a money question, not only a labeling one. The China Section 301 list duties apply to goods of Chinese origin, whichever country they ship from. Since 24 July 2026 a second layer applies as well: a Section 301 action on forced-labor enforcement sets an additional 12.5% duty on products of China (HTS 9903.05.31), and different rates for other economies, including 10% for 17 economies such as Mexico and India (USTR notice of action, July 2026).

Because the rate depends on origin, an incorrect origin claim produces a duty underpayment on every entry that carries it. The incentive to relabel Chinese goods as third-country goods is what transshipment enforcement exists to counter.

The trade data carry a caveat on this point. Census figures show China's share of total US goods imports falling from about 21% in 2018 to 9% in 2025. The researcher who computed that share notes that some sourcing shifted to third countries and that transshipment is not captured in the figures, so part of the decline may reflect relabeled goods rather than relocated production.

Transshipment and the 2025 penalty that lapsed

Transshipment, in the enforcement sense, means routing goods through a third country to disguise their origin and evade duties. It is distinct from ordinary transshipment in logistics, where cargo changes vessels at a hub port without any claim that its origin changed.

In 2025 the executive branch added a specific penalty. Executive Order 14326, signed 31 July 2025, provided in Section 3 that goods CBP determined were transshipped to evade duties would face a 40% additional duty in place of the origin country's rate, plus any other applicable fine or penalty, including those under 19 U.S.C. 1592. It directed that CBP "shall not allow for mitigation or remission," and that Commerce and Homeland Security publish a list of countries and facilities used in circumvention every six months.

That order rested on the International Emergency Economic Powers Act (IEEPA). On 20 February 2026 the Supreme Court held in Learning Resources, Inc. v. Trump that IEEPA does not authorize tariffs, and CBP stopped collecting IEEPA duties on entries from 24 February 2026. It follows that the 40% IEEPA transshipment duty is no longer collected. That conclusion is an inference: the research found no primary source stating it expressly, found no later instrument reviving a transshipment-specific duty, and could not confirm whether the six-month circumvention list was ever published.

What did not lapse is more important. The origin rules, the marking rules, EAPA and the 19 U.S.C. 1592 penalty statute are all acts of Congress or regulations, not IEEPA measures, and all remain in force as of October 2026.

EAPA: how CBP investigates evasion

The Enforce and Protect Act (EAPA, Section 421 of the Trade Facilitation and Trade Enforcement Act of 2015, codified at 19 U.S.C. 1517) gives CBP a formal process to investigate evasion of AD/CVD orders, whether by transshipment, misdeclared origin or undervaluation. Any interested party, such as a domestic producer or a union, or a federal agency can file an allegation.

Interim measures. Within 90 days of initiating an investigation, CBP may suspend liquidation, require cash deposits or require single-transaction bonds.
Final determination. CBP must decide by day 300, extendable to day 360 (Treasury OIG-24-026, 26 March 2024, p. 11).

The Treasury Inspector General's review of fiscal 2019 and 2020 gives the most detailed public outcome data in the research. Of 278 allegations, 83 ended in final affirmative determinations of evasion (29.9%), 4 were negative, 67 did not qualify and 124 were withdrawn. The affirmed allegations represented about $298 million in potential revenue loss. Two limits apply: the data cover only those two fiscal years, and $298 million is potential loss, not money collected.

More recent activity is larger. On 29 July 2026, CBP announced that EAPA investigations had identified more than $1 billion in additional duties owed, the first time the program had reached that level in its roughly ten-year history. That figure is as reported by the law firm Brownstein on 5 August 2026; CBP's release could not be retrieved, and the period and number of investigations behind it were not confirmed.

EAPA matters most for products under AD/CVD orders on Chinese goods, such as aluminum extrusions, plywood, steel products and solar cells. EAPA investigations target transshipment of exactly these covered products.

Penalties for false origin claims

Beyond the marking duty and EAPA, a false origin declaration on an entry is a false statement under 19 U.S.C. 1592. The statute scales the maximum civil penalty to culpability:

Culpability	Maximum penalty where duty was lost	Where no duty was lost
Fraud	Domestic value of the merchandise	Domestic value of the merchandise
Gross negligence	Lesser of domestic value or 4 times the lost duties	40% of dutiable value
Negligence	Lesser of domestic value or 2 times the lost duties	20% of dutiable value

The importer of record carries this exposure, not the overseas supplier that suggested the routing. That is the practical reason to treat a supplier's offer to ship "through Vietnam" as a liability, not a tariff solution.

Common mistakes

Equating "shipped from" with "country of origin." Origin follows the last substantial transformation.
Accepting a third-country certificate of origin as proof. CBP decides origin under US law and can demand production records.
Using removable marks. A sticker is not a permanent mark where permanent marking is required.
Marking only the retail box. The article itself must be marked unless an exception applies.
Abbreviating the country name. Non-English or abbreviated names outside CBP's accepted list do not satisfy 134.45.
Ignoring AD/CVD orders. Many Chinese-origin product categories are covered, and EAPA targets their transshipment.

Where a product's origin is genuinely uncertain, a binding ruling under 19 CFR Part 177, or review by a licensed customs broker or trade attorney before entry, is the documented way to settle it.

Frequently asked questions

If my Chinese goods are finished in Vietnam, are they Vietnamese?

Usually not. Under 19 CFR 134.1(b), origin moves to Vietnam only if the Vietnamese processing substantially transforms the goods into a new article with a different name, character or use. Simple assembly, packaging, labeling, cutting to length and minor finishing generally leave Chinese origin in place. CBP decides each case on its facts.

What does a "Made in China" marking need to look like?

It must give the English name of the country, be legible, indelible and permanent, and sit in a conspicuous place where the ultimate purchaser will see it, under 19 U.S.C. 1304 and 19 CFR 134.11 and 134.41. Abbreviations and non-English names that CBP does not accept do not satisfy the rule.

What is the penalty for incorrect country of origin marking?

Unmarked or improperly marked goods are assessed an extra duty of 10% of final appraised value unless they are exported, destroyed or properly marked under CBP supervision before liquidation (19 CFR 134.2). A false origin declaration can also draw 19 U.S.C. 1592 penalties, and intentionally defacing a mark is a criminal offense.

Is the 40% transshipment penalty still in effect?

Apparently not. The 40% duty came from Executive Order 14326 of July 2025, an IEEPA measure, and IEEPA duty collection stopped on 24 February 2026 after the Supreme Court's Learning Resources ruling. No primary source located for this page states the lapse expressly. EAPA, marking rules and 19 U.S.C. 1592 penalties remain fully in force.

What is EAPA?

EAPA, the Enforce and Protect Act (19 U.S.C. 1517), is CBP's statutory process for investigating evasion of antidumping and countervailing duty orders through transshipment, false origin or undervaluation. CBP can impose interim measures within 90 days and must decide by day 300, extendable to day 360, per Treasury OIG-24-026.

Does a certificate of origin from my supplier prove origin?

No. A supplier's certificate of origin is evidence, but CBP determines origin under US law and can ask for production records showing where the goods were made and transformed. If the records show only minor processing in the third country, the certificate will not change the finding, and the importer of record carries the penalty exposure.

Country of origin, origin marking and transshipment