Can You Change the Country of Origin to Reduce Tariff Charges?
A Deep Dive into Substantial Transformation and Customs Compliance
With new tariffs introduced under various U.S. trade policies, including the recent “Liberation Day” provisions, many importers are exploring creative ways to reduce exposure to these increasing costs.
One of the most common questions we receive at Proboxx is this:
“If I ship my goods from China to another country—say, Vietnam or Mexico—and then into the U.S., can I legally avoid the China tariffs?”
The short answer?
Only if your product undergoes a process known as “substantial transformation.”
Otherwise, no matter how you route the shipment, the tariff rate will remain the same as if it came directly from China.
In this blog, we’ll explore:
- What is "country of origin" and why it matters
- The legal definition of “substantial transformation”
- Real-world examples of what qualifies—and what doesn’t
- The risks of misdeclaring origin
- How customs authorities interpret this rule
- Strategic advice for sellers navigating today’s tariff landscape
- How Proboxx can help you stay compliant while protecting your margins
What Is “Country of Origin” and Why Does It Matter?
The country of origin (COO) of a product plays a key role in determining:
- Applicable tariff and duty rates
- Import restrictions or quota regulations
- Marking and labeling requirements
- Eligibility for Free Trade Agreements (FTAs)
This classification is not based on the country where the goods were shipped from, but rather on where they were manufactured or substantially transformed.
For example, if a product was made in China, shipped to Mexico, and then imported to the U.S., U.S. Customs and Border Protection (CBP) will still consider the product Chinese in origin—unless it was significantly changed in Mexico.
Substantial Transformation: The Legal Definition
The concept of “substantial transformation” is a cornerstone of U.S. customs law. It’s used to determine the country of origin in cases where multiple countries are involved in the supply chain.
According to CBP:
“A substantial transformation occurs when an article emerges from a process with a new name, character, and use different from those possessed by the article prior to processing.”
Let’s break that down:
- New name – The product is no longer called what it was originally (e.g., raw fabric becomes a shirt).
- New character – It has different physical properties or essential qualities.
- New use – It serves a different function from the original materials.
This test was first introduced in the U.S. Supreme Court’s Anheuser-Busch case (1969) and has since become the gold standard for evaluating country-of-origin claims.
Examples: What Qualifies as Substantial Transformation?
Let’s look at two categories—what usually does qualify, and what usually doesn’t.
✅ Examples That Typically Qualify:
- Garment manufacturing:
Cutting and sewing raw fabric into finished clothing. - Electronic assembly:
Assembling components from multiple sources into a fully functional device. - Food processing:
Combining raw ingredients into a completely new product (e.g., cocoa powder, sugar, and milk becoming chocolate bars). - Machinery production:
Integrating different metal parts, circuits, and wiring into a new type of industrial machine. - Pharmaceutical processing:
Transforming raw chemicals into tablets with distinct medical use.
In each of these cases, the end product has a different name, purpose, and character than its original inputs.
❌ Examples That Do Not Qualify:
- Repackaging:
Moving a product into different boxes or containers. - Relabeling:
Changing labels or adding new branding without altering the product. - Simple assembly:
Screwing together pre-finished parts (like furniture legs onto a table top). - Quality inspections:
Verifying compliance or inspecting for defects doesn’t change the item. - Adding instructions or accessories:
Placing manuals or inserts into the packaging doesn’t transform the product.
In these cases, the goods remain fundamentally the same—and will continue to be treated as originating from the original country.
Common Misconception: Shipping Through a Third Country
Some sellers mistakenly believe that shipping goods through another country before entering the U.S. changes the origin.
For example:
- A Chinese-made electronic product is sent to Thailand
- It is repacked, labeled, or lightly assembled
- Then shipped to the U.S.
However, if no substantial transformation takes place, CBP still considers this a Chinese product—and the tariff will reflect that.
This misconception has led to importers facing:
- Fines and penalties for misdeclaration
- Delays or detentions at port
- Loss of import privileges
- Risk to Amazon/retail accounts due to non-compliance
How Customs Authorities Evaluate Substantial Transformation
CBP relies on a case-by-case analysis and often refers to “rulings” or precedents (available at rulings.cbp.gov).
Factors considered include:
- What processing occurred in each country
- The complexity of the transformation
- Whether the final product has a new classification under the Harmonized Tariff Schedule (HTS)
CBP may also request:
- Detailed bills of materials
- Process flowcharts
- Before/after photos
- Invoices and manufacturing records
If origin is misrepresented, CBP has full authority to reclassify the product and issue financial penalties.
Legal Compliance Is Not Optional
Sellers are required by law to:
- Accurately mark the country of origin
- Declare the correct origin in customs filings
- Provide evidence of substantial transformation if asked
Failing to comply with origin rules is a customs violation—not a business strategy.
Penalties can include:
- Up to $10,000 per violation
- Seizure or forfeiture of goods
- Audits and blacklisting
How Proboxx Supports Sellers in Navigating Origin and Tariff Rules
At Proboxx, we understand that the evolving global trade landscape can be overwhelming—especially when margins are tight and competition is fierce.
That’s why we provide full support to Amazon and e-commerce sellers seeking to optimize their supply chains while staying compliant with all international regulations.
Here’s how we help:
1. Compliance Review
We evaluate your current production and shipping flows to identify if there are real opportunities for reclassification based on legitimate transformation.
2. Customs Documentation Support
We help prepare the right origin documentation, from manufacturer declarations to product transformation descriptions—so you’re ready if CBP asks for proof.
3. Smart Supply Chain Redesign
If reclassification is not viable, we help design alternative logistics strategies:
- Drip-feeding from overseas storage
- Splitting shipments to multiple markets
- Balancing between DDP and DDU to optimize duties and VAT
- Leveraging FTA-compliant countries when relevant
4. Expert Consultation
We connect you with vetted customs brokers and trade attorneys for complex cases—so you’re not navigating this alone.
Final Thoughts: Don’t Gamble on Compliance
In times of increased scrutiny and tighter margins, sellers need clarity—not shortcuts.
If your product is manufactured in China and simply shipped through another country, you are still liable for China tariffs—unless the product undergoes substantial transformation.
Relying on incorrect assumptions, TikTok rumors, or supplier advice can cost you more than just duties. It can cost your entire business.
Let's Talk
Have questions about your product’s eligibility for reclassification?
Need help reviewing your manufacturing process or documentation?
Reach out to our team at Proboxx. Or book a call with us HERE.
We’ll walk you through it, step by step.
We’re not here to play games with customs—we’re here to help you get it right.