Identifying “Transhipments” Subject to 40% Tariff: A Guide for Businesses

A new 40 percent tariff is slated for goods identified as “transhipments,” a measure widely believed to target Chinese-origin products undergoing minimal processing in Vietnam before re-export to the United States. While detailed guidelines are pending, businesses can currently rely on the existing U.S. Customs and Border Protection (USCBP) regulations concerning Country of Origin Marking to mitigate the risk of their goods being labeled as transshipments.

 

Country of Origin Marking: General Provisions

 

The fundamental principle of Country of Origin Marking, as enforced by USCBP, mandates that all foreign-origin articles entering the U.S. must be clearly and legibly marked with the English name of their country of origin. The primary objective is to inform the final U.S. consumer about the product’s manufacturing origin.

Effective marking methods often integrate directly with the product (e.g., branding, stenciling, molding). Other methods are acceptable provided they remain legible and visible until the product reaches the ultimate U.S. purchaser. The marking must be durable enough to resist accidental defacement, destruction, removal, alteration, obliteration, or obscuration.

 

Determining Country of Origin Under the Existing Regime

 

USCBP defines the country of origin as where an article is manufactured, produced, or grown. However, the country of origin can change in a secondary country under specific circumstances:

  • Substantial Transformation: If additional work or material is added in the second country, resulting in a “substantial transformation.” This occurs when a new article with a different name, character, and use is created.
  • NAFTA Marking Rules (19 CFR Part 102): For goods originating from a NAFTA country (Canada, Mexico, or the United States), if the second country is determined to be the country of origin under these specific rules.
  • Textile or Apparel Products (19 CFR 102.21): Regardless of NAFTA origin, if the country of origin for a textile or apparel product is determined to be the second country by the general rules outlined in 19 CFR Part 102.21. (Note: For textile or apparel products from Israel, specific rules in 19 CFR Part 12.130 apply.)

Businesses are advised to adhere to these established regulations while awaiting further official guidelines from both the U.S. and Vietnamese governments.

 

Anticipated Developments and Considerations

 

China’s Potential Response: China is expected to react to this new tariff, especially given its significant trade relationship with Vietnam. Any retaliatory measures from Beijing, a major source of inputs for Vietnamese manufacturing, could have a substantial impact on Vietnam’s economy. Bloomberg estimates a potential long-term loss of 25 percent of Vietnam’s US exports, possibly risking over 2 percent of its annual GDP.

 

Formal Content Threshold: Neither the U.S. nor Vietnam has specified a formal threshold for determining “transshipment” status. Trade analysts widely anticipate a near-zero tolerance policy from the U.S. government, potentially flagging goods with as little as one percent Chinese-origin content. While trade agreements typically define origin based on value-added or transformation criteria, no such thresholds have been officially announced for this specific agreement.

 

Further clarifications regarding the agreement’s rules of origin and “safe harbors” are expected. Businesses should stay informed about these impending guidelines to ensure compliance and avoid potential tariff implications.

Find Your Ideal Vietnam Suppliers
Share this:

Trump Escalates Trade War with New Tariffs on Allies and Developing Nations


 

WASHINGTON/BRUSSELS, July 7 (Reuters) – U.S. President Donald Trump dramatically intensified his ongoing trade war on Monday, informing key allies like Japan and South Korea, as well as a host of developing nations, that they will face significantly higher tariffs starting August 1.

The new levies impose a 25% tariff on U.S. imports of all goods from Japan and South Korea, a move that initially rattled Wall Street, causing the S&P 500 Index to drop sharply. However, Asian markets appeared to absorb the news more calmly.

In letters dispatched to 14 countries so far, Trump hinted at the possibility of further negotiations while simultaneously warning of reciprocal actions if affected nations retaliate with their own tariff increases. “If, for any reason, you decide to raise your tariffs, then, whatever the number you choose to raise them by, will be added on to the 25% that we charge,” Trump explicitly stated to Japan and South Korea in letters released on his Truth Social platform.

These new, higher tariffs will take effect from August 1 and are distinct from previously announced sectoral tariffs, such as those on automobiles, steel, and aluminum. Trading partners have been under immense pressure to finalize deals with the U.S. since Trump initiated a global trade war in April, which has disrupted financial markets and prompted governments worldwide to devise protective economic measures.

A slight reprieve emerged as Trump signed an executive order on Monday, extending the deadline for negotiations from Wednesday to August 1. When asked about the firmness of this new deadline, Trump replied, “I would say firm, but not 100% firm. If they call up and they say we’d like to do something a different way, we’re going to be open to that.”

Former U.S. trade negotiator Wendy Cutler expressed disappointment over the tariffs imposed on close allies like Japan and South Korea but maintained optimism for a potential breakthrough. “While the news is disappointing, it does not mean the game is over,” stated Cutler, who serves as vice president of the Asia Society Policy Institute.

Global Impact and Responses

Beyond key allies, the U.S. will also impose a 25% tariff on goods from Tunisia, Malaysia, and Kazakhstan. Levies will climb to 30% for South Africa, Bosnia and Herzegovina, 32% for Indonesia, 35% for Serbia and Bangladesh, 36% for Cambodia and Thailand, and a substantial 40% for Laos and Myanmar. Trump also indicated that a deal with India was close to being finalized.

On Tuesday, Japanese Prime Minister Shigeru Ishiba reported some progress in avoiding even higher tariffs, which Trump had recently suggested could reach 35%. Ishiba confirmed that the U.S. proposed swiftly proceeding with negotiations towards the August 1 deadline, with the potential for revisions based on Japan’s response.

South Korea announced plans to intensify trade talks with the U.S., viewing Trump’s latest move as an effective extension of a grace period before reciprocal tariffs might be adopted. Thailand expressed confidence in securing competitive tariff rates, while Malaysia’s trade ministry acknowledged U.S. concerns on imbalances but stressed the importance of constructive dialogue. Indonesia’s officials believe there’s still room for negotiation, with their top negotiator set to meet U.S. trade representatives.

For Bangladesh, whose readymade garments industry relies heavily on the U.S. market, the news was “absolutely shocking.” Mahmud Hasan Khan, president of Bangladesh Garment Manufacturers and Exporters Association, stated that a 35% tariff would severely impact their industry. South African President Cyril Ramaphosa deemed the 30% U.S. tariff rate unjustified, citing that 77% of U.S. goods face no tariffs in his country, vowing to continue engagement with the U.S.

Market Reactions and Economic Outlook

Despite the initial drop, U.S. stocks showed resilience. The S&P 500 closed down about 0.8%, but Asian markets largely held firm, with Japan’s Nikkei recouping early losses and South Korean stocks jumping over 1%. Tapas Strickland, head of market economics at National Australia Bank, warned of impending volatility as more letters emerge and negotiations intensify ahead of the August 1 deadline.

Earlier on Monday, Treasury Secretary Scott Bessent had foreshadowed these announcements, noting his inbox was “full” of last-minute trade offers from countries. So far, only two deals have been struck with Britain and Vietnam, while Washington and Beijing reached a framework agreement on tariff rates in June. China, however, has until August 12 to finalize a deal to prevent Trump from reinstating additional import curbs. On Tuesday, China warned the U.S. against reinstating tariffs and threatened retaliation against countries that strike deals with the U.S. to exclude China from supply chains.

Broader Trade Blocs Targeted

The European Union, notably, will not be receiving a letter imposing higher tariffs, according to EU sources. A European Commission spokesperson confirmed that the EU still aims to finalize a trade deal by Wednesday following a “good exchange” between European Commission President Ursula von der Leyen and Trump. The EU itself has been internally debating whether to pursue a swift and light trade deal or leverage its economic power for a more favorable outcome.

Beyond established trade partners, Trump also issued a threat to leaders of developing nations within the BRICS grouping (including Brazil, Russia, India, and China), warning of an additional 10% tariff if they adopt “anti-American” policies.

Find Your Ideal Vietnam Suppliers
Share this:

The US-Vietnam Trade Landscape at a Glance

The US-Vietnam Trade Landscape at a Glance

A complex relationship defined by strategic partnership and significant trade friction. Here are the key figures shaping the current policy environment.

20%

Agreed Reciprocal Tariff

The new standard tariff on most Vietnamese exports to the US under the July 2025 agreement.

40%

Transshipment Tariff

A higher rate targeting goods from other countries (e.g., China) routed through Vietnam.

$122B

US Trade Deficit

The 2024 bilateral trade deficit that serves as a primary driver for US tariff policies.

Anti-Dumping & Countervailing Duties (AD/CVD)

Separate from broad tariffs, AD/CVD orders target specific products deemed unfairly priced or subsidized. Vietnam’s designation as a Non-Market Economy (NME) is a critical factor that often results in higher, more unpredictable duties.

The Impact of Non-Market Economy (NME) Status

For Market Economies

The US uses the country’s own domestic prices and costs to calculate dumping margins.

For Non-Market Economies (like Vietnam)

The US disregards domestic data and uses prices from a “surrogate country,” which often leads to much higher duty rates.

Find Your Ideal Vietnam Suppliers
Share this:

Navigating US Tariffs & Seizing Opportunities: Your Strategic Sourcing Partner in Vietnam

The global trade landscape is buzzing with discussions about potential new US tariff policies impacting imports, and for businesses looking to source from Vietnam, these conversations are directly relevant. As your dedicated sourcing agent in Vietnam, we’re here to help you understand these shifts and turn potential challenges into strategic advantages for your supply chain.

The Evolving Trade Landscape: What’s Happening, and Why Does It Matter to You?

Recent discussions in the U.S. revolve around the potential implementation of “reciprocal tariffs” or the expanded use of trade provisions like Section 301 and 232. For Vietnam, specific proposals have emerged, suggesting significant tariffs (e.g., a proposed 46% for textiles and furniture) on key exports. While negotiations are ongoing, the uncertainty can be unsettling for importers.

However, it’s crucial to remember the broader context: the ongoing global push to diversify supply chains away from China. This trend has already positioned Vietnam as a prime destination for manufacturing relocation and foreign direct investment. So, while potential tariffs present new hurdles, they also amplify Vietnam’s strategic importance as a supply base.

Unlocking Opportunities for Your Business in Vietnam: Our Sourcing Advantage

From our vantage point as a seasoned sourcing agency, we see immense opportunities for our clients in Vietnam, even amid these trade discussions:

  1. Strategic Supply Chain Diversification:
    • Many businesses no longer want all their eggs in one basket. We help you establish robust alternative supply chains in Vietnam, reducing reliance on single regions and mitigating geopolitical risks.
    • Whether you’re a startup seeking cost-effective solutions, a large brand demanding stringent quality, or an online retailer looking for unique, niche products in apparel, furniture, or agricultural goods, Vietnam offers a versatile production base.
  2. Accessing Upgraded Manufacturing Capabilities:
    • Significant foreign direct investment (FDI) has poured into Vietnam, driving local factories to upgrade their technology, processes, and quality control systems. This means access to increasingly modern facilities capable of meeting international standards.
    • We leverage our extensive network to connect you with these advanced factories, ensuring your products are made efficiently and to your exact specifications.
  3. Leveraging Vietnam’s Extensive FTA Network (Beyond the US):
    • While direct US-Vietnam FTA is not yet in place, Vietnam boasts a robust network of Free Trade Agreements with major markets like the EU (EVFTA), UK (UKVFTA), Canada (CPTPP), Japan, and others in the RCEP bloc.
    • We guide you in leveraging these FTAs to secure preferential tariffs, expanding your market reach beyond the US and adding flexibility to your global distribution strategy.

Navigating the Challenges: How We Mitigate Risks for Your Business

Potential US tariffs on Vietnamese goods present complexities, but this is where our expertise truly shines. Here’s how we help you mitigate risks and ensure smooth operations:

  1. Minimizing Direct Tariff Impact:
    • Should new tariffs be implemented, we work proactively to identify the most competitive suppliers, negotiate optimal pricing, and explore alternative sourcing solutions to offset increased costs. Our goal is to protect your bottom line.
  2. Combating Transshipment Risks & Ensuring Compliance:
    • The US Customs and Border Protection (CBP) is increasing scrutiny on rules of origin (ROO). We conduct rigorous factory due diligence and origin verification processes to ensure your products meet stringent ROO requirements. This protects your business from costly investigations, penalties, and potential retroactive tariffs related to alleged transshipment.
  3. Strict Adherence to Quality and Standards:
    • To meet the demanding standards of the US market and navigate non-tariff barriers, we partner with factories committed to international quality benchmarks. Our regular and unannounced Quality Control (QC) checks ensure your products consistently meet the highest specifications.
  4. Addressing Rising Costs and Capacity:
    • Increased demand can sometimes lead to higher labor and material costs. We continuously monitor market trends, identify factories with efficient production processes, and secure available capacity to meet your orders competitively.

Your Trusted Partner in Vietnam’s Sourcing Future

In today’s dynamic global trade environment, having a sourcing partner with deep local knowledge in Vietnam is invaluable. We don’t just find suppliers; we manage the entire sourcing lifecycle, from rigorous factory vetting and expert negotiation to stringent quality control, streamlined logistics, and navigating complex customs and origin rules.

Whether you’re a startup optimizing costs, a large brand upholding global standards, or an online retailer seeking unique apparel, furniture, or agricultural products, we’re equipped to support your unique needs.

Let us simplify the complexities, mitigate your risks, and help you unlock the full potential of sourcing from Vietnam.

Ready to explore smart sourcing solutions in Vietnam? Contact our expert team today for a tailored consultation!

Share this: