Made in Vietnam? Transshipment, Rules of Origin and the Chinese Content Problem

The phrase “Made in Vietnam” has become one of the most contested labels in world trade, and the dispute is less about fraud than about what the label was ever supposed to mean. Vietnam imports on the order of $140 billion a year from China and exports a similar amount to the United States, and the correlation between the two flows is the single fact that American trade officials cite most often. This article separates the three things that get called transshipment, reconstructs the enforcement cases that defined the rules, examines how Vietnam has policed its own origin certificates, and asks what the 2025 tariff settlement means for any company whose supply chain crosses the Chinese border on its way to an American port. It is part of the Vietnam Company Stories hub.

Why did “Made in Vietnam” become a problem for Washington?

Because the trade war made the label valuable. From 2018 a product classified as Vietnamese avoided tariffs of up to 25 percent that applied to the same product from China, and the incentive to move the last step of production across the border, whether legitimately or not, became overwhelming.

The numbers that followed were dramatic enough to invite suspicion. Vietnamese exports to the United States rose from roughly $47 billion in 2017 to over $135 billion in 2024 by American figures, while Vietnamese imports from China rose from around $58 billion to more than $140 billion over the same period, according to Vietnamese customs. In several product categories the two curves moved together month by month. American officials, first under the Trump administration in 2019 and then under the Biden administration, described Vietnam as a “conduit” and set out to prove it.

The early cases were straightforward. In 2019 US Customs and Border Protection and Vietnamese customs jointly identified shipments of Chinese plywood, aluminium and steel that had been relabelled in Vietnamese ports with no processing at all. Vietnam’s own General Department of Customs reported dozens of origin-fraud cases that year, including a container of Chinese-made bicycles carrying “Made in Vietnam” tags and a firm exporting Chinese solar panels under Vietnamese certificates. The government responded with public prosecutions and a directive on combating origin fraud, in part to demonstrate to Washington that it was not complicit.

The more difficult cases were the ones that involved real factories. When a Chinese electronics company sets up a plant in Bắc Giang, ships in printed circuit boards, displays and housings, and employs Vietnamese workers to assemble them into a finished device, the result is a Vietnamese product under every existing rule of origin. It is also, by any economic measure, mostly Chinese. The relocation wave documented in the China Plus One story consisted overwhelmingly of this kind of investment, and it is this, rather than the relabelled bicycles, that the 2025 tariff was designed to punish.

How do rules of origin actually decide where a product is from?

Through a test called substantial transformation, which asks whether the processing in Vietnam produced a new article with a different name, character or use. Value thresholds and tariff-classification changes are used as proxies. None of the tests measures Chinese content directly.

For US non-preferential purposes, which is what matters for the ordinary tariff schedule and for the Section 301 duties on China, Customs and Border Protection applies the substantial transformation doctrine developed by American courts over a century. Assembling components into a finished electronic device generally qualifies; screwing four legs onto an imported table top generally does not; the vast middle ground is decided case by case through binding rulings that importers can request in advance. There is no percentage threshold. A product can be 80 percent Chinese by value and still be Vietnamese if the transformation is substantial.

Vietnam’s own system, set out in a 2018 decree and a Ministry of Industry and Trade circular, uses two alternative tests for non-preferential certificates of origin: a change in tariff classification at the four-digit level, or a local value content of at least 30 percent. The 30 percent figure is calculated on the ex-works price and counts Vietnamese labour, overhead and profit, so a product assembled from imported kits can clear it with relatively modest processing. Preferential origin under trade agreements, examined in the EVFTA and CPTPP story, uses stricter product-specific rules, which is why so few exporters claim those preferences.

The gap between the legal tests and the political question is the heart of the matter. When the US Trade Representative or a senator says that Vietnam is transshipping Chinese goods, they usually mean that products with high Chinese content are entering under Vietnamese origin. When Vietnamese customs or a US import lawyer hears the word, they understand a specific fraud. The 2025 negotiation was conducted, on both sides, without resolving which meaning was in play.

What happened when Commerce found circumvention in steel, plywood and solar?

The department extended existing anti-dumping and countervailing duties on Chinese goods to cover the same goods finished in Vietnam, in three landmark cases between 2019 and 2023. Each case established that minimal processing does not launder origin, and each imposed duties that in some instances exceeded 200 percent.

Steel came first. In December 2019 the Commerce Department ruled that corrosion-resistant and cold-rolled steel exported from Vietnam using substrate from South Korea and Taiwan was circumventing duties on those countries, and extended the orders, with combined rates reported at up to 456 percent. The ruling did not directly concern China, but it set the template: coating or cold-rolling an imported slab in Vietnam was held to be insufficient to confer origin for duty purposes. Vietnamese producers using their own slab, including the integrated mill profiled in the Hoa Phat story, could demonstrate genuine origin and were spared.

Hardwood plywood followed, with Commerce finding in 2023 that plywood assembled in Vietnam from Chinese face and back veneers and cores was circumventing the China orders. The largest and most consequential case was solar. In August 2023, after a year-long inquiry initiated by a US module maker, Commerce found that units of BYD, Canadian Solar, Trina Solar and Longi’s Vietnamese subsidiary Vina Solar, among others, were assembling Chinese wafers and cells into modules in Vietnam, Malaysia, Thailand and Cambodia to avoid duties. A presidential moratorium delayed collection until June 2024. A subsequent full anti-dumping and countervailing investigation of the four countries concluded in April 2025 with duties on Vietnamese solar that ranged from tens of percent to, for non-cooperating firms, several hundred percent.

The solar case demonstrated the limits of the “plus one” strategy when the plus one is owned by the company that was targeted in the first place. Chinese solar manufacturers had built genuine, large factories in Vietnam, employing thousands, and had still been found to be circumventing because the high-value steps, polysilicon, ingots, wafers and often cells, stayed in China. Several of the plants scaled back or closed during 2024 and 2025. The effect on Vietnam’s own renewable-energy ambitions, which depend on cheap panels, is a footnote to the solar boom story.

How has Vietnam policed its own certificates of origin?

With escalating seriousness since 2019, driven by fear of losing the US market rather than by domestic pressure. Customs has prosecuted fraud cases, the trade ministry has tightened certificate issuance, and in 2025 the government imposed new controls on origin certification and on the licensing of Chinese-owned exporters in sensitive sectors.

The first public reckoning was the Asanzo affair of 2019, when a Vietnamese consumer-electronics brand marketed as domestic was found to be assembling televisions from Chinese kits with almost no local processing, and the earlier Khaisilk scandal, in which a celebrated silk retailer had been selling Chinese scarves with the labels replaced. Both were domestic-consumer cases rather than export fraud, but they exposed the absence of any legal definition of “Made in Vietnam” for goods sold at home. A draft decree to create one circulated in 2019, was contested by industry and had still not been issued in final form by 2026.

For exports, the system relies on the trade ministry and the Vietnam Chamber of Commerce and Industry issuing certificates of origin, and on customs verifying them. Following the 2019 US pressure, the ministry set up a task force, revoked certificates from firms found to have misdeclared, and began publishing lists of products at risk of circumvention investigation, updated each year, so that exporters could anticipate scrutiny. After the April 2025 tariff announcement the government went further, ordering a crackdown on origin fraud, tightening the rules for granting certificates, and, according to Vietnamese and international reporting, applying additional review to Chinese-invested projects seeking to export to the United States.

The commercial incentive to comply has become sharper than any regulatory one. A Vietnamese exporter caught in a circumvention finding does not merely lose the shipment; it loses the American customer, who faces retroactive duties and will not return. Industrial park operators, whose business model is described in the industrial parks story, have quietly started screening tenants for origin risk because a single enforcement action can taint an entire zone in the eyes of US buyers.

What did the 40 percent transshipment tariff of 2025 actually target?

In practice, origin fraud and goods without substantial transformation, rather than products with high Chinese content that meet existing rules. The rate was announced in July 2025 without a definition; the August executive order and the October framework agreement applied it to goods “determined to have been transshipped”, leaving the determination to US customs practice.

The ambiguity was, for several months, the single largest uncertainty facing Vietnamese exporters. If “transshipped” meant any product with majority Chinese content, the electronics belt in Bắc Ninh and Thái Nguyên, the garment sector and much of furniture would have faced 40 percent, and the China Plus One model would have been over. If it meant fraud and circumvention in the existing legal sense, the 40 percent rate was largely symbolic, a higher penalty for conduct that was already penalised.

The evidence from the second half of 2025 points to the narrower reading, with an important qualification. The executive order framework applied the transshipment penalty across all countries covered by the reciprocal tariffs, and directed customs to apply it where goods were found to have been routed to evade duties. There was no announced Chinese-content threshold and no general application to assembled electronics, and the framework agreement negotiated with Vietnam, examined in the tariff shock story, committed Hanoi to strengthen origin enforcement and share customs data rather than to accept a value-content rule.

The qualification is that the definition remains at Washington’s discretion. The same executive order allowed the administration to publish lists of countries and facilities engaged in circumvention, and the enforcement apparatus, including EAPA investigations and Commerce circumvention inquiries, continued to operate on a case-by-case basis. A Vietnamese exporter in a sensitive sector could still find its product declared transshipped, at 40 percent, by an administrative determination that no treaty text prevents.

Is Vietnam actually reducing its Chinese content, or just managing the optics?

Slowly reducing it, in some sectors, with a great deal of optics on top. Local value added in electronics has risen as Samsung and others qualified Vietnamese suppliers, and supporting industries have grown, but the aggregate dependence on Chinese inputs has not fallen because the export mix keeps shifting towards the sectors that rely on them most.

The most-cited success is Samsung, whose count of Vietnamese first- and second-tier suppliers rose from a handful in 2014 to something over 300 a decade later, according to company statements, and whose local content, by its own account, is now significant in packaging, plastics, moulds and some mechanical parts. The high-value inputs, memory chips, displays and camera modules, still come from Korea or China. The same pattern applies at the Apple suppliers in Bắc Giang and the Intel plant in Ho Chi Minh City, where the Vietnamese step is assembly, test and packaging rather than fabrication.

Academic research using input-output tables suggests the foreign value-added share of Vietnamese manufactured exports remained roughly stable through the 2010s at around 45 to 50 percent, with China’s share within that rising as it displaced Japan and Korea as the source of intermediate goods. A widely discussed 2023 analysis by economists at the Federal Reserve and elsewhere found that a considerable share of the growth in US imports from Vietnam after 2018 was matched by growth in Vietnamese imports from China of related products, consistent with rerouted supply chains rather than replaced ones. Vietnamese value added is rising in absolute terms because the volume is rising; the share is not.

Government policy has tried to change this through supporting-industry programmes, tax incentives for domestic suppliers and, more recently, an explicit push into semiconductor design and packaging. The instrument that would matter most, a strong domestic materials and components base, takes decades and heavy capital to build, and Vietnam’s private industrial groups, with the partial exception of the steel and automotive assemblers, have not built it.

What does the rules-of-origin problem mean for founders, investors and operators?

That origin is now a strategic variable, not a customs formality. A Vietnamese production footprint is worth a 20 percent US tariff rate rather than a much higher Chinese one only if the product can survive scrutiny of what was actually done in Vietnam, and that scrutiny is becoming routine.

For operators, the response is to make the transformation genuinely substantial and to be able to prove it. That means process documentation, a bill of materials with origin by line, and a defensible position on which steps create the product’s essential character. It also means thinking about which steps to localise first: the ones that most clearly change the tariff classification or that involve the most Vietnamese labour and overhead, rather than the ones that are cheapest to move. Companies that moved only the final screw-driving step from Dongguan to Bắc Ninh are the most exposed and will be the first hit.

For investors, the question is ownership as much as process. The circumvention cases of 2019 to 2025 fell disproportionately on Chinese-owned plants in Vietnam, and the 2025 framework was widely understood to be aimed at them. A Vietnamese exporter with Vietnamese, Korean, Japanese or Western ownership has, in practice, a lower enforcement risk for the same production process, which is a political fact rather than a legal one but is priced into which suppliers American buyers now choose.

For founders, the structural opportunity is the supporting-industry gap itself. Every year of American pressure raises the value of a genuinely Vietnamese source of the components, fabrics, castings and sub-assemblies that currently cross the border from China. The firms that fill that gap are building the assets that make “Made in Vietnam” true, and they are selling into a market whose customers have a regulatory reason to pay for it.

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