We moved assembly to Vietnam — do we still pay the China tariff?

Status, and the date it was taken: the one perishable number on this page is the Section 301 rate. Chapter 99 heading 9903.88.01 was read on 19 August 2026 from the official USITC Harmonized Tariff Schedule export and reads “The duty provided in the applicable subheading plus 25%.” The China stack moved repeatedly through 2026, and other Chapter 99 headings can apply to the same entry, so this is not a claim that 25% is your total bill. Rates and agency deadlines are the perishable facts here, and each one is dated where it appears. The rest is mechanism, statute and case law, which does not move on a timer — a 1908 origin test does not go stale, and a ruling that superseded another stays superseded.

Method, so you can weigh it: verified 19 August 2026 against CBP's own rulings database (CROSS), the eCFR, and the Federal Register. The three quotations from HQ H301619 were pulled directly from rulings.cbp.gov/api/ruling/H301619. Every ruling below is cited by number and searchable at rulings.cbp.gov.

Probably yes — you still pay it. Moving final assembly to another country usually does not change where your goods come from for tariff purposes. Duty origin is decided by whether the work abroad created a new name, character, or use — not by where the last factory sits. Simple assembly of Chinese parts, even in a real factory with real staff, is the textbook case of no change.

And here is the part that catches people: the same shipment can be legally “Made in Mexico” on the label and legally Chinese for duty at the same time. Those are two different determinations under two different rule sets. Getting the first one right tells you nothing about the second.

The ruling that says it in CBP's own words

In 2018 Johnson Electric moved motor production to Mexico: Chinese subassemblies in, finished brushed electric motors out. CBP ruled on it twice.

The final ruling, HQ H301619 (2018-11-06), holds — verbatim:

“The country of origin of the electric motor for purposes of marking is Mexico. The country of origin of the electric motor for purposes of the application of subheading 9903.88.01, is China.”

One product. One factory. Two different countries of origin, both correct, at the same moment. The label said Mexico. The Section 301 duty was owed as if it were Chinese.

The scope sentence that governs the whole topic, also verbatim from H301619:

“When determining the country of origin for purposes of applying current trade remedies under Section 301, Section 232, and Section 201, the substantial transformation analysis is applicable.”

Cite H301619, not H300226. The famous version of this ruling is HQ H300226 (2018-09-13) and it is superseded on exactly this point. CBP's own correction, verbatim: “It has come to our attention that the ruling contained an error with regard to its articulation of the scope of the applicability of the substantial transformation test. This ruling serves to modify HQ H300226 with regard to this matter.” Because CBP acted within 60 days of issuing H300226, the modification took effect immediately with no notice-and-comment. Anyone quoting H300226's scope language is quoting text CBP withdrew.

The test, and the honest part about it

19 CFR 134.1(b) requires that work added abroad “effect a substantial transformation.” The courts' test is a new name, character, or use — from Anheuser-Busch Brewing Ass'n v. United States, 207 U.S. 556 (1908, often miscited as 1907; argued December 1907, decided January 1908), where cleaning and coating cork was held not to be manufacture, and United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (1940), codified at 19 CFR 134.35(a).

There is no percentage that saves you. The test in 19 CFR 134.1(b) and the case law above turns on name, character and use — it states no value-added threshold, no minimum number of operations, no headcount and no capital-investment test, and CBP has not read one into it in the rulings cited below. The “35% value added” rule people half-remember belongs to preference programs — it is not the non-preferential origin test. CBP also runs a subsidiary “essence” inquiry: in HQ H303864 a Chinese motor gave a washer pump “the very essence” of what it is, and origin stayed Chinese.

Two similar-looking products can come out differently. That is worth saying out loud rather than pretending the rule is crisp — it is not, and a page that pretends otherwise will get someone's entries wrong.

What CBP has actually said no to

Origin did not change: simple assembly of subassemblies (H301619) · wristwatch assembly (H304105) · a washer pump where the Chinese motor carried the essence (H303864) · an unassembled futon, pure kitting, every item keeping its own origin (H318891) · optical transceivers where the foreign work was programming, firmware loading, tuning, testing and packaging (H335829) · “paper grass” cut to 2mm strips, crinkled and packaged (H352504, 2026-03-04).

Origin did change: box fans whose components were injection-moulded in Vietnam (N305760) · catalytic converters in Canada (H312891) · hinges whose pins were made in Poland from bar stock (H329582) · an ink base where the protest was granted and Section 301 duties refunded (H325936) · pens with a complete ink cartridge made in Italy (N345964).

The dominant pattern across these rulings — a pattern, not a bright line, and the caveat above about similar-looking products still applies: making a component abroad has changed origin; combining finished Chinese components abroad has not. Cases that turn on processing a single input, like H352504 and H335829, sit outside that split and are decided on whether the processing changed name, character or use at all.

19 CFR 102.17 codifies operations that never qualify on their own: a change in end use, dismantling, simple packing or repacking, mere dilution, and collecting parts without more than minor processing.

Three exceptions that will bite specific readers

1. Textiles and apparel are governed by a different rule entirely. 19 CFR 102.21(a) says its provisions “will control the determination of the country of origin of imported textile and apparel products for purposes of the Customs laws and the administration of quantitative restrictions” — general-purpose, not marking-only. For apparel, tariff-shift governs, not the classic substantial transformation test. An article telling apparel importers to apply the classic substantial transformation test is applying the wrong rule in the ordinary case — 102.21 has carve-outs, so read it rather than assuming either test applies across the board.
2. Canadian and Mexican goods use Part 102 for marking (via 19 CFR 134.1(b)) — which is precisely why the Johnson Electric motor could be Mexican on the label and Chinese for duty.
3. AD/CVD is a different animal with a different decision-maker. Origin for antidumping and countervailing scope is decided by the Commerce Department under the anti-circumvention statute, 19 U.S.C. §1677j(b), on a five-factor “minor or insignificant” processing test — not by CBP, and not by this test. Related: EAPA reaches AD/CVD orders only (19 U.S.C. §1517(a)(3)); there is no EAPA case to bring against a competitor purely for dodging Section 301.

What it costs to get wrong

Two numbers matter, and most coverage mentions only the first.

The duty itself. Take the Johnson Electric fact pattern — electric motors, HTS 8501.10.40, carrying Chapter 99 heading 9903.88.01 at the additional 25% ad valorem rate stated in the ruling. See the status block above for when that rate was read and what it does not include.

The penalty on top. 19 U.S.C. §1592(a)(1) applies “without regard to whether the United States is or may be deprived of” any lawful duty — no revenue loss is required for exposure to exist. For negligence the exposure is the lesser of the goods' domestic value or 2× the duty loss (or 20% of dutiable value where there is no revenue effect); gross negligence runs to 4× / 40%.

Separately, 19 U.S.C. §1304(i) imposes a 10% ad valorem marking duty that “shall not be construed to be penal” and “shall not be remitted wholly or in part.” Because it is a duty rather than a penalty, it stacks on top of §1592 exposure.

The fact that decides most real cases — §1592(e). For negligence, the government must establish only “the act or omission constituting the violation.” After that, “the alleged violator shall have the burden of proof that the act or omission did not occur as a result of negligence.” Once CBP shows a materially false origin declaration, you have to prove you exercised reasonable care. No file, no defence. 19 U.S.C. §1484(a)(1) puts that duty of “reasonable care” on the importer of record — not on your supplier, and not on your freight forwarder.

The largest lever anyone has here — prior disclosure, §1592(c)(4). Disclose before, or without knowledge of, a formal investigation and the merchandise “shall not be seized,” and for negligence or gross negligence the penalty caps at interest only, conditioned on tendering the unpaid duties at disclosure or within 30 days of CBP's calculation. That turns a negligent origin error from up to 2× the duty loss into interest. Two catches worth stating plainly: you bear the burden of proving you had no knowledge of a formal investigation, and the investigation is deemed to have commenced on the date CBP internally recorded the discovery — so the window can already be shut while you still think you are early. Mechanics: 19 CFR 162.74.

“We have a binding ruling, so we are covered”

Binding rulings are real, free, and genuinely useful — 19 CFR Part 177, submitted through eRulings, searchable through CROSS. They bind all CBP personnel until modified or revoked (19 CFR 177.9(a)). But four limits get missed:

1. The facts must match exactly. 19 CFR 177.9(b)(1) issues a ruling “on the assumption that all of the information furnished … is accurate and complete in every material respect,” and it applies only where the described and actual transactions are the same. Change a supplier, a process step, or an input's origin and it stops covering you.
2. Only the requester may rely on it (19 CFR 177.9(c)). A competitor's favourable ruling is persuasive, not protective.
3. Prospective only. 19 CFR 177.1(a) — no ruling on a transaction already pending “by reason of arrival, entry, or otherwise,” and none on an entry already liquidated. You cannot get a ruling to fix a problem you already have.
4. Revocable — and, within 60 days of issuance, revocable immediately with no notice-and-comment. That is exactly what happened to H300226, above.

The five things people believe that are not true

1. “We moved final assembly to Vietnam, so it is not Chinese any more.” Simple assembly with a pre-determined end use is the paradigm case of no transformation.
2. “The label says Made in Mexico, so we owe Mexican rates.” Two determinations, two rule sets — the most expensive misunderstanding in this topic.
3. “Section 301 depends on where it shipped from.” It depends on origin, not export. Routing through a third country changes the port of lading and nothing more.
4. “Testing, programming, packaging, kitting and finishing add enough value.” H335829, H352504 and H318891 all say no, and none of the authorities cited on this page sets a value-added percentage that confers origin.
5. “Our binding ruling covers us.” See directly above.

A change to the mitigation ranges you may be reading

Executive Order 14411, Strengthening Customs Enforcement (2026-06-03, 91 FR 35125), §4(c) set CBP a deadline of 1 September 2026 to set a minimum penalty floor of not less than 50% of the assessed penalty, add a liquidated-damages floor, and eliminate mitigation for repeat offenders. Those changes would supersede the mitigation ranges in 19 CFR Part 171 Appendix B.

As at our last check, 19 August 2026, CBP had not issued the implementing change, so the Part 171 Appendix B ranges still stood. We have not re-checked since that date. If you are relying on a published mitigation range, read the current Appendix B text and check whether CBP has acted on the 1 September 2026 deadline — this page does not tell you whether it has. The statutory multiples quoted higher up come from §1592 itself and are not what EO 14411 changes.

Where you actually want a licensed customs broker or trade counsel

This page explains the test; it is not legal advice and it cannot resolve your facts. Bring in a licensed customs broker or a trade attorney when: your processing sits anywhere near the line between “made a component” and “combined components”; you import textiles or apparel, which is a different rule entirely; you are considering a prior disclosure, where timing is the whole game and the deadline may already have passed silently; or you have received a CBP Form 28, Form 29, or any EAPA notice. If you are about to restructure a supply chain on the theory that it changes origin, get a binding ruling before you move the production, not after — rulings are prospective only.

Sources

1. HQ H301619 (2018-11-06), Modification of NY N299096; country of origin of electric motors from Mexico; 2018 Section 301 trade remedy; 9903.88.01, HTSUS — rulings.cbp.gov/api/ruling/H301619
2. HQ H300226 (2018-09-13) — superseded on scope by H301619
3. 19 CFR 134.1(b), 134.35(a), 102.17, 102.21(a), 162.74, 177.1(a), 177.9
4. 19 U.S.C. §1484(a)(1), §1592(a)(1)/(c)(4)/(e), §1304(i), §1517(a)(3), §1677j(b)
5. Anheuser-Busch Brewing Ass'n v. United States, 207 U.S. 556 (1908); United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (1940)
6. Executive Order 14411, 91 FR 35125 (2026-06-03)
7. CBP rulings cited by number throughout; all searchable at rulings.cbp.gov

Sources are linked to primary documents throughout — CBP's rulings database, the eCFR, the Federal Register and the HTSUS. Every figure above can be checked against them. If you find something here that is wrong, it will be corrected and the correction dated.