Country of Origin: Why 'Shipped From' Doesn't Mean 'Made In'

Your bill of lading says "shipped from Vietnam." Your commercial invoice says "Origin: Vietnam." But the product was manufactured in China, packed in Vietnam, and loaded onto a vessel in Ho Chi Minh City.

Customs doesn't care where the ship departed. They care where the product was made. That distinction — between shipping country and country of origin — is where costly errors begin.

This guide explains how country of origin is determined, what happens when you get it wrong, and how to verify before you file.

Is the country of origin the same as the country of export?

No. Country of origin refers to where a product was manufactured, produced, or substantially transformed. Country of export is simply where it was last shipped from. According to U.S. Customs and Border Protection (CBP), these are two separate fields on Customs Form 7501, and they often differ.

A product made in China but shipped from a warehouse in Vietnam is still a Chinese product. The vessel's departure port does not change where the goods were made. According to Avalara's cross-border trade compliance guide, tariffs are assessed based on the country of origin, not the country of export.

This matters because the country of origin determines:

• Applicable duty rate under the Harmonized Tariff Schedule

• Eligibility for FTA preferences (USMCA, KORUS, etc.)

• Exposure to trade remedies such as anti-dumping or countervailing duties

• Section 301 or Section 232 tariffs targeting specific countries

Getting the origin wrong doesn't just affect your duty rate. It can trigger penalties, audits, and loss of trade program benefits.

What is substantial transformation and when does it change the origin?

When a product is made entirely in one country, the origin is straightforward. But when materials from multiple countries are involved, customs authorities apply the substantial transformation test. According to the International Trade Administration (ITA), substantial transformation means a good underwent a fundamental change in form, appearance, nature, or character through processing or manufacturing in the country claiming origin.

The standard comes from U.S. case law. In United States v. Gibson-Thomsen Co. (1940), the court established that a product must acquire a new name, character, or use in the second country for that country to be considered the origin.

Here is what does and doesn't qualify:

• Counts as substantial transformation: Raw sugar, flour, and dairy from multiple countries combined into cookies in Country E — new product, new use (ITA example)

• Does not count: Fresh vegetables from various countries mixed and frozen in another country — no fundamental change (ITA example)

• Does not count: French steel plate cut to size in the UK — same name, same character, same use (CBP Ruling N340819)

• Does not count: Chinese pharmaceutical ingredient (API) tableted and packaged in the U.S. — medicinal use unchanged (CBP Ruling HQ H215656)

The key question is whether the processing creates something genuinely new. Repacking, relabeling, simple assembly, and dilution with water typically do not qualify.

What happens when you declare the wrong country of origin?

Wrong origin declarations trigger a range of consequences under U.S. customs law. The severity depends on whether CBP classifies the error as negligence, gross negligence, or fraud.

Marking duty. Under 19 U.S.C. 1304(f), articles not properly marked with their country of origin are subject to an additional 10% duty on the appraised value. This applies even if the error was unintentional.

Civil penalties under 19 USC 1592. This is the primary enforcement statute for false or misleading customs declarations, including origin misstatements:

• Negligence (failure to exercise reasonable care): penalty up to 2x the unpaid duties, or 20% of dutiable value if no revenue loss

• Gross negligence (actual knowledge or wanton disregard): penalty up to 4x unpaid duties, or 40% of dutiable value

• Fraud (voluntary and intentional): penalty up to the full domestic value of the merchandise

CBP can review entries going back 5 years. A single misclassified origin, repeated across dozens of shipments, can compound into a significant liability.

Real-world impact. In one documented case cited by the CCB Journal, an importer brought in canned mushrooms from Canada. CBP later determined the mushrooms were actually processed in China — and the processing in Canada was insufficient to change origin. The importer faced 148.1% anti-dumping duties retroactively applied to shipments that had already been sold for minimal profit.

According to CBP's Customs Trade Partnership Against Terrorism (CTPAT) program, the agency has observed a significant increase in illegal transshipment schemes, particularly involving goods subject to anti-dumping and countervailing duties. CBP enforcement includes marking duties, civil penalties under Section 1592, and in some cases, criminal prosecution.

How do you verify the correct country of origin before filing?

Verification starts with asking the right question. Not "where did this ship from?" but "where was this manufactured or substantially transformed?" If your product passed through a third country, you need to determine what happened there.

Step 1: Ask your supplier directly. Request documentation showing where manufacturing took place. If the product contains components from multiple countries, ask where final assembly or processing occurred and what operations were performed.

Step 2: Apply the substantial transformation test. Did the product get a new name, character, or use in the last country of processing? If the answer is no — if it was only repackaged, relabeled, or lightly assembled — the origin stays with the country where meaningful manufacturing happened.

Step 3: Check for trade remedies. Verify whether the true country of origin is subject to anti-dumping duties, countervailing duties, Section 301 tariffs, or Section 232 tariffs. A wrong origin declaration that avoids these duties escalates the violation from a paperwork error to potential fraud.

Step 4: Request a binding ruling. For recurring or high-value products, request a country of origin advisory ruling from CBP. According to CBP's regulations under 19 CFR Part 177, foreign manufacturers, exporters, and U.S. importers can all request these rulings. They provide certainty and serve as a defense in future audits.

Quick reference: Country of origin verification checklist

• Confirm where the product was manufactured, not just where it shipped from

• If it passed through a third country, determine what processing occurred there

• Apply the substantial transformation test: new name, character, or use?

• Repacking, relabeling, and simple assembly do not change origin

• Check if the true origin country is subject to AD/CVD, Section 301, or Section 232

• For recurring imports over $10,000/year, request a CBP advisory ruling

• Keep origin documentation for at least 5 years (CBP audit window)

• Ensure the B/L shipping country and the CI origin country are correctly differentiated