Tariff Deep Dive: Understanding Country of Origin and Its Impact on Import Tariffs

Updated on August 15, 2025. Originally written February 13, 2025

Summary

In early 2025, the U.S. introduced sweeping tariff and customs changes, beginning with a 10% tariff on goods manufactured in China, followed by the removal of the $800 de minimis exemption for China-origin goods in May and for all countries by August. These shifts make Country of Origin—where a product is actually made—a critical factor in determining duties, taxes, and compliance requirements. Importers must accurately determine and document COO to avoid penalties, adjust pricing strategies, and navigate the rapidly changing trade landscape.

Intro 

On February 4th, 2025 the United States has issued a 10% tariff on goods with a China Country of Origin starting a rapidly changing regulation rollercoaster over the first half of 2025. In 2022 alone, the US imported $536B of Made in China products. Previously with de minimis entry, shipments with a value of less than USD $800 were able to import into the United States with little to no processing at customs. With de minimis entry revoked for Made in China goods in May and for all other countries at the end of August, this is dramatically changing how goods are shipped into the U.S.

With the new tariffs, goods manufactured in China and other countries need to go through additional screening and incur any associated taxes, duties and fees. There has been some confusion on if this will affect all goods shipped from China—It does not. What is important is what the Country of Origin is.  

What Is a Country of Origin? 

Determining the Country of Origin (COO) is a fundamental step in customs compliance and tariff calculation. The COO identifies where goods were manufactured or produced, rather than the location they were shipped from. Alongside the Harmonized System (HS) code and customs valuation, the COO is one of the key factors in determining the tariff treatment for imported goods. 

For customs purposes, there are two types of origin: Preferential Origin and Non-Preferential Origin. 

Preferential vs. Non-Preferential Origin 

• Preferential Origin - This classification applies to goods that qualify for special trade programs, such as Free Trade Agreements (FTAs) or duty exemption programs. When applicable, it allows for reduced or eliminated duty rates on imports. However, preferential origin is only relevant in specific trade agreements for eligible products that qualify. It doesn’t apply to the majority of general imports. 

• Non-Preferential Origin - This classification is used for standard customs entry and determines the tariff treatment and the applicable duty rate. There are many different tariff treatments that customs can apply, and common treatments include general rates, special rates, or Most-Favored Nation (MFN) rates when no special trade arrangements apply. It identifies the actual manufacturing country of the product. Customs authorities rely on non-preferential origin to apply standard duties, taxes, and fees. 

Because of the new tariff laws, all goods manufactured in China (which also includes Hong Kong) are subject to the general rate as the Non-Preferential Origin, and therefore will incur associated tariffs, duties, taxes and fees. 

How Is Country of Origin Determined? 

Non-preferential origin is assigned based on strict customs rules that depend upon the number of countries involved in the product’s manufacture. Firstly, if a product is made in only one country and no additional work was done in any other country, origin will be deemed as that one original country.  

When goods involve production in multiple countries, the COO is determined by where they underwent their last substantial transformation—a change transformative and significant enough to result in a new product or a critical stage of manufacturing. 

For example, if a merchant imports jackets from China and attaches patches before selling them in the U.S., the COO remains China because: 

• The patches do not constitute a significant transformation of the original jacket. 

• The product retains its essential character as a jacket. 

• No additional materials or manufacturing processes have altered the fundamental nature of the item. 

Why Does Country of Origin Matters for Importers? 

Along with other compliance datapoints, the COO determines what customs compliance is needed, and what tariff treatment is applied to imported goods. It defines what duties and fees are applied. The COO determines whether standard duty rates apply or if special trade program benefits can be leveraged. COO may also render goods ineligible for special trade programs, like how previously China COO goods were eligible for de minimis entry in 2024 but in May were marked as not be eligible. It affects the total landed cost of goods, influencing pricing strategies for importers. 

COO is necessary for importers to get right in order to be compliant with Trade Regulations. Misinformation or inaccurate information can result in penalties—some quite severe.  

Understanding and accurately determining the country of origin is essential for any business involved in international trade. Importers must ensure compliance with customs regulations, properly document the COO, and be prepared for potential tariff implications. Working with trusted partners to automatically adjust to shifting trade agreements and tariffs is becoming more and more important.  

Need help navigating these changes? Contact us today.