Vietnam’s New Tariff Deal Puts a Spotlight on Traceability
A New Rule, A New Risk
Vietnam has secured a preliminary trade deal with the United States. The agreement avoids a 46% across-the-board tariff but sets a new baseline duty of 20% on Vietnamese-origin goods.
There’s one catch: if a product is found to contain a significant amount of Chinese-sourced material, it will be hit with a 40% tariff instead.
This isn’t about mislabeling finished goods anymore. The term “transshipment” is being reinterpreted to apply to materials, not just final products. That means goods legally made in Vietnam can still be treated as Chinese if the inputs trace back to China.
That shift changes the rules of the game. Companies sourcing from Vietnam will now need to prove not only where their product was made, but where each component came from. Otherwise, they risk getting caught in a 40% tariff trap.
Substantial Transformation May No Longer Be Enough
Under long-standing U.S. customs doctrine, a product that undergoes a substantial transformation—changing its name, character, or use—takes on the origin of the country where that process occurred. Vietnam-based assembly has typically been enough to qualify goods as Vietnamese, even if some parts came from China.
The new enforcement trend may override that. If a product has heavy Chinese input, it may now be treated as Chinese in practice, regardless of the transformation that occurred. No final guidance has been issued yet, but legal experts and industry groups are bracing for an aggressive interpretation.
Some expect the threshold for Chinese content to be as low as 10% of material value. Others say even lower levels may draw attention, especially in categories like apparel, footwear, furniture, and electronics.
Apparel Is Especially Exposed
Vietnam’s apparel industry relies heavily on raw materials from China. Fabrics, trims, buttons, and zippers are commonly imported before cutting and sewing takes place in Vietnam.
A jacket may be made in Vietnam but still contain 50% or more Chinese inputs by cost. That product is now vulnerable to being classified as “transshipped” and facing the 40% tariff.
Apparel brands that moved sourcing from China to Vietnam during the last trade war now face a new compliance problem. Without visibility into the full Bill of Materials, they may not be able to defend their country-of-origin claims.
And Vietnam isn’t the only concern. Other sourcing hubs—Cambodia, Thailand, Indonesia—also rely on Chinese materials. As U.S. enforcement widens, those countries could face similar scrutiny.
BOM-Based Traceability is Now a Compliance Requirement
To understand your exposure, you need to know where your materials came from. That requires Bill of Materials (BOM) traceability.
Without it, you’re guessing.
With it, you can calculate exactly how much of a product’s value is tied to Chinese content. That’s the information customs will look for. That’s what determines whether you pay 20% or 40%.
Most enterprise systems weren’t built for this. They track the final manufacturing location, not the upstream inputs. That leaves teams scrambling through spreadsheets, emails, and certificates when customs comes knocking.
Inspectorio’s traceability platform is built to solve this problem. It collects and verifies BOM data across tiers, flags risk based on country-of-origin thresholds, and provides a record you can present during a compliance audit. No other system currently supports BOM-level visibility and compliance tracking at this scale.
What You Should Do Now
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- Get BOM-level visibility. Work with your suppliers to collect detailed Bills of Materials and map out the origin of each component.
- Model your risk. Use that data to identify products with more than 10% Chinese content. These may face the 40% tariff.
- Request customs rulings. For high-risk products, request advance rulings from CBP to confirm country-of-origin treatment before shipping.
- Audit your Vietnam lines. Review every product sourced from Vietnam. Assess whether your country-of-origin assumptions still hold.
- Reinforce your documentation. Keep clear, traceable records showing how each product was made, including supplier declarations, transformation steps, and cost breakdowns.
Traceability is the Only Way Through This
The U.S.-Vietnam deal didn’t eliminate the threat of tariffs. It replaced one type of risk with another.
You can’t rely on old assumptions about country of origin. You need hard data to prove where your products came from—and that starts with knowing what they’re made of.
Traceability isn’t about optimization anymore. It’s about access. If you can’t prove origin, your goods might not move. Or worse, they move—and get hit with a 40% duty bill later.
