Virtually every product brought into the United States must have a so-called "country of origin." Think of it as the official place it comes from. And this is the country that counts for calculating tariffs.But what does it really mean when something is a "Product of China"? How much of it actually comes from China? And how do customs officials draw the line?Here in the U.S., the rules are delightfully counterintuitive. A product's country of origin is not necessarily where that product got on the container ship to come here. It's not necessarily where most of its ingredients are from or even where most of the manufacturing happened.Our system is much stranger. The answers can be surprisingly philosophical — and at times, even poetic.This episode of Planet Money was produced by James Sneed with help from Sylvie Douglis. It was edited by Jess Jiang, fact-checked by Sierra Juarez, and engineered by Kwesi Lee. Alex Goldmark is our executive producer.Find more Planet Money: Facebook / Instagram / TikTok / Our weekly Newsletter.Listen free at these links: Apple Podcasts, Spotify, the NPR app or anywhere you get podcasts.Help support Planet Money and hear our bonus episodes by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy
What does 'Made in China' actually mean?
But then, Donald Trump was elected president for his first term. And country of origin suddenly started to matter a lot. Because in 2018, Trump put big tariffs on lots of Chinese products. And how does customs determine what is a Chinese product? Well, it's anything whose country of origin is China. That is when Maureen's phone started ringing off the hook.
So suddenly, companies were coming in and saying, well... I do do some manufacturing in China, but a lot of my parts are coming from outside of China, or I'm really only sending this thing to China for packaging or testing. Do I still have to pay duties on this as a product of China? Even though, I mean, I'm exporting it from China, but am I really making it in China?
Other companies were trying to switch up their manufacturing so their products wouldn't count as made in China anymore. They're asking Maureen, how much can I bend the definition of made in China?
If I move some or all of my manufacturing operations from China to Malaysia or China to Vietnam, how much do I have to move before the goods will no longer be considered Chinese by U.S. customs and I don't have to pay duties on Chinese products?
And whenever clients ask Maureen questions like this, which they are doing more and more these days, she has to take a deep breath, sit them down, and say, Okay, here is how we determine a product's country of origin. There's one main rule in the U.S. It is called the Substantial Transformation Test.
And it says a product gets its country of origin from the last place where it went through a substantial transformation.
A substantial transformation is processing from which the article emerges with a new name, use, or character.
Are you literally quoting this test?
I believe I am. Sounds like you've memorized it.
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