We heard of several Chinese manufacturers that are opening a Vietnam factory, in order to serve their American customers better by avoiding Trump’s tariffs.

Sometimes that makes sense, and sometimes it doesn’t… If one of your suppliers tell you about their ability to produce in Vietnam, what should you do?

First, is manufacturing really going to take place in Vietnam?

If the goods are made in China and trans-shipped through another country, you as a buyer based in the USA face severe risks (including jail time).

Suppliers often seem to offer good solutions, but you should reject them if they are meant to cover the truth. See an example on the China Law Blog:

A US importer suspects its Vietnamese “producer” is not actually making anything, but rather simply transshipping product that comes from the Chinese company that owns it. The company visits the Vietnam facility and it does not appear anything is actually being produced there. The US importer raises this concern with the Chinese company which tells the US company that it can avoid any problems by being listed as the consignee of the products and not the importer of record since it is the importer who is at risk. This too is simply wrong information.

Second, how much manufacturing is going to be done in Vietnam?

If the goods are manufactured in Dongguan and packed in Hanoi, can they be “Made in Vietnam”? Certainly not.

What about doing all the assembly in Hanoi? It might not be sufficient.

As long as most/all of the components come from China, there is a risk.

From the same article on the China Law Blog:

There is often a lot you can do to legally change the country of origin of your products, but the key here is legally. The other key here is that the rules for figuring out the appropriate country of origin are incredibly complicated and best left to an experienced and qualified international trade lawyer, especially in light of all that is going on between China and the United States these days. Even our China lawyers do not claim to be qualified on this score and, for instance, about all I tell my clients who ask for country of origin help is something like the following:

About all I know is that putting together your electronics product in China and then shipping it to Vietnam for a plastic case to be put on it is not going to do the trick. Beyond this though, you are going to need to consult with our trade and customs lawyers because this is not something we can afford for you to get wrong.

What can you ask your supplier, as a start?

The first step is to ask your supplier some basic information to establish if there is “significant transformation”:

• What processes will be done in their Vietnam facility on your products?
• What components will be sourced locally?

You can ask them if you can send an auditor to visit them and confirm what processes are done on site.

I’d also ask if they really own and control the Vietnamese factory. Can they share documents that show the owner(s) of that business? If they are doing trading, you might be fine with it, but you should be aware of it…