How Do Tariffs Affect Foreign Firms Manufacturing In China/China Firms Manufacturing Outside China?

In our recent coverage of US Tariffs Hitting China Video Surveillance, there have been questions about different scenarios such as a non-Chinese company manufacturing in China and a Chinese company manufacturing outside of China. Would tariffs apply in these circumstances?

Tariffs are applied according to country of origin, not company of origin. Country of origin forms the core of the US' Harmonized System of tariffs. (See CBP document here.)

How do you determine a product's "country of origin"? The WTO agreement on rules of origin, which the US is party to, says: "for the country to be determined as the origin of a particular good to be either (1) the country where the good has been wholly obtained or, (2) when more than one country is concerned in the production of the good, the country where the last substantial transformation has been carried out".

Therefore, non-Chinese companies manufacturing in China are still affected by the new tariffs. For example, GM makes some cars in China that it exports to the US, and recently confirmed to USA Today that those cars are subject to the tariffs.

However, because of the country of origin system, if Hikvision manufactures products in India that are then shipped to the US from India, those products are considered Indian imports, not Chinese ones. So they would not be affected by the China tariffs.

However, if it's overwhelmingly clear that Hikvision is only making very cosmetic changes to cameras 'manufactured' in India, and there is no "substantial transformation" taking place in India at all, the US could determine the products to effectively be made in China and still slap tariffs on them, even if they are shipped out of India. (See page 9 of CBP document.)

China has been doing this for years with all of their products. They ship them to another country then ship them from that country to the US to avoid whatever the restriction may be if the product is coming from the US. China does this with consumables as well. They are the largest producer of honey and cut it with non honey products to make it cheaper. The US caught on to this and tests to identify the country of origin of the Honey (because) they are selling it as pure when it is not) when it comes form another country (shipping wise) consumers do not know if it is pure or not without the testing, which does not catch it all. They do a similar thing with Garlic. China is a master at manipulating the system to meet their needs and put them at an advantage in the market.