Avoiding Origin Violations: How Foreign Businesses in China Can Legally Route Goods Through ASEAN and Beyond

To avoid origin violations, foreign businesses sourcing from China can legally route goods through ASEAN by ensuring substantial transformation, accurate origin labeling, and thorough documentation. Regulatory scrutiny is intensifying, so only compliant, transparent supply chains can safely access US and EU markets.

Foreign companies sourcing from China are increasingly exploring indirect shipping routes through Southeast Asia to access the US and EU markets while dodging steep antidumping duties (AD) and countervailing duties (CVD). This strategy, however, has drawn intense scrutiny from regulators.

Both the US and EU have recently ramped up enforcement against “transshipment” schemes that disguise Chinese-origin goods as ASEAN exports. High-profile crackdowns exemplify such risks: in April 2025, the US Department of Commerce finalized punitive tariffs on solar panels assembled in Vietnam, Malaysia, Thailand, and Cambodia (with rates as high as 542.64 percent for Vietnamese-origin panels) after finding they were essentially Chinese products routed through Southeast Asia. Likewise, in April 2025, the EU extended its AD measures to cover imports from third countries when evidence shows Chinese goods are simply repackaged or lightly processed there.

In this climate of tighter oversight, companies must understand where the legal line lies. This article examines the latest US and EU enforcement actions, clarifies what constitutes legal vs. illegal transshipment, explains rules of origin like substantial transformation, and compares ASEAN transit hubs (Vietnam, Malaysia, Singapore) for viability.

Enforcement landscape: US and EU crack down on origin fraud

US post-2023 trade enforcement

The US has significantly escalated its trade enforcement efforts against origin fraud and duty evasion in recent years. In August 2025, the Department of Justice launched a multi-agency Trade Fraud Task Force specifically to target importers and others defrauding US customs. This reflects a broader trend: tariff evasion and customs fraud are now top-tier priorities for prosecutors, with whistleblower rewards and even criminal charges on the table.

The US Customs and Border Protection (CBP) is likewise investigating allegations that importers are routing Chinese goods through third countries to dodge AD/CVD orders. Over 400 Enforce and Protect Act (EAPA) cases have been opened to date across industries, and CBP increasingly imposes tough interim measures (like suspending entries or requiring cash deposits of duties) early in investigations.

Recent enforcement has spanned products from steel pipes and chemical additives to solar modules. Notably, CBP now scrutinizes any claims that goods are “Made in Vietnam” or elsewhere if the offshore processing appears minor, treating false country-of-origin declarations as a form of customs fraud with hefty penalties.

EU trade defense and anti-circumvention

The EU is similarly intensifying its fight against origin fraud and duty circumvention. In 2024, the European Commission initiated a record 33 new trade defense investigations, the most in any year since 2006. By end-2024, the EU had 199 trade measures in force, and it began automatically registering imports in new cases to catch sudden surges that might signal stockpiling ahead of duties.

A major focus is on anti-circumvention probes. The Commission has not hesitated to extend AD duties to third-country exports when evidence shows Chinese products are being routed through those countries to evade existing measures.

Beyond trade tariffs, the EU also leverages its Anti-Fraud Office (OLAF) and national customs to police origin fraud. OLAF has conducted joint raids and investigations into cases like a EUR 4 million (US$4.65 million) fraud involving 17,000 Chinese e-bikes falsely declared as Turkish exports to the EU. In some instances, European importers have faced criminal consequences: in one ongoing case, a European manager was prosecuted for assembling Chinese e-bike parts in the EU and mis-declaring origin, with potential penalties of €60 million and prison time.

Overall, the EU’s enforcement stance is growing more hardline: monitoring import patterns, working with ASEAN governments, and making clear that merely funneling Chinese goods through another country will not shield them from EU trade defenses.

ASEAN cooperation with the US and the EU

Importantly, many Southeast Asian governments are cooperating with US and EU efforts, as they seek to avoid reputational damage and trade sanctions. Vietnam has ramped up its own customs inspections to crack down on origin fraud since 2019, uncovering schemes where Chinese goods were relabeled as Vietnamese for export.

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Malaysia, for its part, announced in 2025 that it is centralizing the issuance of Certificates of Origin (COOs) for all US-bound exports under its Ministry of Trade, explicitly to prevent abuse of its country of origin by transhippers. The country vowed to investigate and prosecute any “attempt to circumvent tariffs through false declarations of value or origin,” signaling a zero-tolerance stance in alignment with US trade fraud enforcement.

Legal vs. illegal transshipment: What’s permissible?

With enforcement on the rise, it’s critical to distinguish legitimate rerouting or outsourcing from illicit transshipment. In both the US and EU contexts, the legality hinges on whether the goods undergo a meaningful transformation in the intermediate country or if the route is merely designed to disguise the true origin.

What counts as illegal transshipment

“Transshipment” in the pejorative sense refers to shipping Chinese-origin goods through a third country (like an ASEAN member) without substantial change, then falsely declaring them as products of that country to avoid duties. This includes simple relabeling, minimal assembly, or trivial processing, all generally not enough to confer a new origin.

US authorities regard tactics like repackaging, minor alterations, or shell assembly lines as clear-cut evasion. As a trade compliance advisory note, merely re-boxing or lightly assembling Chinese parts in another country is insufficient to create a new origin and will be treated as fraud. The US can impose back-duties, heavy fines, and even pursue importers under the False Claims Act if they knowingly misdeclare the country of origin.

The EU, on the other hand, addresses the same practice through anti-circumvention rules. Assembly operations in a third country (or within the EU) are considered circumvention when the core components originate from the country under trade measures and the local processing is limited.

EU regulations provide clearer benchmarks than the US: if 60 percent or more of the value of the parts in the final product are Chinese, and/or local value added is below 25 percent, the operation is presumed to be designed to avoid duties, and the EU may extend the original tariffs to the goods concerned.

Likewise, in both cases,  simply routing goods through a third country’s port, bonded area, or free-trade zone without substantive manufacturing (such as only changing labels or documentation) does not alter origin under either US or EU rules and is treated as illegal when used to evade duties.

What is allowed: Legal routing

On the other hand, it is legal to route goods via third countries if proper procedures are followed and, crucially, if the goods undergo a genuine substantial transformation in that country (or if no false origin claim is made).

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“Substantial transformation” generally means the product emerges from the third country with a new identity or essential character different from its inputs. We detail the specific origin tests in the next section, but broadly, a foreign business can establish a manufacturing or assembly operation in, say, Vietnam or Malaysia and legitimately declare the products as Vietnamese or Malaysian provided that the operation is more than superficial. For the US, if the processing in the ASEAN country results in a new article with a different name, use, and tariff classification, then the country of origin can lawfully be that ASEAN country (and thus not subject to China-specific tariffs).

For the EU, if the assembly or processing meets thresholds (for instance, well above 25 percent local value added and using mostly local/regional parts), then it is not considered circumvention.

In practice, this means activities like full-scale manufacturing, significant component integration, or complex assembly in the ASEAN hub are permissible. For example, a Chinese company might set up a factory in Vietnam that manufactures electronic appliances using a combination of Chinese and locally sourced parts. If the final appliance’s key transformation steps (soldering of PCB boards, installation of firmware, final product assembly, and testing) happen in Vietnam and the Chinese inputs are just raw materials or subcomponents, the finished goods can rightly be labeled “Made in Vietnam.” Both US and EU customs would accept that origin, as long as documentation supports it.

Notably, transparent business models are legal: utilizing ASEAN nations as true manufacturing bases or for “bona fide” distribution (without falsifying origin) does not violate any rules. Even simply transshipping through a third country is not illegal per se if the goods’ origin is correctly declared as China and any due duties are paid, but in that case, there is no duty saving. The problem arises only when transshipment is coupled with false origin claims to avoid duties.

Substantial transformation and rules of origin: Keys to legal routing

At the heart of legal routing through a third country are the concepts of substantial transformation and rules of origin. These dictate when a product is considered to originate from Country B (for example, Vietnam) versus Country A (say, China) for customs purposes.

The US applies a case-by-case “substantial transformation” standard, rooted in customs rulings and legal precedent. In the absence of a free trade agreement (FTA), the key question is whether a process in a third country gives the product a new name, character, or use compared to the original Chinese inputs. This is a qualitative determination rather than a formulaic test.

Although a Change in Tariff Classification (CTC) may suggest transformation, US Customs also evaluates whether the process adds enough value or technical substance. Merely repackaging, assembling from pre-fabricated components, or conducting cosmetic alterations rarely suffice. The focus is on whether there is meaningful transformation: for example, assembling a complex product like a printed circuit board, sewing textiles into garments, or fabricating structural machinery. Without such a transformation, even a tariff shift may fail to confer a new origin. Thus, foreign companies should ensure manufacturing in ASEAN includes genuine input alteration or complex assembly to meet the US threshold.

In contrast, the EU follows structured Rules of Origin (ROO) as embedded in its customs code and FTAs. These include specific criteria such as Change in Tariff Heading (CTH), value-added thresholds (typically 40 percent or 50 percent), or specific technical processes. Under non-preferential rules, the last substantial transformation in a country generally determines origin if economically justified. For preferential trade under FTAs (such as EVFTA), rules are more detailed and vary by product.

Importantly, the EU applies stricter anti-circumvention criteria in trade remedy contexts. The so-called 60/40–25 percent rule states that if 60 percent or more of a product’s component value comes from China and local value-added is below 25 percent, the origin remains Chinese regardless of technical classification shifts. Thus, compliance in the EU hinges on both quantitative thresholds and a good-faith manufacturing contribution.

Lastly, ASEAN countries, through agreements like the ASEAN Trade in Goods Agreement (ATIGA), typically require either 40 percent regional content or a CTH for a product to qualify as ASEAN origin. These rules are pivotal for leveraging ASEAN’s growing FTA network with the EU, China, Japan, and others. However, ASEAN countries are not uniform in enforcement or interpretation, and some have been flagged for weak origin control mechanisms.

Certificates of Non-Manipulation: Proving clean transit

When shipping goods through third countries, one valuable tool to bolster your compliance position is the Certificate of Non-Manipulation (CNM) (sometimes called Certificate of Non-Modification).

A CNM is an official document, typically issued by a customs authority or an authorized body in the transit country, certifying that the goods were not altered or further processed while in that territory. In other words, it vouches that the products remained in the same condition (except for maybe unloading/reloading or storage) during transit. CNMs can play a crucial role in demonstrating to the US or EU customs that no illegal origin-switch or undeclared processing occurred on the way.

In practical use, CNMs are most valuable when goods pass through a third country’s port or warehouse, but the importer seeks to preserve the original origin or prove no undeclared processing occurred.

They are not a substitute for a COO when a real origin change has occurred; in that case, a normal COO is issued by the country of production. Rather, CNMs are a supplementary document to maintain trust in the supply chain.

Each ASEAN country may have slight nuances in CNM issuance, but all share the goal of providing verifiable evidence of compliance. Businesses should factor in the time and paperwork for CNMs when planning transit routes. Having these certificates on file can significantly strengthen defense in an audit or investigation, showing that businesses took proactive steps for transparency.

Practical recommendations for compliance and success

For foreign businesses charting a “China + ASEAN” export strategy, there are several practical steps to ensure routing via ASEAN remains legal, transparent, and competitive:

• Assessing product risks and origin rules early: Before re-routing goods through ASEAN, businesses should determine whether their products are subject to AD/CVD or other trade actions targeting Chinese-origin inputs. Companies must identify the applicable origin thresholds, such as local value content or tariff classification shifts, and assess whether their supply chains can realistically meet those requirements.
• Establishing real local processing (not just repackaging): ASEAN routing is only lawful when substantial transformation takes place. This includes meaningful manufacturing steps such as assembly, machining, or fabrication. Shifting portions of the production process, sourcing components regionally, or transferring equipment and technology can help achieve the necessary value addition.
• Controlling the supply chain from input to export: Businesses must maintain transparency and oversight across all supplier tiers. Accurate origin declarations should be required from upstream vendors, and safeguards must be in place to prevent subcontracting that reintroduces Chinese-origin content. Supplier audits, contractual clauses, and monitoring tools can help ensure full compliance.
• Maintaining comprehensive documentation (digitally, where possible): Companies should keep detailed, shipment-specific records, including COO, bills of materials, production records, shipping documents, and Certificates of Non-Manipulation for goods transiting third countries. Organized documentation is essential for customs audits, as the evidentiary burden typically rests with the exporter.
• Declaring and marketing truthfully: Goods should only be labeled with an ASEAN country of origin when substantial transformation criteria are clearly met. Businesses must ensure consistency across commercial documents, certificates, and marketing materials. In cases of uncertainty, companies should seek advance rulings from customs authorities in the destination market.
• Building internal compliance and audit readiness: Enterprises should develop formal compliance programs that assign responsibility to trained personnel, establish clear procedures, and conduct regular internal audits. Maintaining origin records and being prepared to demonstrate production processes will facilitate swift responses during regulatory reviews or investigations.
• Monitoring regulatory developments and engaging authorities: Staying informed on trade enforcement developments in the US, EU, and ASEAN jurisdictions is essential. Companies should proactively adjust operations based on new AD/CVD actions or legal amendments. Engaging local authorities and customs bodies can also help resolve issues constructively and demonstrate good-faith compliance.

Key takeaways for businesses

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As the US and EU trade enforcement intensifies, simple transshipment is no longer a viable workaround for avoiding AD/CVD duties. For foreign manufacturers in China, the path forward lies in legal compliance through genuine manufacturing, proper origin labeling, and rigorous documentation. ASEAN countries remain valuable partners for supply chain diversification, not as channels for relabeling Chinese goods, but as hubs for real production.

When goods undergo substantial transformation and meet applicable origin rules, they can legally enter Western markets with normal or preferential duty rates, even if Chinese inputs are used. The distinction is clear: properly processed goods with verifiable paperwork present a competitive advantage, while misdeclared products risk penalties and disruption. By leveraging ASEAN capabilities and backing this with transparent compliance, companies can remain both lawful and cost-effective.

Regulators are not targeting compliant businesses; they are focused on those evading rules. Firms that invest in proper structuring, documentation, and audit readiness can reduce legal exposure and strengthen resilience and market credibility. Legal ASEAN routing isn’t just possible: it’s the smart, sustainable path for businesses adapting to today’s global trade environment.

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