Made In India? Oh Yeah?

medium120524158US has imposed high tariffs — up to 245% — on Chinese goods while keeping a lower 10% duty on imports from other countries. This big tariff gap gives Indian exporters a short-term chance to grow sales to US, even if their products are 15-25% costlier than China’s. But not all goods will qualify for the lower rate. Simply routing Chinese products through India and labelling them as “Indian” violates US Customs rules and can lead to heavy penalties.To benefit from lower tariffs, exporters must prove their goods are genuinely made in India — something that’s not always straightforward. For example, if a smartphone is assembled in India using parts from various countries, how much of the work must be done in India to qualify?This is where US non-preferential Rules of Origin (RoO) matter. These rules decide a product’s origin when there’s no trade deal in place between US and the supplier country. If a product has too many Chinese inputs and doesn’t meet RoO standards, it could be labelled as Chinese and face higher tariffs.With US now applying country-specific tariffs, non-preferential RoO will become the key test for all imports. Indian businesses aiming to export to US without delays, penalties or tariff shocks will need to understand and comply with these rules.Two types of origin rulesRoOs aim to answer a simple but crucial question: where is a product really made, as against where it’s shipped from. It’s about establishing where the product was actually transformed into something new.There are two types of origin rules: preferential and non-preferential. Preferential RoOs apply under free trade agreements (FTAs) to ensure that only goods genuinely made in a partner country get lower tariffs. For example, under the India-Japan FTA, India allows most Japanese goods to be duty-free, but only if they meet rules proving they were made in Japan.Non-preferential rules apply to goods outside FTAs. They are essential for tracking export values and enforcing country-specific trade rules, especially when high tariffs or restrictions apply.US Customs and Border Protection (CBP) agency uses two main tests to determine a product’s country of origin. First, it considers a product to be wholly obtained if it is grown, mined, or produced in one country — like fruits harvested or minerals extracted.Second, complex products like chemicals or machinery must meet the “substantial transformation test”. A product is made in the country where it gets a new name, purpose, or function through substantial transformation. Simple steps like assembling, packaging, or labelling don’t count.Often, it’s not clear what counts as a substantial transformation. CBP makes the final call. Here are a few examples of what CBP considers a substantial transformation.* In textiles and apparel, CBP considers the country where the fabric is made as the origin country. For example, if yarn from country A is turned into fabric in country B, then country B is the origin. Simply cutting or sewing the fabric doesn’t count. Will this hurt garments made using imported fabric?* For smartphones and laptops, the origin depends on where key parts like motherboards or logic boards are assembled and programmed. Will this hurt export of most high-end smartphones? The same applies to laptops – programming the motherboard, like installing the BIOS, decides the origin.* Substantial transformation in pharmaceuticals and chemicals usually means a chemical reaction or change in the molecule. Turning an API into a tablet or capsule isn’t enough if the chemical makeup stays the same.* Processes like roasting, fermenting or cooking count as substantial transformation for food and farm products. But simple steps like freezing, peeling or repackaging are not enough.* The solar cell is the most essential part of solar panels. So, even if the panel is assembled in another country, its origin is based on where the cell was made. In a ruling, US Customs decided that panels assembled in country B using cells from country A were still considered to be from country A. Most solar panels made in India fail this test.Build, don’t just assembleIndian exporters must closely review their production processes. There must be real manufacturing or transformation of inputs, like making key parts, programming or chemical changes. Products must clearly qualify as “Made in India”, backed by strong documentation. If there’s any doubt, exporters can request a binding ruling from US Customs for clarity and legal certainty.In an FTA, such rules are discussed at the product level. Expect origin rules to become more trade limiting under the trade agreement with US. These rules weren’t used much before, but with Trump’s country-specific tariffs, they’ve become the primary test for all imports.India has discussed introducing non-preferential RoOs, but could not finalise them. It should do so now because US non-preferential RoOs could be a more effective tool than tariffs in limiting Chinese inputs in exports from other countries. If this becomes clear to US, it might scale back its aggressive tariff strategy.The writer is an expert on trade & tech issues