How US Fashion Brands Can Avoid Section 301 Tariffs by Manufacturing in Vietnam
If a fashion brand is still manufacturing in China, it is paying a 25% tax on every unit imported into the United States — and has been since 2018.
That tax is called the Section 301 tariff. It was imposed by the US Trade Representative on a broad range of goods manufactured in China, including most apparel and textile categories. Unlike standard import duties, Section 301 is a punitive trade measure — and it shows no sign of going away.
For a brand importing $300,000 of goods annually from China, that's $75,000 in additional cost per year. Paid directly to US Customs. On top of production cost, freight, and standard duties.
The good news: it is entirely avoidable. And the solution is simpler than most brand founders realize.
What Is the Section 301 Tariff — and Why It Still Matters in 2026
Section 301 of the Trade Act of 1974 gives the US President broad authority to impose tariffs on imports from countries engaged in unfair trade practices. In 2018, the Trump administration used this authority to impose tariffs on hundreds of billions of dollars of Chinese goods — including List 1, 2, 3, and 4 tariffs that cover most apparel, fabric, and accessories categories.
The tariff rate on most apparel categories from China is 25% of the declared customs value. This is applied on top of the standard Most Favored Nation (MFN) duty rate — which itself ranges from 0% to 32% depending on the garment category and fiber content.
In 2025 and 2026, tariff escalations introduced additional measures on specific categories. For brands heavily dependent on China manufacturing, the total duty exposure on imported goods has reached levels that materially affect margin and pricing competitiveness.
Critically — these tariffs apply to goods manufactured in China regardless of where the company is registered. A US brand, a UK brand, or an EU brand importing Chinese-manufactured goods into the United States faces the same 25% Section 301 exposure.
Why Vietnam Is the Most Effective Section 301 Alternative for Apparel Brands
Vietnam is not subject to Section 301 tariffs. Apparel manufactured in Vietnam and exported to the United States is assessed at standard MFN duty rates only — no punitive tariff surcharge.
This is not a loophole or a grey area. It is simply the result of Vietnam not being a target of US Section 301 trade actions. Vietnam-manufactured goods have a clean tariff status under US trade law — provided the goods are genuinely manufactured in Vietnam and accompanied by a valid Certificate of Origin (C/O Form B).
Beyond the tariff advantage, Vietnam brings several structural benefits that make it the strongest China Plus One destination for apparel brands:
Production capability: Vietnam has been manufacturing apparel for global brands including Nike, Adidas, Gap, Zara, and H&M for over 30 years. The workforce expertise, production infrastructure, and machinery across all major apparel categories — activewear, streetwear, womenswear, and tailoring — are fully comparable to Chinese production standards.
Labor cost advantage: Vietnam's manufacturing labor costs are structurally lower than China's, and the gap is widening as Chinese wages continue to rise. For most apparel categories, Vietnam delivers a lower total landed cost than China — even before the Section 301 saving is counted.
IP protection framework: Vietnam is a signatory to the Berne Convention and TRIPS agreement. Combined with a US-law contract structure, brands manufacturing in Vietnam have stronger legal recourse for IP protection than a direct Chinese factory relationship typically provides.
The Numbers: What Section 301 Is Costing Your Brand Right Now
Here's the landed cost comparison for a typical streetwear order:
Example: 1,000 units of heavyweight hoodies, FOB price $20 per unit.
Manufacturing in China:
FOB price per unit: $20.00
Section 301 tariff (25%): $5.00
Standard import duty (approx. 17%): $3.40
Total landed cost per unit: ~$28.40
Total for 1,000 units: ~$28,400
Manufacturing in Vietnam:
FOB price per unit: $20.00 (comparable)
Section 301 tariff: $0.00
Standard import duty (approx. 17%): $3.40
Total landed cost per unit: ~$23.40
Total for 1,000 units: ~$23,400
Saving per 1,000 units: $5,000
Saving on $300K annual import: ~$75,000
Saving on $500K annual import: ~$125,000
These figures are illustrative. Actual FOB pricing varies by category, fabric, and volume. But the structural advantage is consistent: for every dollar of China-manufactured apparel imported, Vietnam manufacturing saves approximately $0.25 in Section 301 tariff alone — before any FOB price difference is counted.
How to Ensure Your Vietnam-Made Goods Qualify for Tariff-Free Import
Not all "made in Vietnam" claims are equal under US Customs rules. To import Vietnam-manufactured apparel free of Section 301 tariffs, goods must genuinely meet the substantial transformation standard for Vietnamese origin — meaning the garments must be cut and sewn in Vietnam from fabric that was woven or knitted in Vietnam or a third country (not China in most cases).
The document that proves this is the Certificate of Origin Form B (C/O Form B), issued by the Vietnam Chamber of Commerce and Industry (VCCI). This is the standard export document a customs broker needs to apply the correct duty rate at US Customs entry.
What to look for in a Vietnam manufacturer:
Sources fabric from Vietnam or qualifying non-Chinese origins
Provides a legitimate C/O Form B issued by VCCI
Garments are genuinely cut and sewn at a Vietnam facility
Can provide production documentation if requested by CBP
Working with a manufacturer that is registered in the US adds an additional layer of legal accountability — the contract is governed by US law, and disputes can be resolved in US courts. This matters if CBP ever questions the origin of the goods.
How to Transition Your Production from China to Vietnam Without Disruption
The most common concern brands raise when considering a China-to-Vietnam transition is quality continuity — will a new manufacturer match what they have? The answer, when the right production partner is chosen, is yes. Here is a practical transition approach:
Step 1 — Start with one style or one category
There is no need to move the entire production volume at once. Identify one style or one product category — ideally a bestseller with stable specs — and commission a Vietnam transition sample alongside current China production. Compare directly.
Step 2 — Use existing tech packs
A capable Vietnam manufacturer can work from existing China production tech packs, approved samples, or reference garments. The spec does not need to be recreated — it needs to be replicated and verified.
Step 3 — Run parallel production during transition
Many brands maintain a China relationship while building Vietnam production capacity. This reduces risk during the transition period and allows validation of quality, lead time, and communication before committing full volume.
Step 4 — Scale Vietnam as confidence builds
Once one style is validated, expand to additional categories. Most brands complete the full transition within two to three seasons — capturing increasing tariff savings with each production run shifted to Vietnam.
Agile Apparel Source works with brands at every stage of this process — from initial sample comparison to full-volume production.
Conclusion
The Section 301 tariff is a permanent feature of the US-China trade relationship for the foreseeable future. Every season spent manufacturing in China is another season of paying 25% more than necessary on every unit imported.
Vietnam manufacturing eliminates that exposure — legally, permanently, and with a production capability that matches or exceeds what China delivers for most apparel categories.
The brands that make this transition in 2026 will enter 2027 with a structural cost advantage that compounds season over season.
Ready to calculate your Section 301 saving?
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