Manufacture of tobacco products

Under the updated framework of MD 229 of 2025, the manufacture of tobacco products remains a Qualifying Activity under the 'Manufacturing of goods or materials' category. Forensic auditors will verify the 'Substantial Transformation' test to ensure the activity is not merely 'Trading' (an Excluded Activity if conducted with non-Free Zone persons). High substance is required due to the specialized machinery and labor-intensive nature of tobacco processing.

Audit Red Flag

Misclassification of 'simple assembly' or 're-packaging' as 'manufacturing' to circumvent the substantial transformation requirement.

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