What is Country of Origin?

In the import process, country of origin meaning refers to the destination from which the goods are being imported or simply the country of manufacture, production, or growth where the goods comes from. The country of origin must be displayed clearly while shipping products internationally as it is essential in deciding the eligibility of the goods for preferential tariff and trade agreement rates. When the entire consignment doesn’t come from one country, the legal principle of substantial transformation which is an internationally recognized standard is used to determine the origin of the goods.

A change of origin does not take place by simply shipping it through another country. E.g. if a shipment of Cuban tobacco comes from Denmark, the country of origin does not change to Denmark.

Significance of Country of Origin in Import

The country of origin is a vital element in the import process as it is used for determining and regulating duty rates, preferential trade agreements, trade sanctions, and import quotas. The US Customs & Border Protection (CBP) is vigilant about verifying the country of origin because there are revenue and admissibility issues involved with every import shipment. The country of origin is also required for marking purposes. The import regulations require the end-user to be informed about the country of origin of the articles imported.

How to Determine Country of Origin?

The country of origin is provided in detail if the imported shipment is subject to any of the various free trade agreements or duty preference programs.

1. Is the Product Wholly Obtained or Wholly Produced?

To determine the country of origin, it is important to know from where the product is wholly obtained or produced. A product will not be labeled ‘Made in USA’ unless it is entirely produced using US origin materials, and completely manufactured by US laborers. Even if a part of the composition of the product has been made using significant imported materials or with the help of foreign labor, then the ‘Made in USA’ claim cannot be attached without stating specific conditions.

The Federal Trade Commission, however, may authorize the importer to post a conditional claim, such as ‘Made in USA from Chinese materials’, or use similar such words that convey the origin of the product.

2. De Minimis Rule

De Minimis is a Latin expression meaning “about minimal things”. The rule helps to import qualifying goods without the application of export administration regulations. The goods will still be considered as satisfying the applicable rule of origin if the value of the non-originating materials does not exceed the threshold specified in each set of rules of origin. This threshold is normally 10% or 15%.

3. Substantial Transformation Rule

According to this legal principle, the country of origin refers to the last country where the imported product underwent a substantial transformation. For this rule to be applied, the product should have undergone a fundamental change in terms of form, appearance, nature etc. basically anything which added value to the original item when it was first produced, grown and then exported.

This rule also helps decide the purpose of origin in a simple, concise manner, especially in cases where the entire product doesn’t come from one country. All classifications are subjective and the final call is taken by the customs officers based on their interpretation of the situation.

Rules of Origin

Rules of origin are used to determine if the imported shipments are eligible for duty-free or reduced duties under the Free Trade Agreement (FTA) rules of the country. Some products may come under the purview of this benefit even if they contain non-originating (non-FTA) components.

If a product is wholly grown, manufactured, and assembled mostly in one country, it is simple to apply the rules of origin. However, when a product has components that originate in multiple countries, determining the rules of origin can become complex as the rules are detailed, specific and vary with every agreement and type of product.

There are two basic types of rules of origin -- preferential and non-preferential. While in both cases the general rules remain the same, the specific rules may vary from country to country.

Preferential Rules of Origin

The preferential rules of origin are those types of rules that pertain to specific trade agreements made between partners of a free trade area. This includes tariff concessions and also reflects their specific trade interests. The rules differ from one agreement to another. These rules determine all the products that can benefit from tariff concessions.

Non-Preferential Rules of Origin

The non-preferential rules of origin are general and can be applied to all applications. They are used to determine the country of origin of a product for purposes such as anti-dumping and countervailing duties, origin marking, government procurement, trade statistics, import quotas, most-favored-nation treatment, and others. The rule that a product, wholly obtained and produced in a single country is a product of that country typically applies here.

Proof of Origin

A Certificate of Origin must be provided by the importers in the US so that the customs officers can certify that the particular goods qualify for the preferential tariff treatment accorded by the law. Only those importers with a valid Certificate of Origin are allowed to claim preferential tariff treatment for originating goods. The certificate must be completed and signed by the exporter despite them not being the producer of goods.

The certificate should comply with the following criteria:-

  • The knowledge that the product originates
  • Reasonable faith in the written representation of the producer that the goods originate

The importer must make a declaration on the import documentation claiming preferential tariff treatment based on a valid Certificate of Origin they have in their possession. The request for preferential tariff treatment must be made no later than one year from the date of import of goods, provided a Certificate of Origin for the goods is obtained.

Labeling or Marking of Country of Origin in US Import

Every article, product, goods of foreign origin that is imported into the US must be marked with the name of the country of origin in English unless an exception for the same is provided in the law.

Why is Country of Origin Marking Required?

The country of origin helps the end-user in the US identify where a particular imported article was made, created, or manufactured. According to the court of law, this marking of goods is essential so that the ultimate purchaser may, by knowing where the goods were produced, decide to refuse/buy the items. The law also provides a marketing advantage to US producers as the ultimate purchasers can discriminate against foreign goods if they wish to do so.

When do Imported Goods Require Country of Origin Marking?

The goods that have to be imported to the US must be marked before its shipping. The marking must be clear and permanent so that the ultimate users have no trouble in understanding where the goods have come from.

Country of Origin Labeling Requirements

  • The words ‘Made In’ have to be marked only when the name of another locality besides the country/locality where the article was manufactured, appears on the article.

  • The words ‘assembled in’ may be used to indicate the country of origin of an article where here the country of origin refers to the country in which the article was finally assembled.

  • The markings should be permanent, legible, and precise. The font should be clear with the letters having the same size.

  • The markings should be located such that it can be seen even when the article is handled casually. One shouldn’t have to disassemble the article, remove or change any parts or position of the parts to view the markings.

  • The markings must not be covered or concealed by any attachments or additions.

  • Abbreviations and variant spellings abbreviations that indicate the name of a country are acceptable. However, it is preferable to fully spell out a country’s name and leave no room for confusion.

Exceptions to Country of Origin Marking

Only under the following conditions can a consignment be exempted from the country of origin marking rules:-

  • The article is incapable of being marked.

  • The article cannot be marked before it is shipped to the US without causing an injury/damage to the item.

  • The article cannot be marked before it is shipped to the US as it may be expensive to mark it and may prove economically unviable of its importation.

  • When the container holding the article reasonably indicates the article’s identity.

  • The article is a crude substance.

  • The article is being imported for use by the importer and is not intended for sale in its imported or any other form.

  • The article has to be processed by the importer in such a manner that any marking would be concealed or destroyed permanently.

  • The article was produced more than 20 years before its importation into the US.

Country of Origin for determining Import Duty

Determining the country of origin early is important to make sure the product complies with the CBP import rules and regulations. Understanding the country of origin rules is a key element in deciding the best place for your product, its components, or the sub-assemblies to be made. For companies exporting goods from China to the US, it is crucial to understand the implications of the country of origin and how it can affect the future ability to export, tariff rates, Import duty among other things.

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