The process of determining the country of origin for a product of international trade has long been a subject of much discussion within the global trade community. This issue, for many traders, causes an economic barrier to trade. Since there is not a specific U.S. statute that provides an overall definition of “rules of origin” or “country of origin,” U.S. Customs and Border Protection (CBP) is the principal agency in determining origin. They rely on a body of court decisions, agency regulations and interpretations to confer origin on an imported product. At times, this can be very subjective and can convey a lack of transparency in the process of determining product origin.
CBP recognized this issue, and attempted to address it in 1994 and 2008 by offering more simplified and standardized rules for determining origin. However, when they were put forward to the international trade community, CBP’s efforts were met with opposition; CBP ultimately decided not to proceed with their proposals. Simultaneously, in 1995, the World Trade Organization (WTO) formed a committee to address this issue and while the committee has made substantial progress in addressing rules of origin, to date they still have not come to an agreement on all aspects of origin rules.
Country of origin is just one component of the information required when filing an entry for customs clearance purposes into the United States. However, the role of this small piece of information is usually at the heart of many problems with the data submitted on a customs entry. This single component will determine tariff rates, enforcement of trade remedies (Dumping and Countervailing duty claims), quotas on products, product labeling requirements, product procurement policies, government trade policies, etc. Should you make a mistake on this issue, you could be faced with fines and penalties based on the entries you have filed with CBP.
The country of origin of an imported product is defined in U.S. law and customs regulations as the country of manufacture, production, or growth of any article of foreign origin entering customs territory of the United States, and while this sounds very simplistic, in today’s global economy, it is not always so simple. Much of what is produced today is a collective product, which has components from multiple countries. CBP uses two sets of rules when determining origin, the Non-Preferential Rules for countries with which we have most-favored nation (MFN) status and Preferential Rules for countries or regions with which we have free trade agreements (FTA) or bilateral agreements to extend preference to those counties or regions.
Determining country of origin may be very simple when a product is produced, manufactured, or assembled in a single country where component pieces are from the same country. However, in today’s global trade environment, where goods are sometimes produced using components from multiple countries but assembled in another country, the process of determining origin becomes very complex. To add more complexity to this single piece of information, you now have to add specific rules, which are written into various trade agreements, determining the eligibility of a product for specific trade agreement qualifications.
With the enactment of the Modernization Act, much of the responsibility for determining origin now falls on the importer of record to demonstrate reasonable care and supervision on the international trade process he is involved with. Therefore, a strong knowledge base on this subject is required. It is due to this specific fact that individuals involved in international trade must continually keep informed on the changes in trade regulations, which include the enactment of trade agreements with other countries. The NEI is dedicated to providing people involved in international trade with an entryway to for education on this type of subject.