What’s the Country of Origin?
When discussing a product’s country of origin, there are two very common (and incorrect) phrases we hear from companies all the time: “The origin is ‘Country X’ because it came from there” and “The origin is ‘Country Y’ because we make it there.”
Simple, right? Well, no...it’s not that simple.
The country of origin of the product isn’t based on the point of shipment. Just because you purchased something from a specific country doesn’t mean the origin of the product is going to be that country. If this were the case, the latest smartphone I bought at my local wireless store would be “U.S. origin” because I bought it down the street. I got it from the U.S. so it must be U.S. origin – we can just ignore that “Made in China” statement on the back of the box. Well, no…unfortunately that’s not how it works.
Additionally, the country of origin of a product is not always where a company “makes” the product.
Unfortunately, there are no standardized or harmonized rules of origin across the world so the country of origin for a product could be different from country to country.
The country of origin may be determined based on a variety of factors including, but not limited to, the tariff shift of the raw materials, the value added in a particular country, the essential character of a product, the location where the components underwent a “substantial transformation,” or, any combination of these (or other) requirements.
The next level of the headache deals with the marking requirements of the product. Should you use “Made in…” or “Assembled in…” or something else? Well, it depends.
In addition to a lack of harmonized rules of origin, there is also a lack of standardized country of origin labeling requirements from country to country. For example, the United States allows the use of the phrase “Product of” but other countries require that only “Made in” be used. There are countries that require the marking to state “Assembled in” when you have assembly operations but limit the use of “Made in” to just production that involves the processing of unfinished raw materials into the finished product.
There is also an inconsistency with the acceptability of abbreviations, shortened country names, or reference to trade unions or blocs. For example, markings like “Made in GB” or “Made in Grt Brit” may work in one country, however, would be rejected by a country that would require “Made in Great Britain.” An item marked as “Swiss Made” may be acceptable in some countries while other countries would penalize you for not using “Made in Switzerland.” “Made in the EC” could work for countries that accept the “European Community” as a country of origin marking, but, other countries may think the origin is “Ecuador” based on the abbreviation.
It can also be complex and overwhelming when some countries differentiate the origin of a product for duty purposes from the origin for marking purposes. For example, in the United States, when evaluating if retaliatory duties were to apply to a product (e.g. Section 301 duties on Chinese origin product), U.S. Customs and Border Protection will review a variety of information, including the essential character of the product, its components, and where they underwent the last substantial transformation. However, a different standard of analysis may apply when determining the origin for marking purposes. As a result of the different requirements, you may have situations in the United States where, for example, you can label your product “Made in Mexico” based on the production undertaken in Mexico, however, be assessed duties as a Chinese country of origin product given the essential character of the Chinese origin components used in the production.
Because there are so many factors tied to the country of origin of a product, be it labeling, duty assessment, qualification under a preferential trade agreement, or other country-specific requirements, you can’t proceed with assumptions such as “The origin is ‘Country X’ because it came from there” and “The origin is ‘Country Y’ because we make it there.” You need to evaluate the requirements of the importing country to assure the proper origin is utilized and you’re not subjecting yourself to potential fines or penalties.
Please contact us to find out how we can assist with the country of origin assessment of your product.