How much do today’s importers really perceive about Country of Origin (COO)? In an ever-changing global economy, manufacturers are sourcing materials and components from around the world. Importers may be certain they have COO clarified and down to an exact science, however, it may be more difficult now than ever to determine COO to satisfy the U.S. Customs and Border Protection’s explicit rules. 

Why is country of origin important?

COO refers to the country of manufacture, production or growth where an article or product comes from. Country of origin is also important for marking purposes. Import regulations put an emphasis on informing the end user of the country of origin of imported articles.

Duty rates, preferential trade agreements, trade sanctions and import quotas are regulated according to COO—and, as always, play a large role. Because of revenue and admissibility issues involved, CBP is more vigilant than ever about verifying accurate COO.

The impact of Non-Preferential vs. Preferential rules

Each country has its own rules of origin. For example in the Unites States, there is one set of rules for goods imported from a NAFTA country, and then another for imports from anywhere else in the world. Importers must analyze against these multiple rule sets by using sourcing, processing and assembly information to determine an accurate country of origin, and the results could potentially produce different requirement-- even for a single Bill of Material (BOM).

As more countries compete in the marketplace, more rules and regulations are created and/or updated.

There are two main types of Rules of Origin to maintain company compliance. Preferential Rules of Origin such as Free Trade Agreements/Generalized System of Preferences are trade agreement-based, and Non-Preferential Rules of Origin, determining COO for marking purposes. The rules of origin for Preferential and Non-Preferential are different based on the country of import and trade agreement and can vary widely. Importers need to carefully assess the appropriate rules for COO marking purposes and/or if their company is looking to claim FTA privileges.

 Consider non-preferential (marking) Rules of Origin into Canada and the U.S. How does an importer determine if the COO is different if you import from a NAFTA Country (US, MX, CA) versus if you import from any other country in the world. 

This example shows how COO is determined using both non-preferential and preferential agreements, mainly from Canada -- U.S. and Canada: 

 

Although components for a desk chair come from Mexico, Canada, China, India and the U.S., the table below—showing HS numbers, description and item-help determine that theCOO is indeed the U.S., where the desk chair is assembled.

 

 

 

The COO challenge

As noted previously, COO marking has become a requirement in most countries over the last few decades. With this requirement, companies are finding that many countries require imported items to be marked with a single country of origin, and, with sourcing, processing and assembly happening all over the world, it becomes difficult to determine country of origin accurately.

Managing the country of origin marking process is tedious and consists of manually analyzing BOMs to determine origin. The accuracy of determining the country of origin information can result in delays, detentions, monetary penalties or even criminal sanctions.

Errors in origin determination or marking can incur fines of up to $500,000 USD per violation. Habitual errors can result in increased costs to administer detection and correction programs and, ultimately, the loss of your company’s reputation with CB. The most severe penalty is the loss of importing and/or exporting privileges.

The solution

Automating origin determination, whether preferential or non-preferential, alleviates the challenges of manually reviewing BOMs against the eligibility criteria, which will, in turn, significantly reduce the time needed to qualify for preferential programs or determine non-preferential origin. Solutions can automate the decision-making process based on the appropriate Marking Rules of Origin for each importing country as well as bundle the pertinent regulations and rulings for reference

 For more information on Country of Origin Determination, visit: 

 http://connected.integrationpoint.com/acton/attachment/20069/f-0132/1/-/-/-/-/CountryofOriginPresentation.pdf