Permanent link for What Is Country of Origin? The Ever-Changing Puzzle of Definitions on June 20, 2023

Country of origin is one of the more confusing concepts to master in conducting international trade or even applying to U.S. domestic business activities. There are three crucial pieces of data that must be managed for compliance purposes in international trade - customs value, Harmonized System (HS) classification, and country of origin. Customs value which determines the amount of duty and taxes to be paid on imported goods is based on a global standard known as the "Valuation Agreement", a treaty administered by the World Trade Organization. HS classification is a standardized system for the classification of goods adopted by almost every country in the world. Country of origin, conversely, is subject to no global standard. There are many authorities and governing bodies (called jurisdictions) that are crafting specific rules of origin which meet the specific objectives and purposes of that jurisdiction.

Before making country of origin too complicated or confusing, there is a universally accepted basic concept of country of origin which should be the default definition until some entity decides to redefine it. In international trade, "country of origin" refers to the country where a product was grown, produced, or manufactured. For raw materials and commodities, this means it wholly originated in a country. For manufactured goods, the country of origin is typically determined by the place where the product underwent its last substantial transformation, meaning the point at which it was transformed into a new and distinct article from the raw material or components used in the production of the goods. This general definition of country of origin should be the default definition in international trade, both import and export, until some authority re-defines it.

Here are the most common jurisdictions (primarily in the United States) of country-of-origin definition to be aware of.  These authorities have established specific definitions of "country of origin" for various purposes:

1. Importing into the United States: U.S. Customs and Border Protection (CBP) is responsible for enforcing trade regulations at U.S. ports of entry. The CBP uses a specific set of rules to determine the country of origin for imported goods, known as the "Marking of Country of Origin of Imported Merchandise" regulations, utilized for declaration requirements on all U.S. customs entries and the country of origin marking of goods. These regulations define the country of origin as the product’s country of last substantial transformation, following the basic default definition for country of origin.
2. Exporting from the United States: When U.S. exporters are completing export documents and export declarations for international shipments, they should still declare the country of origin, as required on the export commercial invoice and export declaration, utilizing the same basic default definition of country of origin – the country it was manufactured in or substantially transformed in – until another jurisdiction of country of origin supersedes that definition. Technically, every country of destination is a different jurisdiction that can define country of origin for their purposes. Still, U.S. exporters should stick to the general definition unless instructed otherwise by their foreign customers.
3. United States-Mexico-Canada Agreement (USMCA): The USMCA is a free trade agreement between the United States, Mexico, and Canada. The USMCA includes specific rules of origin that determine whether a product qualifies for preferential tariff treatment under the agreement. The specific rules of origin written into the agreement require the use of tariff shift and regional value content as the defining rules determining qualification as an originating good from the parties to the agreement.
4. All other U.S., and most other international free trade agreements: Each FTA agreement will have specific rules of origin written in the same manner as the USMCA agreement.
5. Federal Trade Commission (FTC): The FTC issues its own set of country-of-origin rules for the use of “Made in the USA" in the United States. U.S. manufacturers are not required to mark or identify U.S.-made products on product labels are in advertising material, but if they do, it must meet a strict set of FTC rules. If a U.S. business makes a claim of “Made in the U.S.” the FTC considers the statement to be an unqualified claim or origin and sets the standard that it must be “all or substantially all” made in the U.S. – loosely quantified as 80% or more.  If not, then a qualified claim is required. Qualified claims must include phrases like "Made in the USA with imported parts" or “Assembled in the U.S. with U.S. and foreign components”. The FTC's objective is to ensure that consumers are not misled about the domestic and foreign content of the products they purchase.
6. U.S. Department of Agriculture (USDA): The USDA has specific regulations regarding the labeling of agricultural products, including country of origin labeling (COOL) requirements. Under these regulations, certain food products must be labeled with their country of origin, including beef, pork, lamb, chicken, and goat meat, as well as perishable agricultural commodities such as fruits and vegetables.
7. Buy American Act: The Buy American Act is a federal law that requires that certain federal government purchases of goods and materials be made from domestic sources unless an exception applies. Under the Buy American Act, a product is considered to be of domestic origin if it is manufactured in the United States, and at least 50% of the cost of the components of the product is attributable to materials mined, produced, or manufactured in the United States.
8. Michigan State Trade Expansion Program (STEP): The Michigan STEP program is a state-run program that provides grants to small businesses in Michigan to help them expand their exports. The program includes specific rules regarding the country of origin of the exported products. To be eligible for the program, a product must be manufactured in Michigan and at least 51% of the value of the product must be attributable to materials and labor costs in Michigan.

Mastering the intricate concept of country of origin in international trade, as well as its application to U.S. domestic business activities, can be a perplexing endeavor. The definition of country of origin lacks a universal consensus, allowing jurisdictions to mold it to their specific objectives. However, before succumbing to overwhelming complexity, it is crucial to recognize the universally accepted basic concept of country of origin—a default definition that refers to the country where a product was grown, produced, or manufactured. This general definition should serve as a starting point in international trade until an authoritative entity redefines it. By familiarizing ourselves with the various jurisdictions and governing bodies involved, such as U.S. Customs and Border Protection, the United States-Mexico-Canada Agreement (USMCA), and the Federal Trade Commission, we can navigate the labyrinthine landscape of country of origin with confidence and compliance. Whether importing or exporting, it is vital to adhere to the prevailing definitions while remaining open to the ever-evolving dynamics of international trade.

Are you interested in learning more about Country of Origin?  Since 1999, GVSU's Van Andel Global Trade Center (VAGTC) has been helping Michigan businesses succeed globally through import and export training and consulting. Whether you are thinking about opening a new market, figuring out customs compliance and international regulations, or looking for overseas suppliers to complement your global supply chain, Van Andel Global Trade Center can help.  Contact us today!

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About the Contributor:

Mark Bleckley is the Associate Director at GVSU’s Van Andel Global Trade Center. He is a licensed customs broker and has been involved in global trade for over 30 years. He has managed all aspects of import and export operations, including transportation and logistics, customs clearance, export documentation, recordkeeping, compliance and management of Harmonized Tariff Schedule and country of origin determination and management, as well as, analyzing free trade agreements for maximum benefit.

Categories: Country of Origin
Posted on Permanent link for What Is Country of Origin? The Ever-Changing Puzzle of Definitions on June 20, 2023.