A client recently asked for help in determining Country of Origin for their imports. As they noted, it is not always obvious. 21st Century supply chains are complex for even the simplest products. Parts are sourced globally before being assembled and shipped to the final destination.
Country of origin, often abbreviated COO, is one of the elements, along with harmonized code and commodity valuation, in determining duty/tax rates. While trade agreements such as USMCA (formerly NAFTA) have specific and complex rules of origin, the basic COO elements are:
Country in which the commodity is made, mined, grown, manufactured, or underwent substantial transformation. The 3 way test for substantial transformation is new name, new character, new use.
Substantial Transformation Rule….used to determine country of origin if articles or components are not wholly obtained from one country…Does article have new name, character, or use?
Change in character- altered physical characteristics of article or components. Were changes cosmetic? What was the process that resulted in change?
Change in use- Is end use of article interchangeable with end use of components? Is end use of component predetermined at time of importation? What was the process that resulted in change of use? Predetermined end use generally precludes substantial transformation but subject to specifics of article/components in question.
Change in name- this is the least compelling of the factors supporting substantial transformation. Do components retain original name after processing?
Subsidiary/Additional Factors- extent and nature of operations (complex or simple); value added and/or cost incurred during transformation process; essential character of article (components transformed into finished product); change from producer to consumer good; tariff shift.
Ad Hoc Logistics can help with regulatory questions or your international logistics needs. Contact firstname.lastname@example.org