Date: Mar 24, 2015
Rules of origin are used to determine the country of origin (COO) of a product for purposes of international trade. The COO of merchandise can affect, among other things, admissibility, rate of duty, eligibility for special programs, and marking requirements.
Under the Tariff Act of 1930, every article of foreign origin (or its container) imported into the U.S., unless exempted, must be marked in a manner that will indicate to the ultimate purchaser the article's country of origin. For example, goods originating in China must be marked, "Made in China" or "Product of China." See 19 U.S.C. Section 1304(a). The Tariff Act expressly exempts some products from COO marking requirements, such as certain coffee and tea products and spices. See 19 U.S.C. Section 1304 (f) and (g). In addition, the Tariff Act regulations at 19 C.F.R. Section 134, which are administered and enforced by the U.S. Customs and Border Protection (CBP), provide exemptions to COO marking requirements. Among the products exempted from COO marking requirements by regulation are: vegetables, fruits, nuts, berries, live or dead animals, fish, and birds in their natural state. See19 C.F.R. Section 134.33. However, many of the products exempted from COO requirements under the Tariff Act must nevertheless bear country of origin labeling (COOL) under regulations administered and enforced by the U.S. Department of Agriculture (USDA). COOL labeling requirements apply to products such as beef, chicken, pork, peanuts, and perishable agricultural commodities. (For more information on COOL, see the PackagingLaw.com article, A Brief History and Overview of Country of Origin Labeling Requirements.)
Most products under the jurisdiction of the U.S. Food and Drug Administration (FDA) are also subject to the Tariff Act COO marking regulations. Under FDA regulations, foods are considered misbranded if their labels include any statement regarding geographical origin that is false or misleading. In its Compliance Policy Guide on Country of Origin Labeling, FDA provides the following examples:
FDA further explains in the policy guide that its policy regarding false or misleading country of origin labeling is to defer to CBP.
The Tariff Act regulations specify that articles of foreign origin entering the United States must be marked with the English name of the COO. The marking must be legible, located in a conspicuous place, and permanent. Articles that are incapable of being marked (e.g., liquids) are exempt, but their containers must be marked with the COO of the contents. If an article is packaged in a container that is normally not opened by the ultimate purchaser before sale, the container must be marked with the COO of its contents. If the container is reusable, the container must be marked with its COO (e.g., product of X, container made in Y). If a container is not intended for reuse, the container generally does not need to be marked with its COO.
Preferential vs. Non-preferential Rules
There are two types of rules governing COO markings: preferential and non-preferential. Preferential rules of origin are part of a free or preferential trade arrangement that includes rules that determine whether a product can benefit from the tariff preference. The North American Free Trade Agreement (NAFTA) is an example of a trade agreement that offers tariff concessions for goods that "originate" in the NAFTA area and a tariff shift analysis is applied to determine their COO.
Non-preferential rules of origin are used to determine the COO when a good does not qualify for preferential treatment. Goods that are "wholly obtained" (grown, produced, or manufactured) in a single country originate in that country. Determining the country of origin for goods that are not "wholly obtained" in a single country is more challenging.
In the U.S., non-preferential standards for goods manufactured in, assembled in, or using materials originating in more than one country specify that the COO is the last place in which the good was substantially transformed into a new and distinct article of commerce, based on a change in name, character, or use. There is no specific U.S. statute that provides an overall definition of non-preferential "rules of origin" or "country of origin." Instead, CBP relies on a body of court decisions, CBP regulations, and agency interpretations to determine the origin of an imported product if the matter is in doubt.
If the country of origin is in dispute, CBP may consider:
Courts have been reluctant to make broad rulings in this area of the law, and courts frequently emphasize the fact-specific nature of COO determinations. However, CBP will issue legally-binding advance rulings to petitioners regarding COO determinations, as well as other issues related to the importation of merchandise into the U.S. An advance ruling may be requested by any person who has a direct and demonstrable interest in the question or questions presented in the ruling request. A database of published rulings, the Customs Rulings On-Line Search System (CROSS), is available on CBP's website.
In today's global manufacturing environment, a finished product's component parts can originate in many different countries. As a result, determining origin can be a very complex and sometimes subjective process. It is critical for importers to understand the rules and regulations that impact the labeling of their products.
Keller and Heckman has experience in helping to determine a product's tariff classification code and country of origin for marking purposes. We are also familiar with obtaining Customs Rulings regarding these matters. Please contact us if you have any questions.