How Do You Determine Country of Origin, and Why Is This Vital for Trade Compliance?

As global trade has expanded, the public and government agencies have grown increasingly aware of the importance of a product’s country of origin (COO). The COO is one of the most important factors in determining appropriate mode of transportation and maintaining compliance with all applicable rules and regulations. However, the primary impact of determining proper COO can be found through an understanding of free trade agreements (FTA) and compliance measures.

Country of Origin and Free Trade Agreements

The country of origin allows Customs and Border Protection (CBP) agents to clearly and easily identify where a given import originated. This may include origination of individual ingredients in food imports, the harvesting of minerals and raw materials, the manufacture of goods, and any other change in the merchandise in another country. While the origination of raw materials is import, if the product is changed significantly, the place where the change occurred must also be documented. Although a critical factor for US imports, COO also applies to imports to other countries. For example, imports to the UK from France may fall under a specific set of criteria between the two countries.

COO relates to FTAs by helping shippers understand how to accurate calculate duties, taxes, or other fees for imports and exports. If a company does not keep track of the COO, the company may lose money by paying unnecessary duties for a given import. Similarly, some countries may require the payment of additional duties for imports or exports to other countries, and the importer or export of record could be held liable for fraudulently hiding the COO to evade such payments.

Country of Origin and the Importance of Marking and Labeling

Marking and labeling is commonly believed to primarily impact the transport of food in international trade. For example, the US may impose limitations on the shipment of beef from countries A and B. However, marking and labeling compliance measures extend to all other types of imports, especially arms.

If an embargo or trade limitation, such as a maximum import of product A, exists for the trade between two countries, COO helps importers and exporters determine if the shipment can be processed legally. Furthermore, some countries may ban the sale of specific merchandise to entities in a given country, and the COO certificates can be of vital importance in guarantee the appropriate, legal transfer of ownership to the respective parties.

Country of Origin and Compliance Measures

Since COO follows the legal pathway for trade between countries, violations of tracking and documenting the appropriate COO may lead to additional penalties for a given shipper, such as restrictions on import and export capabilities, delays in shipments, additional inspections, fines, penalties, and incarceration. Essentially, the COO is how governing entities ensure all embargoes and restrictions in international trade are kept. Therefore, the COO is essential to maintaining the wishes of the United Nations, which may include sanctions on international trade at varying times.

While determining the country of origin, shippers should consider where the product came from and how it was manufactured. These two factors allow a shipper to accurately determine a shipment’s origination, which helps to ensure compliance with the payment of duties and any other regulatory measures. Basically, the COO is a way of helping keep all parties safe and in compliance throughout the scope of international trade processes.

 

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