Authored by: Vijendra Kargudri
Among the global trade community, the discussion on process of determining any product’s Country of Origin (COO) has been a long drawn one. For many businesses this process causes an economic barrier to trade. with no specific U.S. statute to provides an overall definition of “country of origin” or “rules of origin,” the principal agency to determine this has been U.S. Customs and Border Protection (CBP). In order confer origin on an imported product, the CBP rely on a body of court decisions, agency regulations and interpretations. On occasions, the subjective nature of this can convey a lack of transparency in the process of determining product’s origin.
Addressing the challenges in determining COO
Having recognized this challenge, CBP attempted to address it in 1994 and again in 2008 presented more simplified & standardized rules for determining COO. However, when their proposal to the international trade community drew disapproval, they ultimately withdrew their proposals. Simultaneously, in 1995, the World Trade Organization (WTO) formed a committee to address this issue. Though this committee made substantial progress in addressing rules to determine COO, to date they still have not come to an agreement on all aspects of COO rules.
Importance of COO
Though COO is just one component of the information required when filing an entry for customs clearance purposes into the U.S., its role is usually at the heart of many problems with the data submitted on a customs entry. This single component helps determine tariff rates, enforcement of trade remedies (Dumping and Countervailing duty claims), quotas on products, product labeling requirements, product procurement policies, government trade policies, etc. Should a business make a mistake on this, they will be slapped with hefty fines & penalties based on the entries filed by them with CBP.
The COO of an imported product is defined in U.S. Law & Customs Regulations as – the country of manufacture, production, or growth of any article of foreign origin entering customs territory of the U.S. Though this sounds straight forward, in today’s animated socio-political environment and global economy, it is not so simple. Products today are produced as a collective product, with components from multiple countries. Hence, CBP uses two sets of rules when determining COO –
- Non-Preferential Rules for countries with which U.S. has most-favored nation (MFN) status, and
- Preferential Rules for countries or regions with which U.S. has free trade agreements (FTA) or bilateral agreements to extend preference to those counties or regions.
Challenges in determining COO
Determining COO may be very simple when a product is produced, manufactured, or assembled in a single country where component pieces are from the same country. With globalization, more goods are produced using components from multiple countries and assembled in another country importing them. The process of determining origin becomes very complex in such circumstances. Increasing number of embargoes & tariffs add more to the complexity to this single piece of information. To determine the eligibility of a product for specific trade agreement qualifications, one has to now understand specific rules written into various trade agreements.
With the enactment of the Modernization Act, much of the responsibility in determining COO now falls on the importer of record to demonstrate reasonable care & supervision on the international trade process involved with. Due to this specific fact, individuals involved in international trade ought to constantly keep informed on the changes in trade regulations, including the enactment of trade agreements with other countries.
How can Krypt help?
Krypt is an SAP preferred integration & implementation partner and has assisted in the success of global businesses through successful integrations & implementation of SAP GTS, TM, IBP & EWM.
For all product importers & trade managers, Krypt can help you capture Country of Origin (COO) for a Material using Batch Management. To get an insight into this, read our blog entitled: “How to Capture Country of Origin for a Material Using Batch Management“
To know more about our products/services, please request a DEMO or do contact us.
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