Whenever you want to arrange an international shipment for anything other than documents (when shipping documents, the country of origin is not important), the forms require that you identify the country of origin of the goods being shipped. How do you know what the country of origin is? To explain the rules for country of origin we should start with the Code of Federal Regulations (CFR) definitions cited below. The CFR contains a set of 50 rules and regulations made by Federal agencies.
Checkout this website for the complete set of the Code of Federal Regulations. It’ll help you understand the various rules for country of origin:
http://www.gpoaccess.gov/cfr/index.html
For example, every US shipper who imports or exports goods is responsible for knowing the definitions and complying with the rules contained in title 19 of the CFR. Importers are required to use reasonable care in determining the “country of origin.” The failure of an importer to exercise reasonable care in determining country of origin can result in the imposition of penalties, loss of special duty or trade preferences — and possibly the exclusion or seizure of merchandise.
Proof of country of origin is often provided by a certificate of origin or similar document. This document usually provides information to support the origin claim such as goods that are wholly obtained or produced in a certain country. But not all decisions about origin are straightforward.
What about iron ore shipped to the US from China, smelted in the US and then shipped to Canada as ingot? Could these ingots qualify for duty free entry into Canada as US origin goods under the NAFTA rules? The answer is “yes” in this case, but it depends on the classifications of the imported item and the exported item.
19 CFR Sec. 134.1 Definitions: General Rules (b) Country of origin.
“Country of origin” means the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin”.
There are many specific, detailed rules for various classification groups listed in the general note 12 of the harmonized tariff schedules of the United States which contains the same information as 19 CFR 102.20 cited below.
19 CFR Sec. 134.1 Definitions: General Rules (b) Country of origin.
“Country of origin” means the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin”.
19 CFR Sec. 102.11 Country of Origin – NAFTA and similar trade agreements.
The following rules shall apply for purposes of determining the country of origin of imported goods other than textile and apparel products covered by Sec. 102.21.
(a) The country of origin of a good is the country in which:
(1) The good is wholly obtained or produced;
(2) The good is produced exclusively from domestic materials; or
(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in Sec. 102.20 and satisfies any other applicable requirements of that section.
NAFTA: NAFTA origin is determined by assigning a six digit number to the imported product and the finished product. The first two numbers of a classification are the chapter and the first four numbers are called the heading. The first six numbers are called the sub heading. Let’s take that example of an imported iron ore smelted and converted into iron ingots. This is how country of origin determination works:
Non agglomerated Iron ore is classified as 2601.11.
Iron ingots are classified 7206.10.
General note 12 of the harmonized tariff schedules of the United States, chapter 72 states that “a change to headings 7206 through 7207 from any heading outside that group” qualifies for a change in country of origin. Therefore according to the NAFTA rules, the Iron Ingots qualify for country of origin USA.
Section 134: These ingots would also qualify as US origin according to the rules in section 19 CFR 134.1 since the ingots are a new and different article than the iron ore with a new name character or use.
So, when determining the country of origin of articles you are exporting or importing, be sure to check for country of origin information and make an informed decision. If you need help, give me a call or an email.
Thomas M. Stanton is with AFMS, LLC in Portland, OR. He can be reached at 800-246-3521 or tom.stanton@afms.com.
Checkout this website for the complete set of the Code of Federal Regulations. It’ll help you understand the various rules for country of origin:
http://www.gpoaccess.gov/cfr/index.html
For example, every US shipper who imports or exports goods is responsible for knowing the definitions and complying with the rules contained in title 19 of the CFR. Importers are required to use reasonable care in determining the “country of origin.” The failure of an importer to exercise reasonable care in determining country of origin can result in the imposition of penalties, loss of special duty or trade preferences — and possibly the exclusion or seizure of merchandise.
Proof of country of origin is often provided by a certificate of origin or similar document. This document usually provides information to support the origin claim such as goods that are wholly obtained or produced in a certain country. But not all decisions about origin are straightforward.
What about iron ore shipped to the US from China, smelted in the US and then shipped to Canada as ingot? Could these ingots qualify for duty free entry into Canada as US origin goods under the NAFTA rules? The answer is “yes” in this case, but it depends on the classifications of the imported item and the exported item.
19 CFR Sec. 134.1 Definitions: General Rules (b) Country of origin.
“Country of origin” means the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin”.
There are many specific, detailed rules for various classification groups listed in the general note 12 of the harmonized tariff schedules of the United States which contains the same information as 19 CFR 102.20 cited below.
19 CFR Sec. 134.1 Definitions: General Rules (b) Country of origin.
“Country of origin” means the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin”.
19 CFR Sec. 102.11 Country of Origin – NAFTA and similar trade agreements.
The following rules shall apply for purposes of determining the country of origin of imported goods other than textile and apparel products covered by Sec. 102.21.
(a) The country of origin of a good is the country in which:
(1) The good is wholly obtained or produced;
(2) The good is produced exclusively from domestic materials; or
(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in Sec. 102.20 and satisfies any other applicable requirements of that section.
NAFTA: NAFTA origin is determined by assigning a six digit number to the imported product and the finished product. The first two numbers of a classification are the chapter and the first four numbers are called the heading. The first six numbers are called the sub heading. Let’s take that example of an imported iron ore smelted and converted into iron ingots. This is how country of origin determination works:
Non agglomerated Iron ore is classified as 2601.11.
Iron ingots are classified 7206.10.
General note 12 of the harmonized tariff schedules of the United States, chapter 72 states that “a change to headings 7206 through 7207 from any heading outside that group” qualifies for a change in country of origin. Therefore according to the NAFTA rules, the Iron Ingots qualify for country of origin USA.
Section 134: These ingots would also qualify as US origin according to the rules in section 19 CFR 134.1 since the ingots are a new and different article than the iron ore with a new name character or use.
So, when determining the country of origin of articles you are exporting or importing, be sure to check for country of origin information and make an informed decision. If you need help, give me a call or an email.
Thomas M. Stanton is with AFMS, LLC in Portland, OR. He can be reached at 800-246-3521 or tom.stanton@afms.com.
