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Determining Origin for Section 301 Tariffs Poses Challenges

Thursday, September 05, 2019
Sandler, Travis & Rosenberg Trade Report

There continue to be conflicting reports in the press about the correct test to apply to determine country of origin for purposes of the Section 301 tariffs the U.S. is currently imposing on imports from China. Importers should be aware that while the COO claims made by their vendors may be correct under the source country’s rules, they may be incorrect under U.S. rules. With an ever-increasing tariff burden at stake, as well as potential penalties for getting it wrong, it is important for importers to understand the applicable rules and verify COO claims made by their suppliers.

Unlike rules for value and classification, COO rules are not harmonized internationally. Countries often develop their own COO tests or adopt one from a particular free trade agreement. Even within a country the tests can vary depending on the specific issue involved. For example, different origin rules can exist for FTAs, product marking, or preference program qualification, to name a few.

The U.S. uses various COO tests in various circumstances, and there are essentially two tests used for determining COO for purposes of Section 301 duties: (1) substantial transformation or (2) the special origin rules found under 19 CFR Part 102. Which one to use depends on the product at issue.   

As a result, COO tests used by the country of manufacture (e.g., a specified percentage of local content) may not be applicable to determining origin for U.S. import purposes. Similarly, the last country of processing and export may not be the country of origin for U.S. purposes.

ST&R offers substantial experience analyzing COO claims and helping companies establish a COO reasonable care process. For more information, please contact Marilyn-Joy Cerny at (212) 549-0161, Elise Shibles at (415) 490-1403, or Kristen Smith at (202) 730-4965.

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