International Trade: Rules of Origin
Description:... Determining the country of origin of a product is important for properly assessing tariffs, enforcing trade remedies (such as antidumping and countervailing duties) or quantitative restrictions (tariff quotas), and statistical purposes. Other commercial trade policies are also linked with origin determinations, such as country of origin labeling and government procurement regulations. Rules of origin (ROO) can be very simple, noncontroversial tools of international trade as long as all of the parts of a product are manufactured and assembled primarily in one country. However, when a finished product's component parts originate in many countries -- as is often the case in today's global trading environment -- determining origin can be a very complex, sometimes subjective, and time-consuming process. U.S. Customs and Border Protection (CBP) is the agency responsible for determining country of origin using various ROO schemes. On July 25, 2008, CBP proposed implementing a more uniform system of ROO as an alternative to the "substantial transformation" rule that is currently in place. CBP says that this system "has proven to be more objective and transparent and provide greater predictability in determining the country of origin of imported merchandise than the system of case-by-case adjudication they would replace." This report deals with ROO in three parts. First, we describe in more detail the reasons that country of origin rules are important and briefly describe U.S. laws and methods that provide direction in making these determinations. Second, we discuss briefly some of the more controversial issues involving rules of origin, including the apparently subjective nature of some CBP origin determinations, and the effects of the global manufacturing process on ROO. Third, we conclude with some alternatives and options that Congress could consider that might assist in simplifying the process. This report will be updated as events warrant.
Show description