Here are the most important points from the article:
- Country of origin (COO) is the country where a product, article or commodity was first made.
- A certificate of origin (CO) is a document that proves where a product comes from.
- A certificate of origin is very important for working out whether a product or shipment is subject to sanctions, tariffs, or quotas, and if it’s eligible for preferential treatment supported by multilateral trade agreements.
- In a time of growing trade wars and the sanctions used to fight them, a shipment’s COO can also affect a company’s risk profile.
Since products may be manufactured or processed in multiple countries, determining their origin can often be challenging. For this reason, we have established rules to determine a product’s origin. Generally, origin is categorized into ordinary origin and preferential origin.
Every good has a place of origin. For some goods, this origin is straightforward to determine. Examples include plants or live animals cultivated or raised in a specific location.
But what if a car consists of thousands of parts, each potentially originating from many different countries? Is the car’s country of origin necessarily the country where the assembly plant is located? Not necessarily.
You can read more below about the rules governing the determination of the origin of goods.
Common origin and preferential origin
From a customs perspective, origin is categorised into two types, each applicable under different circumstances.
- Common origin determines whether a product is subject to specific rules, such as tariff quotas, product regulations, anti-dumping duties and countervailing duties.
- Preferential origin is important for transactions involving EU trade agreements with non-EU countries. In such cases, preferential origin certification must be obtained for goods imported into the EU or its partner countries in order to qualify for reduced tariffs.
Importance of the Country of Origin
- Tariffs: Each country sets its own tax rate for goods, so rates can vary a lot. Some countries pay extra taxes on imports, while others get discounts or pay nothing. These differences can have a big effect on how much it costs to import things.
- Trade Agreements: Free Trade Agreements often lower tariffs only for goods that meet specific rules about where they came from. EU members can give their own products special treatment, but only if those products are made or processed in the EU. Simply moving products through the country is not enough.
- Brand Perception: Where a product comes from affects how buyers think about how good, reliable and valuable it is. If you know where your products come from, people will trust you more. You will also be able to charge more for your products and sell them more easily in other countries.
How to determine the country of origin of goods
The country of origin of goods is determined by the country in which the goods were produced or substantially processed, rather than by the place of shipment or transit. In international trade, this is usually established using the following three principles:
1. Wholly obtained
If goods are produced, harvested or manufactured entirely in one country, that country is their country of origin.
Example:
- Rice grown and harvested in Thailand → Country of origin: Thailand
- Beef born, raised and slaughtered in Australia → Country of origin: Australia
This scenario is common for agricultural, mineral, and natural resource commodities.
2. Substantial transformation
When goods undergo processing in multiple countries, the country of origin is typically deemed to be the country in which substantial processing or manufacturing occurs — that is, the country in which the product’s nature, use, or tariff classification undergoes a fundamental change.
Examples:
- Steel produced in China and processed into finished mechanical parts in Vietnam → Country of origin: Vietnam
- Korean components assembled in Malaysia to form a new electronic product: Country of origin = Malaysia
Simple packaging, sorting, or labelling generally does not constitute substantial transformation.
3. Regional Value Content (RVC):
Under free trade agreements, certain goods must meet regional manufacturing cost or value-added percentage requirements to qualify as originating in member countries.
Example:
- An electronic product assembled in Mexico with 75% of manufacturing costs originating from USMCA member countries.
- Country of origin: Mexico (eligible for agreement benefits).
If the specified percentage is not met, the product does not qualify as originating under the agreement and is subject to normal tariff rates.
