Country of Origin or Country of Assembly

Get Paid Commenting on Facebook

Country of Assembly and Country of Origin

Medical Device
first time import
Ocean Freight
CFS Ocean Cargo
Ocean Cargo
Country of Origin
How to import cosmetics/beauty products into the US
E-Commerce

How to Determine Country of Assembly and Country of Origin

The difference between country of assembly and country of origin can have a significant impact on the duties and taxes imposed when a product is imported into the United States.

The country of assembly refers to the country where the final product is put together or assembled, while the country of origin refers to the country where the product was originally made or produced. For example, a smartphone may be assembled in China using components made in Korea and Japan. In this case, China would be the country of assembly, while Korea and Japan would be the countries of origin for the respective components.

When a product is imported into the United States, the customs authorities will determine the country of origin based on the rules of origin. These rules are used to determine the “substantial transformation” that a product undergoes when it is assembled or manufactured, and whether that transformation is sufficient to confer origin on the final product. The rules of origin can be complex and vary depending on the product and the trade agreement in place, but they generally involve factors such as the value-added in each country, the level of processing, and the source of the materials.

Get Paid Per App Review

The duties and taxes that are imposed on an imported product can depend on the country of origin. For example, products that are imported from countries that have free trade agreements with the United States may be eligible for lower or zero tariffs, while products imported from non-FTA countries may be subject to higher tariffs. Additionally, certain products may be subject to specific duties based on their country of origin or the materials used in their production.

In the example above, if the smartphone assembled in China meets the rules of origin for a free trade agreement between the United States and China, it may be eligible for lower or zero tariffs when imported into the United States. However, if the components used in the smartphone were made in a non-FTA country, they may be subject to higher tariffs.

Overall, the difference between country of assembly and country of origin can have a significant impact on the duties and taxes imposed when a product is imported into the United States. It is important for importers to understand the rules of origin and the trade agreements in place to determine the applicable duties and taxes for their products.

Get Paid To Do Simple Live Chat

Substantial Transformation or Country of Assembly Test

The U.S. Court of Appeals for the Federal Circuit (the Court) provides a new legal ground concerning the determination of country of origin for U.S. Customs and Border Protection (CBP) purposes.

On March 12, 2019, the Court issued a decision affirming the findings of the Court of International Trade (CIT) that the U.S. Department of Commerce (Commerce) had provided a sufficient explanation for not using the substantial transformation standard to determine the country of origin of solar panels and cells imported from China.

Instead, the Commerce applied a country of assembly test for the products that were subject to countervailing and antidumping duty orders and the CIT affirmed Commerce’s decision.

Summary

Commerce issued countervailing duty and antidumping duty orders covering solar panels assembled in China using non-Chinese solar cells. If Commerce had used the substantial transformation test, the country of production of the solar cells would be likely granted country of origin because the process of assembling the solar cells into solar panels does not substantially transform those solar cells.  In this decision, Commerce declined to use the substantial transformation test, instead used “the country of assembly test” regardless whether the assembly process substantially transforms the merchandise. 

Paid App Reviewer

In-Depth Coverage: Country of Origin

Substantial Transformation Test or Country of Assembly Test

In previous AD/CVD cases involving solar cells and solar panels from China or Taiwan, Commerce recognized that some solar cells manufactured in China or Taiwan can be assembled into panels elsewhere and some solar cells manufactured elsewhere can be assembled into panels in China or Taiwan.

In general, the substantial transformation standard is applied to determine the country of origin when the product under consideration is subject to antidumping, countervailing, or other safeguard measures (Belcrest Linens v. United States, 741 F.2d 1368, 1370-71 (Fed. Cir. 1984))

Therefore, Commerce applied the substantial transformation test to determine the country of origin. Commerce determined that solar cell is the origin-conferring component and the process of assembling the solar cells into panels does not constitute a substantial transformation.  Commerce therefore concluded that the AD/CVD duty orders covered solar cells and solar panels from China including solar panels assembled outside of China using Chinese solar and, but excluding solar panels assembled in China using non-Chinese cells.

In-Depth Coverage: Marketing and Advertising Compliance

After decisions on the case, the Chinese solar industry, anticipating a rote application of the substantial transformation test, had shifted its supply chains by assembling panels in China using only non-Chinese solar cells so that their solar imports to the United States would no longer fall within the class or kind of merchandise within the scope of countervailing duty and antidumping duty orders covering solar cells from China.

In this way, the industry was using the substantial transformation test as a means of circumventing the duties imposed by the orders.” The further stated that “the modules assembled in China using third-country solar cells would not be captured by a traditional substantial transformation analysis. “

Commerce stated that “its standard substantial transformation analysis would be insufficient for determining the country-of-origin of this specific product because relying on the substantial transformation analysis alone could result in failure to provide relief to the domestic industry for the alleged injury.”

Get Paid To Do Simple Chat Jobs

The Court also states that “the Chinese solar industry, recognizing that the solar cells were defined as the origin-conferring component under the substantial transformation test, began sourcing the solar cells from other countries.

The appellants challenged the decision of Commerce and argued that “Commerce was inconsistent with the agency’s prior practice for determining country of origin in similar proceedings and departed from that practice without sufficient explanation. “

However, Commerce stated that it did not apply different country of origin rules to the same class or kind of merchandise. This is because the class or kind of merchandise in Solar II China was not the same class or kind of merchandise in Solar I China or in Solar I Taiwan.  Rather, each class or kind determination is proceeding-specific.

In-Depth Coverage: Importing Medical Device 

Country of Origin of Runner Assembly 

The product under consideration is a runner assembly (runner), which is a part of a Francis type hydro-turbine. The runner assembly consists of band, crown, cone, and blades. The rough machined runner castings sub components will be sourced from a Chinese foundry, where they are welded and roughly machined, and then imported into Canada (in the first scenario) or Japan (in the second scenario) for further processing and manufacturing, which includes inspection, final machining, and balancing.

Classification

The applicable subheading for the runner is 8410.90.0000, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Hydraulic turbines, water wheels and regulators therefor; parts thereof; Parts, including regulators.”

Country of origin

Customs Regulations 19 CFR 134.1(b) defines “country of origin” as the country of manufacture, production, or growth of any article of foreign origin entering the U.S.  If the merchandise in question is not wholly manufactured, produced, or grown within a single country, then we must consider the origin of any component or raw material that is used in the manufacture, production, or assembly of the final product, and whether the further work or material added to the product in a subsequent country effected a “substantial transformation” on that part, component or material, so as to render such other country the “country of origin” of the end product.

In the Case of Canada: NAFTA Marking Rules

In the case where the finishing operations were performed in Canada, the NAFTA Marking Rules will determine the country of origin of the runner.

Customs Regulations Part 102 sets forth the “NAFTA Marking Rules” for purposes of determining whether a good is a good of a NAFTA country for marking purposes. Section 102.11 of the regulations, sets forth the required hierarchy for determining country of origin for marking purposes. Applied in sequential order, the required hierarchy establishes that the country of origin of a good is the country in which:

(a)(1) The good is wholly obtained or produced;

(a)(2) The good is produced exclusively from domestic materials; or

(a)(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in Section 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.

Because the imported runner is neither wholly obtained nor produced exclusively from “domestic” materials, Sections 102.11(a)(1) and 102.11(a)(2) do not apply.

For Section 102.11(a) (3), each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in Section 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.

The runner is classified in subheading 8410.90.0000, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Hydraulic turbines, water wheels and regulators therefor; parts thereof; Parts, including regulators.” The applicable rule for subheading 8410.90, HTSUS, in section 102.20 requires, “A change to subheading 8410.90 from any other heading.” The unfinished runner imported from China to Canada is also classified in heading 8410.90, HTSUS. As a result, the tariff shift requirement is not met, and the country of origin cannot be determined under Section 102.11(a)(1), (2), and (3).

Section 102.11(b) states, “Except for a good that is specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation 3, where the country of origin cannot be determined under paragraph (a) of this section: (1) The country of origin of the good is the country or countries of origin of the single material that imparts the essential character to the good.

Wood Working

In-Depth Coverage: Importing Cosmetics

Section 102.18 (b) (1): For purposes of identifying the material that imparts the essential character to the good under section 102.11, the only materials that shall be taken into consideration are those domestic or foreign materials that are classified in a tariff provision from which a change in tariff classification is not allowed under the section 102.20 specific rule or other requirements applicable to the good.

As we earlier determined, the unfinished runner is classified in subheading 8410.90, HTSUS. It is the single component, which is not allowed under section 102.20 specific rule. Therefore, the country of origin of the entire assembly will be the country of origin of the unfinished runner. Thus, the country of origin of the finished runner assembly will be China for marking purposes.

In the present case, the processes in Canada do not cause a change in the name, character, or use. Although necessary operations are performed in Canada in order for the runner to operate as designed, the runner does not undergo any physical change. As a result, the unfinished runner is not substantially transformed in Canada.

In the Case of Japan as the Country of Last Manufacture

Since Japan is a non-NAFTA country, the analysis of substantial transformation will determine the country of origin for the second scenario performed in Japan, where the manufacturing steps are identical to the first scenario. 

As described above in the case of NAFTA country, the processes in Japan do not cause a change in the name, character, or use. Although necessary operations are performed in Japan in order for the runner to operate as designed, the runner does not undergo any physical change. As a result, the unfinished runner is not substantially transformed in Japan.

Based on the analysis above, the country of origin of the runner assembly for marking and tariff purposes will be China for both the first and second scenarios.

Custom Ruling ― NY N306640: the country of origin marking of a runner assembly (Oct28, 2019).

Paid For App Review

In-Depth Coverage: Customs Valuation

In-Depth Coverage: USDA-Regulated Products

In-Depth Coverage: Importing Food Products 

In-Depth Coverage: Trade Remedies

Paid To Do Simple Writing Jobs

FDA-Regulated Products and Import Requirements

Guidance on customs & logistics solution for traditional and e-commerce importers and exporters

Ocean Cargo

Importer Security Filing (ISF)

An ISF is required when cargo (ocean only) laden on vessel at a foreign port is destined for shipment to the U.S.  Under ISF rule, some importing information and details regarding cargo must be transmitted to the CBP at least 24 hours before goods are loaded onto the vessel, or at least 24 hours prior to the departure to the U.S. 

Logistics Solution

Freight Forwarding

Looking for a freight forwarding partner?  To move your cargo from its current location through customs to its final destination we will partner with you to find the best way for your business. Whatever your transportation, logistics or customs clearance needs, we will do our best to customize a solution for your needs. 

Customs Brokerage & Consulting

Customs Clearance

All goods imported into the customs territory of the U.S. are required to be declared to CBP. Our customs broker will help you stay in compliance with customs laws and regulations and clear your goods quickly and efficiently with our electronic Automated Commercial Environment (ACE) and Automated Broker Interface (ABI) Single Window System.

Section 321 Entry

Section 321 Entry

Section 321 entry allows importing free of duty and tax for shipments imported by one person on one day having a fair retail value in the country of shipment not more than $800. We provide our resident and non-resident clients with dedicated ACE eManifest solutions for Section 321 entry of all modes of transportation. 

Country of Origin

Non-resident Importer Program

If you want to sell your products in U.S. marketplaces, but you are a business owner located outside of the U.S. and do not have an entity or presence in the U.S., you need to be established as a Foreign Importer of Record before your products can be imported into the U.S. We can help you.

E-Commerce

E-Commerce

The Internet has made it easy to find and purchase items from almost anywhere in the world. Our e-commerce experts will help you find the right solution for your international transportation, customs clearance, and delivery to your final destination.  We also provide value-added repackaging, warehousing and distribution services. 

U.S. Customs & Import Requirements

Paid For App Review