Much has been written about qualifying your goods under the North American Free Trade Agreement (NAFTA) Rules of Origin. Importers, you are not finished with your work yet. Origination is only the first step.

Now that you know that your good qualifies or does not qualify you must also learn how to mark it with the proper country of origin. The question is: Which country of origin do you use to put on the good?

If your product is wholly the growth or manufacture of a single NAFTA country, it is simple to determine that the country in which the product was grown or manufactured is the country of origin.

In today’s global economy, however, manufacturers are sourcing materials and components from around the world. It may be more difficult than you are aware to determine the country of origin for marking purposes.

How does NAFTA determine the country of origin for marking purposes?

General Rules:

While the introduction to this article might imply it is an intuitive process, the Customs regulations (19 CFR §102.11) describe a detailed, methodical process for determining country of origin.

For non-textile products a NAFTA importer or the supplier must apply the following rules in order:

A. The country of origin of a good is the country in which:

1. The good is wholly obtained or produced. This rule refers to basic materials such as animal, plant and mineral products or finished goods produced from such raw materials in that country. Interestingly waste and scrap resulting from production in a country take on the origin of that country.
   
   
2. The good was manufactured exclusively from domestic materials. A domestic material is defined to mean a material whose country of origin, as determined by these rules, is the same country as the country in which the good is produced. While this seems similar to the first rule above, it includes parts and componentry, which might contain some foreign content.
   
   
3. The foreign materials in the good undergo a tariff shift defined in the regulations. (19 CFR §102.20)

This rule is less complex than it seems. To apply the rule the importer or foreign supplier must:

• Reference the country of origin rule for the product’s classification found in the table within 19 CFR §102.20,
• Identify all foreign materials in the product,
• Classify the foreign materials to no more than a 6-digit HTS level, and
• Compare the classifications of foreign materials to the classification of the product to determine if the rule applies.

This process allows for a de minimis amount of 7% or 10% by value, depending on the product under consideration. Also the country of origin of indirect materials, packaging, accessories, spare parts and tools can be ignored.

B. Country of origin of sets:

If the primary rules above do not apply and the good is a set as specified in the HTS or by application of HTS classification general rule of interpretation 3, the country of origin of a good is the country or countries of origin of the single material that imparts the essential character to the good.

C. Country of origin of sets, mixtures and composite goods:

If rules A and B above do not apply and the good is a set, mixture or composite good as specified in the HTS or by application of HTS classification General Rule of Interpretation 3, the country of origin of the good is the country or countries of origin of all materials that merit equal consideration for determining the essential character of the good.

D. If rules A, B and C above do not apply then the country of origin of a good is:

1. Goods undergoing minor processing: The country or countries of origin of materials used that merit equal consideration for determining the essential character of the good.
   
   
2. Goods produced through simple assembly from parts from the same country: The country of origin of the good will be the country of origin of the parts, not the country of simple assembly.
   
   
3. Last country of substantial manufacture: If all of the above rules do not apply, then the country of origin of a good will be the country in which the good underwent production.

What about textile rules of origin?

Products classified in Chapters 50-63 of the HTS, along with a handful of other headings, are subject to country of origin rules detailed in the regulations at 19 CFR §102.21. These rules are similar to the above but incorporate processes unique to the textile trade. Interestingly these rules apply to all textile imports into the USA even beyond the NAFTA.

What does not confer country of origin?

A number of common minor manufacturing and distribution processes have no impact upon the country of origin of the product. These processes include among others:

• Simple assembly,
• Finishing work such as painting or applying a preservative,
• Packaging or repackaging into measured doses,
• Repairs, cleaning, laundering or simple alterations,
• Dilution with water or other substances.

Importers whose products undergo such processes should take steps to identify the country where the product is actually manufactured.

NAFTA Preference Override:

There are times when a product might be the production of multiple NAFTA countries. What should the country of origin marking be in that case? The regulations (19CFR§102.19) describe a concept called the NAFTA preference override.

Briefly stated, the country of origin for marking purposes is the last NAFTA country in which a substantial manufacturing process took place. This section of the regulations has been the subject of revised interpretation by CBP. Before relying on this regulation companies are advised to read the CBP notice carefully.

Under unique circumstances it is possible to originate a good in the USA and have further work performed in Mexico resulting in the country of origin for duty purposes being Mexico, but the country of origin for marking purposes being the USA!

Country of origin versus origination:

It is important to emphasize that simply determining the country of origin for marking purposes may not automatically qualify it for favorable treatment under the NAFTA. Generally, country of origin for marking purposes is a lower standard than origination. Otherwise stated, it is possible for your product to have the words “Made in Mexico” printed on the bottom yet the product my not qualify for duty free status under the NAFTA.

Is that all?

Of course there is more detail to this seemingly simple issue that space has not allowed me to include. If any of the above has peeked your interest I encourage you to review the Customs regulations on the subject. (19CFR §102)