Country of Origin (CoO) refers to the country where a product was manufactured, produced or grown. Country of Origin impact on a buyers, particularly when it comes to international trade. In this blog post, we’ll explore what CoO is, why it matters, and what a buyer needs to know about Country of Origin.

What is Country of Origin (CoO)?

Country of Origin (CoO) refers to the country where a product was manufactured, produced or grown. It is an important aspect of international trade because it can affect the way a product is perceived by consumers and governments. CoO is typically indicated on a product’s packaging or labeling, and it can also be determined through documentation such as invoices, bills of lading, and customs declarations.

Why does CoO matter?

CoO matters for a number of reasons, including:

• Legal requirements: In some countries, products must be labeled with their CoO in order to comply with local laws and regulations. Failure to do so can result in penalties, fines, or even the seizure of goods.
• Consumer preferences: Consumers may have a preference for products from certain countries, or they may be willing to pay more for products that are perceived to be of higher quality or safer based on their CoO.
• Trade agreements: Many countries have trade agreements that offer preferential treatment to products from certain countries. CoO can be used to determine whether a product is eligible for these benefits.

How does Country of Origin impact professional buyer?

A buyer must understand Country of Origin, particularly when it comes to international trade. Here are some examples:

• Compliance: Buyers must ensure that their products are labeled with the correct CoO in order to comply with local laws and regulations. Failure to do so can result in delays, fines, or other penalties.
• Risk assessment: Buyers must consider the CoO when assessing the risk of importing a product. Products from certain countries may be subject to higher tariffs, import restrictions, or other trade barriers.
• Supplier selection: Buyers may consider the CoO when selecting suppliers. They may prefer to work with suppliers from countries that offer preferential trade agreements, or they may avoid suppliers from countries that are subject to trade restrictions or sanctions.
• Pricing: Buyers must consider the CoO when pricing their products. Products from certain countries may be subject to higher tariffs or import duties, which can affect the final price of the product.

Calculating Country of Origin when product have components from multiple countries

When a product is made up of components or parts from multiple countries, determining its Country of Origin (CoO) can be a complex process. The calculation of the CoO is usually based on a set of rules that vary depending on the country or region in question. In this blog post, we’ll explore how a product’s CoO is calculated when it has components from multiple countries.

Among what a buyer need to know about Country of Origin, are several methods used to calculate a product’s CoO when it has components from multiple countries. These include:

• Value-added method: This method calculates the CoO based on the value added to the product during each stage of production. The CoO is assigned to the country where the product underwent the most substantial transformation.
• Percentage of cost method: This method calculates the CoO based on the percentage of the product’s total cost that is attributable to each country of origin. The CoO is assigned to the country with the highest percentage of cost.
• Tariff shift rule: This method applies to products that are produced using imported components. The CoO is assigned to the country where the imported components underwent a substantial transformation, which means that they were substantially changed from their original form.
• Regional value content method: This method applies to products that are traded under a free trade agreement. The CoO is calculated based on the value added to the product within the free trade region.

It’s important to note that the rules for calculating CoO can vary depending on the country or region in question. For example, the rules used by the United States may be different from those used by the European Union or other trading partners. In addition, some countries may require specific documentation to support the determination of the product’s CoO, such as a Certificate of Origin or a Statement of Origin. These documents must be completed accurately and in accordance with local laws and regulations.

When sending a Request (RfX) to the market it in necessary to include supplier defined Country of Origin for the specific product. Learn more in the course RFQ template, introducing the content of a RFQ. What should be included in a successful request to the market? The course describe the required information in order to collect correct and strong offers.

Certificate of Origin

Included in what a buyer need to know about Country of Origin is Certificate of Origin (CO), an official document that certifies the country of origin of a product. The purpose of a CO is to provide evidence that the goods being shipped originated in a particular country. This document is typically required by customs authorities when goods are imported into a foreign country.

One of the primary purposes of a Certificate of Origin is to provide proof of the origin of the goods being shipped. Customs authorities in many countries require a CO to verify the origin of the goods, particularly when the goods are subject to preferential trade agreements or import restrictions. For example, under the North American Free Trade Agreement (NAFTA), a CO is required to claim preferential tariff treatment for goods being shipped between Canada, the United States, and Mexico.

Another purpose of a CO is to ensure compliance with local laws and regulations. Many countries have specific requirements for the format and content of a CO, and failure to comply with these requirements can result in delays, fines, or other penalties. For example, some countries require that the CO be notarized or certified by a government authority, while others require specific language or forms.

A CO can also be used to support claims for preferential tariff treatment or other trade benefits. For example, some countries offer preferential treatment to goods from certain countries under free trade agreements or other trade programs. A CO can be used to prove that the goods being shipped meet the eligibility requirements for these benefits.

In addition to the above, a CO can also serve as a commercial document. It can provide valuable information about the product being shipped, such as the name of the exporter and importer, the description of the goods, and the shipment details.

Summary

In conclusion, Country of Origin (CoO) is an important aspect of international trade that can have a significant impact on a buyer’s work. Buyers must ensure that their products are labeled with the correct CoO, consider the CoO when assessing risk and selecting suppliers, and factor the CoO into pricing decisions. By understanding the importance of CoO, buyers can make informed decisions that support their business objectives and comply with local laws and regulations.

Determining a product’s CoO when it has components from multiple countries can be a complex process. The calculation is usually based on a set of rules that vary depending on the country or region in question. Buyers and sellers must be familiar with these rules and ensure that they comply with local laws and regulations when calculating a product’s CoO.

A Certificate of Origin serves a crucial purpose in international trade by providing evidence of the origin of the goods being shipped. It ensures compliance with local laws and regulations, supports claims for preferential trade benefits, and serves as a commercial document. Buyers and sellers must be familiar with the requirements for a CO and ensure that they comply with them to avoid delays or penalties.

Buyers introduction to shipping documents

About Learn How to Source

Learn How to Source (LHTS) is an online platform based in Sweden, offering a range of procurement courses accessible globally. It serves as a community where procurement experts share their knowledge through online courses, designed for various experience levels from introductory to expert. Courses are concise, about 30 minutes each, and cover different aspects of procurement, tailored for different buyer roles. The courses focus on practical knowledge, presented by seasoned professionals, and include quizzes and certificates. They can be accessed from any device, emphasizing microlearning for flexibility and efficiency. More about LHTS in Swedish.

Note: Illustration created by CHAT GPT on January 27, 2024.