The country of origin of merchandise imported into the United States is important for several reasons. The country of origin can affect, among other things, the rate of duty, the eligibility for special programs, admissibility, quota, procurement by government agencies and marking requirements.

There's also a key distinction between “non-preferential” rules, which are those that apply to merchandise in the absence of a trade agreement, and “preferential” rules, such as those that are used to determine eligibility for special treatment under various trade agreements or special legislation. The focus of this article is the non-preferential rules, as the preferential rules vary by trade agreement.

All non-preferential rules of origin are based on the “substantial transformation” criterion when the good consists of materials from more than one country. Substantial transformation is generally considered to be a change in name, character, use, etc. Textiles and apparel employ a more 

The rules of origin for textiles and textile products employ a more rigid form of the substantial transformation principal, called the tariff-shift method. It requires that a product's HTS classification shift from one tariff to another. We'll cover this in a separate article.

Perhaps the most important thing to know is that minor processing doesn't change the origin. Minor processing includes, among other things:

  • Dismantling or disassembly
  • Simple packing, repacking, or retail packaging
  • Mere dilution with water or another substance that does not materially alter the characteristics of the material

This can work in your favor. For example, in a November 2018 decision, CBP ruled that the packaging and dilution of perfume and cologne in China doesn't result in a change of the country of origin (NY N301656). As a result, the products were not subject to the Section 301 tariffs on goods from China. The sprays, imported by Fantasia Accessories, consisted of a single fragrance base from either Singapore or Australia that is sent to China for blending with alcohol, water, and propylene glycol and packaged in aerosol cans. "The blending process alters the viscosity of the fragrances so that they may be applied via a spray mechanism," argued Fantasia. "No chemical reaction, change in structure, or intermixing of fragrance bases occurs during this processing."

The processing in China doesn't amount to a "substantial transformation," CBP said. "While the finished fragrances are made suitable for spraying by diluting the fragrance bases, they retain the same chemical identity and character as the precursor bases," the agency said. "In this case, the changes in concentration and viscosity which occur in China, do not result in a substantial transformation for origin purposes."

If you have any questions concerning country of origin or would like to pursue a ruling on the subject, please contact us at support@inlt.com.

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