International trade transactions involve a series of complex tasks that can affect economic outcomes, growth, and opportunities within specific regions. The country of origin (COO) is just one of many elements that influence cross-border transactions within international trade.
COO is where a product – whether a tangible or intangible item – is manufactured, created, or significantly transformed. It can also refer to the location where services originate. While it may sound simple in concept, the COO impacts areas such as import and export tariffs, brand and product perception, product authenticity, and legal compliance.
The identification of the origin of goods is referred to as ‘Rules of Origin.’ The World Trade Organization (WTO) defines these rules as “the criteria needed to determine the national source of a product.” The WTO helps to open trade by building stronger trade relations between its member countries while providing governance and rules for international transactions. The WTO also serves as a platform for dispute resolution and trade negotiations. Headquartered in Geneva, Switzerland, the WTO consists of representatives from member countries (166 as of September 2024) that voluntarily commit to the governance, growth, and development of fair-trading practices, composed of domestic and international trading laws.
Determining the correct COO can be challenging. Global supply chains create the opportunity for multiple countries to be involved in a single transaction. This allows for the use of materials from various sources throughout the production cycle. Additionally, a product is considered ‘significantly transformed’ when its structure, function, and/or value changes.
COO interpretation often varies from one country’s customs authority to another, and this can change the COO designation. For this reason, an official Certificate of Origin is typically issued by the manufacturer or originator as proof of where the product originated or was transformed. This certificate may be required for customs validation in certain regions. Preferential trade agreements may also apply, impacting tariffs through the reduction or elimination of import and export duties and potentially altering product labeling and marking requirements during transportation and distribution.
COO can also influence brand perception and legal regulatory requirements. Brand perception refers to what potential buyers value and deem important. This perception, combined with product identity, creates credibility, builds reputation, and impacts purchasing choices. Brand perception may be shaped by product quality, customer assumptions, market influences, and corporate policies. It may also be affected by societal or cultural norms.
An example of excellent brand perception is Patagonia. Patagonia started as a manufacturer of activity-specific, technical products and textiles for athletes in non-traditional outdoor activities, such as kayaking, biking, climbing, and camping. Patagonia has proven itself as a brand leader by offering technically functional items that are also stylish, comfortable, and durable. Their policies are transparent, and their processes are sustainable. In addition to offering incredible customer service, Patagonia enjoys strong brand loyalty from customers.
Legal obligations will also vary based on the origin of a product. The country of origin affects the marking, labeling, and documentation requirements needed to legally conduct an international transaction. Additionally, origin can affect product or brand confidence. Consumer perception significantly impacts buying power and brand integrity.
Maintaining compliance with country of origin obligations in international trade is crucial. The COO influences many aspects of the overall supply chain process, impacting purchasing decisions and affecting global expansion. Businesses rely on the subject matter expertise of the supply chain professionals at Bristlecone to ensure robust compliance, sustainable growth, and ongoing advancement within their supply chain environment. With Bristlecone’s comprehensive supply chain offerings, businesses can remain confident in their compliance and focus on continued growth and improvement.
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Tiffany MacKinnon
Solutions and Consulting –
Logistics and Fulfillment
