This fictitious US manufacturer, Let's Pretend Business, expanded their business. To do so, they began to import new goods into the United States.
They had a good product they were already producing within the US, but needed to make their new good overseas due to cost efficiencies and supplies. To do so, they found a foreign supplier, but what they didn't know was the importance of the country of origin.
Their goods required raw materials from two different countries, China, and Vietnam. The final manufacturer of the new product for import is in China.
Almost all goods imported into the United States require markings indicating the country of origin, according to 19 CFR 134 Country of Origin Marking.
Let's Pretend began working with their supplier to create the new product. These steps moved along smoothly, and on time. Now it's time for the goods to be transported to the origination port for ocean shipping to a United States destination port.
Let's Pretend was excited to hear that their product will arrive at their destination port in California in 21 days. Just in time for the holiday season!
Now, this company did ALMOST everything right to import their product from overseas. Where's the error?
However, one thing they did not do was guarantee their label included the proper country of origin.
Because the overall product was assembled in China, and the majority of components were made in Vietnam, the manufacturer in China labeled the goods as made in Vietnam.
What to do when the proper country of origin is identified
Now, in our imaginary scenario, Let's Pretend Business is in quite a predicament. As the goods reach the port, CBP begins the process of clearing your shipment. You've learned that your items have cleared US Customs! YAY!
Wait. Not so fast, you hear from your broker that the country of origin should have been "Made In China," not Vietnam. Now, this could play out in a few ways:
- CBP discovers the error and conducts an investigation
- Submit a Prior Disclosure because you have not received notification of CBP making a discovery
- Keep doing business as usual and risk fines and penalties
Alternatively, the scenario ends with CBP assessing your imports, analyzing and conducting an exam. During the exam they will determine whether the good is a product of Vietnam, as labeled, or of China, where it originated. Violation could result in fines, higher duties for tender, or even seizure of your items.
So, Let's Pretend Business decided to submit a prior disclosure because CBP has not notified them of an exam. Our blog on prior disclosures and included worksheet can help Let's Pretend gather the necessary details to develop a prior disclosure notice.
Proper marking and labeling of an item is product dependent
Let's get back to marking products with the appropriate country of origin and understanding why it is essential.
According to CBP, "every article of foreign origin entering the United States must be legibly marked with the English name of the country of origin unless an exception from marking is provided for in the law."
In Let's Pretend's journey, had they ensured appropriate labeling and taken steps to secure reasonable care, they may not have ended up in this predicament.
Take note, check with your Customs broker to ensure you are taking all necessary steps to achieve reasonable care.
Here we go down the rabbit hole! Achieve reasonable care with country of origin.
The purpose of marking your products is to inform the final purchaser to receive the article in the form in which it was imported of the country of manufacture.
Separately, a product may have "Made In" or "Assembled In" depending upon certain rules of origin. For example, the actual country of manufacture, or the latter, assembly of many components added in another country.
CBP indicates that markings must be easily identifiable; it's best if it can become part of the article itself, i.e., stamping, branding, printing, etc.
Checking for additional labeling requirements on particular goods or products is another best practice. Asking your Customs broker to review your HTS code and ensure you need not provide other markings is a step in reasonable care.
Back to Let's Pretend Business, they've decided to achieve reasonable care so they will submit a prior disclosure to CBP and pay any necessary fines, penalties, and additional duties due.
The consumer cares about country of origin too
While globalization continues, consumers become more educated about the country of origin where their purchases are sourced and manufactured.
According to a 2015 survey by YouGov and GT Nexus indicates that 52% of consumers surveyed about food and beverage products are willing to pay more knowing their goods were ethically and sustainably sourced.
Additionally, a Morgan Stanley survey in 2016 asked consumers how much they care about ethical retailing. Findings conclude that 51% of respondents indicated that ethical credentials are somewhat to very important.
Finally, a 2015 Nielsen global study, resulted in 75% saying a brand's country of origin is more important than several other factors.
Why do consumers care about country of origin?
They want to know the country of origin for a few reasons:
- Ethical and sustainable sourcing
- Workers rights and safety
- Workers health and safety
- Environmental impact
- Social and geopolitical impact
- Commitment to products made in an individual's home country, i.e. "Made in the USA"
Proper identification of the country of origin helps Customs:
- Apply appropriate duties
- Confiscate/seize goods from prohibited countries and/or items
- Step toward achieving reasonable care
- Provide information to the end-user
Lastly, if you mislabel, there are corrective actions you can take.