Following several turbulent weeks, President Trump has introduced a new series of import tariffs. These include a general 10% tariff on imports from nearly all countries, specific duties on steel and aluminium, and steep duties of up to 145% on imports from the People’s Republic of China. A 90-day reprieve has been granted for previously announced higher tariffs.
The Critical Role of Rules of Origin
With these measures now in place—particularly those targeting China—accurately determining the origin of imported goods has become more important than ever. Rules of origin play a central role in applying tariffs and sanctions, and their relevance may increase further if more nuanced tariffs are introduced in future.
Two Types of Origin: Preferential and Non-Preferential
There are two primary types of origin: preferential and non-preferential.
Preferential Origin
Preferential origin applies when a trade agreement exists between the exporting and importing countries, allowing goods to benefit from reduced tariffs. For example, the EU–Canada agreement (CETA) provides such benefits. However, the United States has not entered into such agreements with either the EU or China. As a result, preferential origin is largely irrelevant in the context of the new U.S. tariffs. Even when applicable, preferential origin only affects regular import duties—not the newly imposed or punitive tariffs.
Non-Preferential Origin
In most cases, non-preferential origin is the determining factor for applying duties, sanctions, or other trade measures. The United States Customs and Border Protection (CBP) uses non-preferential origin rules to determine whether goods fall under the new tariffs, including those targeting the EU and China.
Lack of International Harmonisation
Unlike tariff classification (standardised up to the sixth digit under the Harmonised System) and customs valuation (coordinated by the WTO), the rules for determining a product’s origin are not globally harmonised. Efforts by the World Customs Organization (WCO) to standardise these rules began in 1995 but remain incomplete. As a result, a product may be considered as originating from different countries depending on whether it’s entering the EU or the U.S.—potentially leading to unexpected customs costs.
The United States Standard: Substantial Transformation
Under the United States —excluding specific rules for textiles and other products coming from Mexico and Canada—the origin of an imported product is determined by the last substantial transformation it underwent. According to the CBP, this means that a product must acquire a new name, character, or use distinct from its original form.
Mere cosmetic changes or final assembly that does not significantly alter a product’s essential character are typically not sufficient to establish a new origin. For instance, if a forged metal tool is manufactured in China but polished and assembled in the Netherlands, it may still be considered Chinese in origin. A U.S. court supported this interpretation, ruling that the essential component—the forged part—was not fundamentally changed by further processing.
CBP considers several factors when evaluating substantial transformation, including:
• The nature of the production processes
• Value added in different stages
• The function and essential character of the components and final product
• Marketing and intended use
Simple tariff shifts or regional content thresholds are not sufficient to determine origin under U.S. standards.
Practical Examples
1. Assembled circuit boards: The country where the board is assembled generally determines the origin.
2. Pharmaceuticals: For medicines with a single active ingredient, the origin of that ingredient defines the product’s origin.
3. Batteries and solar panels: The country of origin is typically where the cell—the core component—was produced.
Certificates of Origin: Limited Use in the Unites States
Certificates of origin issued by Chambers of Commerce (e.g. in the Netherlands) carry little weight in the United States. They do not take into account the CBP’s strict interpretation of non-preferential origin. Importers in the U.S. are ultimately responsible for ensuring the correct origin is declared and cannot rely solely on foreign-issued certificates.
Legal Remedies and Expert Guidance
U.S. importers may seek binding origin rulings from CBP to gain legal certainty. Exporters aiming to avoid penalties or disputes are advised to consult American trade advisers. Additionally, importers can challenge CBP decisions through formal objections and appeals.
For EU exporters, understanding the complexities of U.S. rules of origin is essential—especially when dealing with high-stakes trade actions or sanctions. Being well-informed or working with a knowledgeable advisor is often the best course of action before engaging with U.S. customs authorities.