What Is Country of Origin (COO) and How Does It Affect Your Risk Profile?

Article Highlights:

• Country of origin (COO) refers to the country where a specific product, article, or commodity was originally manufactured or produced.
• Certificate of origin (CO) is a document that serves as a form of proof and verification of a product’s “nationality”—that is, its country of origin.
• Certificate of origin is instrumental in determining whether a product or shipment is subject to sanctions, tariffs, or quotas, and if it’s eligible for preferential treatment supported by multilateral trade agreements.
• In an era increasingly characterized by sprawling, escalatory trade wars and the sanctions that are weaponized to wage them, a shipment’s COO can also impact a company’s risk profile.

What Is Country of Origin?

The term country of origin—often abbreviated as “COO”—refers to the country where a specific product, article, or commodity was originally manufactured or produced. A commercial item’s country of origin is often a critical aspect of the U.S. importation process: the nation where the product originated from determines whether it is subject to fees, tariffs, quotas, and other customs rules. 

The term country of origin—often abbreviated as “COO”—refers to the country where a specific product, article, or commodity was originally manufactured or produced.

An item’s country of origin isn’t just a factual detail about it, either—it’s a legally enforceable requirement. As U.S. Customs and Border Protection (CBP) explains on its website, “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.”

What Is a Certificate of Origin?

A certificate of origin, often abbreviated as “CO,” is a document that serves as a form of proof and verification of a product’s “nationality”—that is, its country of origin. Certificates of origin are typically prepared by the exporter of the goods, who must produce a CO that adheres to domestic and international guidelines, including those enforced by the American World Trade Chamber of Commerce (AWTCC) and the International Chamber of Commerce (ICC). 

A certificate of origin, often abbreviated as “CO,” is a document that serves as a form of proof and verification of a product’s “nationality”—that is, its country of origin.

Beyond serving as key import documentation, a certificate of origin is also instrumental in determining whether a product or shipment is subject to sanctions, tariffs, or quotas, and if it’s eligible for preferential treatment supported by multilateral trade agreements. In addition, certificates of origin help maintain the level of transparency and accountability necessary to enforce laws prohibiting forced labor and labor exploitation, and can serve as critical evidence in identifying when such laws are being violated by exporting parties. 

Country of Origin Is More Important Than Ever

While country of origin has long been an important legal designation required for products to pass customs, its implications for importers are arguably more consequential than ever. This is especially true in the U.S. Over the past decade, successive presidential administrations have embraced protectionist trade policies intended to shelter and boost domestic manufacturing and other national industries by implementing tariffs, import controls, and sanctions that target international competitors. 

These protectionist instruments have grown exponentially in recent years. According to the Tax Foundation, a nonpartisan think tank analyzing U.S. tax policy, the Trump and Biden administrations have levied nearly $100 billion worth of tariffs on thousands of foreign products, with a particular focus on Chinese goods. 

Whether or not these protectionist policies affect a specific product or article largely hinges on a single piece of documentation: certificate of origin. For original equipment manufacturers (OEMs) and other American companies that source globally, knowing the country of origin of their imports is critical to understanding the tariffs, quotas, and other trade barriers they are legally responsible for complying with. 

Whether or not these protectionist policies affect a specific product or article largely hinges on a single piece of documentation: certificate of origin.

For prudent businesses focused on maintaining their budgets and keeping costs low, country of origin can also be a key determining factor in how they build out their supply chains. Imports that have become targeted by significant tariff rates, for example, may no longer be an economically viable option for U.S. companies. Agile businesses will think seriously about restructuring their sourcing to avoid the steep costs associated with such goods, which will either cut into their bottom line or get passed on to the consumer. 

Why Country of Origin Is a Critical Factor in Supply Chain Risk 

An import’s country of origin plays a pivotal role in calculating tariffs and fees, and determining whether trade quotas apply to specific goods. But in an era increasingly characterized by sprawling, escalatory trade wars and the sanctions that are weaponized to wage them, a shipment’s COO can also impact a company’s risk profile. Imports coming from nations like Russia, Iran, North Korea, and especially China are at a significantly heightened risk of running afoul of U.S. sanctions and trade restrictions. 

But in an era increasingly characterized by sprawling, escalatory trade wars and the sanctions that are weaponized to wage them, a shipment’s COO can also impact a company’s risk profile.

In some cases, simply sourcing from a country like those mentioned above can increase an organization’s risk, even if it knows that its suppliers are not currently subject to U.S. import controls. That’s because the suppliers and manufacturers based in countries like China and Russia are far more likely to become the target of sanctions in the future—especially when compared with businesses operating in countries that have healthy diplomatic relationships and robust trade agreements with America. 

Effective, prescient supply chain risk management (SCRM) goes beyond just adhering to existing U.S. trade laws. It also requires importers to anticipate how those laws and the overarching policies that shape them are going to evolve and expand in the years to come. And anticipating impending sanctions and restrictions means understanding the inherent risks associated with certain countries of origin. 

Consequences for Shipments Without Certificate of Origin

In general, shipments being imported by U.S. businesses need to have a certificate of origin to clear customs. If a shipment is labeled incorrectly or contains false or misleading information pertaining to the country of origin, it may be subject to detainment or seizure. In cases of negligence or fraud, importers may also be found liable for financial penalties. 

How SCRM Tools Can Help Companies Track Country of Origin and Mitigate Risk 

Many OEMs based in the U.S. are multinational corporations with large, layered supply chains that snake across myriad factories, suppliers, and countries of origin all over the world. In order to comply with international regulations, adhere to U.S. trade laws, and ensure that they’re utilizing every possible tariff reduction available to them, these companies need to track the countries of origin for all their shipments. 

For OEMs that manufacture complex products with thousands of components, this can be an onerous logistical undertaking. Fortunately, the Z2Data SCRM platform can serve as a vital resource in precisely this capacity. Z2Data’s Part Risk Manager tool allows customers to view the country of origin for the billion-plus components in its comprehensive database, aiding them in assessing country-related risk and analyzing the various regulations and trade barriers connected to specific parts. 

To learn more about how Z2Data and Part Risk Manager can help your business review country of origin and gauge the multidimensional risks associated with electronic components, schedule a free demo with one of our product experts.