Tariffs, upended trade agreements, regulatory upheaval, trade wars. Executives are responding to rapid changes in the business and trade environment that affect their operations, sourcing, and production and distribution strategies.
The disruption in global commerce is putting renewed importance on a fundamental supply chain principle: Country of origin (COO). Akin to a product’s economic nationality, COO refers to where a good was produced, manufactured, or substantially transformed. Because importers are now being held accountable for their upstream and downstream supplier and distribution networks, COO reporting has become more complex and demands technology solutions that enable value chain partners to collaborate in a product network.
Artificial intelligence can help by providing a dynamic model of the global supply chain and a business network that can serve as a common source of truth against which companies can design optimal value chains, discover market and competitive insights, gather compliance intelligence, triage risk, and source alternative suppliers. Product-specific value chains lay the foundation for understanding, determining, and reporting country of origin, helping businesses turn compliance into a competitive advantage.
Why Does Country of Origin Matter?
Accurately determining and documenting COO is essential to establishing whether goods are subject to tariffs, qualify for preferential treatment, and comply with relevant trade regulations, including in new and evolving areas like forced labor, deforestation, and climate.
COO declarations to customs agencies are getting more complicated, with growing exceptions and restrictions subject to geopolitical dynamics. This shift is compelling companies to enhance their COO assessments and documentation and incorporate current regulatory requirements into pricing strategies.
COO labeling also plays a key role in a business’s marketing strategy. According to polling from Morning Consult, nearly two-thirds of U.S. consumers said they sought out “Made in America” products, and some respondents expressed a willingness to pay higher prices for goods produced domestically.
Mislabeling and failure to conduct proper due diligence on COO is costly. In the last few years alone, the Federal Trade Commission (FTC) has ramped up enforcement and issued fines totaling up to millions of dollars to companies who falsely marketed merchandise as “Made in the USA.”
New Country of Origin Challenges
A single imported good could be made from materials and components from multiple countries. Products with complicated assembly processes are subject to rules of substantial transformation, which aren’t enforced as bright-line tests and vary depending on relevant governments and trade agreements. For example, a product assembled and manufactured in Vietnam might still be deemed to have its country of origin in China if critical and expensive components sourced from China dominate the value and character of the finished product.
Many of today’s rapidly evolving trade policies tie directly back to country of origin. Under the Uyghur Forced Labor Protection Act (UFLPA) — which presumes all goods originating from Xinjiang, China contain forced labor — companies across the apparel, advanced electronics, and automotive sectors must now be ready to document their product value chains down to raw materials and components. Following the addition of 37 more entities to the UFLPA’s flagged entity list, analysis from Altana shows that 2,223 companies in the U.S. are now exposed to forced labor risk from materials originating in Xinjiang.
The volatility of U.S. tariffs poses another challenge. Tariff rates, trade restrictions, and enforcement actions are increasingly subject to geopolitical tensions and trade remedy measures such as antidumping and countervailing duty regulations (AD/CVD). This puts more pressure on companies to accurately determine COO to steer clear of penalties and mitigate exposure to tariffs. Additionally, if the U.S. continues to impose Section 301 tariffs on Chinese imports, businesses that source components from the country but assemble their products elsewhere will need to verify whether substantial transformation has occurred.
Meanwhile, last year enforcement of the Lacey Act — originally enacted in 1900 to combat illegal trafficking of wildlife and later expanded to apply to international trade — increased in scope to include more than 200 new HS Harmonized Tariff Schedule (HTS) codes. From handbags to furniture and musical instruments, importers across industries must prioritize country of origin and prove legal sourcing or face border detentions and serious fines.
Enhance and Modernize Country of Origin Tasks with Altana
Manual methods of determining and verifying a product’s country of origin can take hundreds of hours and yield incomplete data, furnishing results that are immediately out of date. Survey tools rely on suppliers to fill in details with no context or benefit to them, and get only a 10% response rate beyond Tier 1.
These legacy methods are insufficient to comply with landmark regulations like the UFLPA, which requires businesses to have deep insight into their products’ multi-tier value chains. To manage risk and exposure to tariffs, companies need to collaborate with upstream and downstream partners as well as regulators.
Altana enables organizations to navigate increasingly complicated COO requirements effectively, manage risks, and make strategic decisions. It’s the only product network connecting buyers, suppliers, logistics service providers, and regulators.
With Altana, you can:
- Visualize and analyze your value chain connections, identifying hidden relationships and risks
- Collaborate with partners across your value chains to build more resilient, compliant, and cost-effective product lines and ensure accurate country of origin declarations
- Request, share, and link product information across your supplier network to build traceability upstream and downstream — saving time gathering product information, resolving risk by adding proof of compliance, and streamlining documentation for country of origin
Explore our platform and learn how AI can support country of origin determination for your business.
