Proper determination of goods origin is one of the most important requirements in international trade, particularly for imports into the US. US Customs requires precise determinations of origin and bases its practice fundamentally on the regulations of 19 CFR § 102.20. This article systematically examines how origin is determined under US law and highlights pitfalls to watch out for.
How companies and importers can provide correct proof of origin under US law—with a focus on the key transformations according to Section 102.20
Determining Goods Origin under US Customs Regulations: Detailed Analysis of Provisions under 19 CFR § 102.20
Fundamentals of Goods Origin in US Customs Law
The determination of goods origin is a central element for international trade. In the US, a distinction is made between preferential and non-preferential origin. The decisive factor is in which country the goods last underwent a substantial transformation. The terms substantial transformation and CTC constitute the backbone of US rules. The country of origin affects import duties, trade restrictions, and market access. US import regulations stipulate that the country of import determines the definition, not necessarily the country of export.
Economic Implications and Risks of Incorrect Proof of Origin
Correct determination of origin is essential for importers and exporters, as duties, bans, and penalties are based on it. Incorrect declarations in the US can lead to significant additional charges, countervailing duties, and delays. Particular attention is paid to sensitive goods such as steel, aluminum, and electronic components in US-China trade. Complex supply chains increase the challenge regarding intermediate materials and processing steps.
Overview and Purpose of 19 CFR § 102.20
What does 19 CFR § 102.20 regulate?
19 CFR § 102.20 defines in detail for each category of goods what processing steps are sufficient so that a new country of origin may be assigned. The table outlines various criteria—often a change in tariff classification or substantial processing steps. This provides a legally reliable assessment basis for thousands of products. Official Source (eCFR.gov)
Systematic Application of the Table in § 102.20
The Concept of 'Substantial Transformation'
The principle of "substantial transformation" states: Goods are considered to originate from the country where they last underwent a significant change that gave them a new character, name, or use. US Customs (CBP) always decides case-by-case whether the processing is sufficient, sometimes deviating from EU or Swiss standards. CBP precedents and interpretations are binding.
Documentation and Proof Requirements
To provide proof of origin, US Customs requires extensive documentation:Particularly sensitive materials such as aluminum require proof of origin for all stages. If documents are missing, punitive tariffs may apply, e.g., a flat 200% surcharge if aluminum origin is "unknown."
- Origin certificates for precursor materials
- Production documents
- Commercial invoices & transport papers
Distinguishing Preferential and Non-Preferential Origin
Legal distinction
It is especially important to distinguish between Swissness, preferential origin (relevant for free trade agreements), and non-preferential origin (general trade). The US has its own rules, which must not be confused with these frameworks; in addition, individual agreements specify specific rules. This makes the requirements complex. In complex cases, so-called Binding Rules are advantageous; we support companies throughout this process from A to Z. 19 CFR § 102.20 is primarily relevant for non-preferential origin; trade agreements may set their own rules.Practical Example and Typical Pitfalls
Typical mistake: Assuming that final assembly (e.g., vehicle assembly in Sweden with Chinese components) automatically results in Swedish origin. According to CBP Ruling HQ H302821, this is not sufficient if the processing in Sweden does not result in "substantial transformation" or the required tariff change. Companies must document all supply chain steps and regularly verify compliance with CFR table requirements.
Implementation and Compliance Recommendations
Practical implementation
Compliance specialists should be involved early on. Internal processes are necessary to document the origin of each component and recognize risks in time. Legal basis § 102.20 eCFRVisualization of the Risks of Faulty Proof of Origin
Conclusion: Legal Certainty through Precise Determination of Origin
Assigning the correct origin of goods under 19 CFR § 102.20 requires a detailed understanding of production and the supply chain. Only complete documentation and precise adherence to legal requirements protect against costly penalties and subsequent charges. Those who review and control compliance early minimize risks and secure their own competitiveness.