An introduction to start export-import of your products with China

By Palak Bhagasra, Researcher, NITISARA

Products often pass through many countries before reaching us. In 2023, goods worth over $30 trillion were traded worldwide. So it’s not easy to say where a product is really “from.” This is where the idea of Country of Origin(COO) becomes important. This write-up explains what COO means, how it is decided, and why it matters for things like import taxes, trade deals and customer choices. It also talks about the two main types of rule-preferential and non-preferential-and the common ways used to figure out a product’s origin. With examples from countries like the U.S., EU, and India, it shows how different governments handle COO. Have you ever noticed that “Made in “tag on your clothes, electronics, or food products? Product often pass through several countries before they reach us, defining the country of origin isn’t always as straightforward as it seems. In this article, let’s break down what country of origin means, how it’s defined for international trade, and why it’s so important-for governments, businesses, and even us as consumers.

Introduction

In 2024, global merchandise exports reached approximately US$ 24.4 trillion, marking a growth of 2.3% and nearing the peak levels seen in 2022. Much of this trade is highly concentrated: China alone accounted for about 14.3% of the world’s total goods exports in 2024, making it the single largest origin country by far. Germany, the U.S., Netherlands and a handful of others make up the next tier, but their shares are significantly lower. Interestingly, the pattern of “country of origin” matters critically — products labeled as “Made in X” not only influence trade flows but also reflect supply chain structure, regulatory regimes, and comparative advantage: for example, over 66% of European exports remain within Europe, while in Asia, about 59% of exports are intra-regional; in contrast, regions like Oceania, Latin America, and Africa export mainly to extra-regional partners. These numbers underscore how origin matters—not just for trade volume, but for the geopolitical, economic, and regulatory dynamics that shape how goods move globally.

Building on the importance of identifying the Country of Origin (COO) in global trade, international regulations have evolved to ensure transparency, traceability, and fair market access. The World Trade Organization (WTO) sets the overarching framework through its Agreement on Rules of Origin, which distinguishes between preferential and non-preferential origins to standardize how countries classify goods. Complementing this, the World Customs Organization (WCO) provides the Harmonized System (HS) nomenclature and guidance on origin determination under its Revised Kyoto Convention, encouraging consistency among customs administrations.

At the regional level, frameworks such as the European Union’s Union Customs Code (UCC), the United States’ Trade Agreements Act (TAA), and ASEAN’s Rules of Origin Protocols define product-specific criteria and certification procedures. Similarly, CAROTAR 2020 in India and China’s Measures for the Administration of the Rules of Origin ensure compliance within their respective FTA commitments. Many trade agreements—like RCEP, USMCA, and EU-Japan EPA—mandate electronic certification and mutual recognition systems to minimize fraud and simplify cross-border verification. These evolving global standards not only help customs authorities prevent tariff circumvention and origin misrepresentation but also strengthen supply chain integrity in an era where goods often cross multiple borders before completion. As compliance expectations tighten, accurate origin documentation and digital traceability have become critical for exporters and importers navigating the complex web of international trade regulations.

What is Country of Origin?

Country of Origin refers to the country where product is considered to be made. This could be the place where it was grown, mined, manufactured, or significantly changed into its final form. The tricky part is figuring out which country gets the credit when a product is the result of many steps across different borders. For example:

• Mangoes grown in India have India as their COO.
• A laptop assembled in China Using parts from Japan, South Korea, and the U.S. might still be labeled “Made in china”- depending on the rules.

Why Country of Origin is important

You might be thinking: Does it really matter where something is made? Yes, it does. The COO affects many important things like:

1. Imports Taxes (Tariffs): Governments charge different tax rates on products depending on where they come from. A product from Country A may be taxed at 10%, while the same product from Country B could face 25%. That’s why businesses care a lot about how COO is decided.
2. Trade Agreements: Countries often make trade deals with each other that give special benefits-like lower taxes or faster customs clearance-to goods from partner countries. But those benefits only apply if the product is truly from that country.
3. Consumer Choices: People care about where products come from. Some prefer locally made goods. Others look for items from certain countries known for quality-like Swiss watches or Japanese electronics. COO labelling helps customers make informed decisions.
4. Political or Ethical Reasons: Sometimes, people avoid buying goods from a particular country due to political, environmental, or labor issues. Correct COO labelling helps support these choices.

Two Main Types of Rules for COO

Government and international organizations use rules of origin to decide where a product is “from.” There are two main types:

• Non-Preferential Rules: These are used in general situations-like labelling laws, import bans, or when anti-dumping taxes are applied. For example, if a country bans toys from Country X, customs will use non-preferential rules to check if a toy was actually made there.
• Preferential Rules: These are used when countries have trade deals. If India has an agreement with ASEAN countries, and a product from Thailand claims lower tax rates under this deal, it must meet the rules to prove it really “comes” from Thailand.

Common Ways to Decide COO

So how do authorities figure out the COO of a product? Here are some standard methods:

1. Wholly Obtained: This is the easiest case. A product is considered to be from a country if everything-materials, labor, and production-happened there. An Example is the Tea grown in Assam where India is COO.

2. Substantial Transformation: If different parts come from different places, the COO is usually the country where the product went through a major change. An Example: If car parts come from Japan, German, and India, but the final car is assembled in India, it may be labeled “Made in India.”

3. Change in Tariff Code: Every product has a code in the international trade system. If the code changes during manufacturing, that may mean the product changed enough to count as “made” in a new country.

4. Value Addition: Sometimes, the decision depends on where most of the product’s value comes from. For example, if 40% or more of product’s value is added in a certain country, that country can be considered the COO.

How Different Countries Handle COO

The determination of a product’s Country of Origin (COO) is a cornerstone of international trade, impacting tariffs, labeling, preferential treatment under trade agreements, and even consumer perception. However, each nation interprets and enforces COO rules differently, based on its trade policy framework, customs regulations, and global agreements.

1. United States: The United States applies the “substantial transformation” principle to determine a product’s origin. Under this rule, a product is considered to originate from the country where it underwent a significant manufacturing process that resulted in a new name, character, or use. For example, if imported steel is turned into automobile parts in the U.S., those parts may be labeled “Made in USA.” The U.S. Customs and Border Protection (CBP) oversees this process, and the rule plays a critical role in enforcing Section 301 tariffs and Buy American provisions.
2. European Union: European Union: The European Union follows a dual approach combining “wholly obtained” and “last substantial transformation” criteria. Products that are entirely grown, mined, or manufactured in one country are considered “wholly obtained.” For all other goods, the origin is assigned based on the last substantial processing that gave the product its essential characteristics. The EU provides detailed guidance through the Union Customs Code (UCC) and maintains product-specific rules under its various Free Trade Agreements (FTAs). Additionally, the Registered Exporter System (REX) simplifies certification for exporters, especially under preferential trade schemes.
3. India: India’s COO framework includes both non-preferential and preferential origin rules. Non-preferential rules apply to general trade and labeling requirements, while preferential rules apply to goods traded under FTAs or regional agreements. To prevent misuse of preferential tariffs, India enforces the CAROTAR, 2020 (Customs Administration of Rules of Origin under Trade Agreements) regulations. These rules require importers claiming lower tariffs under FTAs to maintain origin-related documentation and verify that the goods genuinely originate from partner countries. This system strengthens compliance, enhances trade transparency, and protects domestic industries from circumvention practices such as “route-through” exports.

Challenges in Today’s World

With supply chains spread across the globe, defining COO is more complicated than ever. Also, some companies fake the origin of goods to avoid taxes or got trade deal benefits. That’s illegal-and customs departments are getting stricter about checking origin documents. Now, governments are using technology like QR code, block chain, and AI to trace supply chains and make origin tracking more reliable. Country of Origin isn’t just a line on a label. It affects everything from taxes and trade to trust and transparency. As global trade continues to grow and change, understanding how COO works becomes more important- for businesses, governments, and even everyday buyers like us.

The views expressed do not represent the company’s position on the matter. Stay informed through Nitisara Platform and Blogs and adapt to emerging trends are poised to thrive in the competitive global marketplace. –  https://nitisara.org/category/blogs-updates.

 References

1. World Customs Organization (WCO). (n.d.). Rules of Origin. Retrieved from https://www.wcoomd.org
2. WTO. (2022). Technical Information on Rules of Origin. Retrieved from https://www.wto.org/english/tratop_e/roi_e/roi_info_e.htm
3. European Commission. (n.d.). Customs: Rules of Origin. Retrieved from https://taxation-customs.ec.europa.eu
4. U.S. Customs and Border Protection (CBP). (n.d.). Determining Country of Origin for Imports. Retrieved from https://www.cbp.gov
5. Directorate General of Foreign Trade (DGFT), India. (2020). CAROTAR Rules, 2020. Retrieved from https://www.dgft.gov.in
6. UNCTAD. (2021). Rules of Origin for Enhanced Trade. Retrieved from https://unctad.org
7. OECD. (2018). Trade in Value Added (TiVA): Origins of Value in Global Supply Chains. Retrieved from https://www.oecd.org