Country of origin (COO)
The Country of Origin (COO) is a critical label that indicates where a product is grown, harvested, manufactured, or produced. Many governments, including that of the United States, mandate COO labeling to provide consumers with essential information about the products they purchase. This labeling is particularly important in the context of globalization, where goods can be made with components sourced from multiple countries, complicating the determination of a clear COO. Supporters of COO labeling argue that it empowers consumers to make informed choices, especially when it comes to preferences for domestic products or concerns about food safety and quality.
In practice, determining COO can involve various methodologies, such as the concept of "substantial transformation," which identifies the location where a product underwent significant changes, or a value-added percentage approach that assesses where the most value was added during production. While some products must clearly display their COO, challenges arise with complex items that may have multiple origins, often leading to labeling on packages rather than individual items. Additionally, COO labeling can also affect tariffs, customs duties, and marketing strategies, as businesses navigate the regulatory landscape. Despite its importance, the topic of COO labeling can be controversial, with differing opinions on its necessity and implications for trade and consumer rights.
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Country of origin (COO)
The country of origin (COO) is a label that governments and organizations use to identify where products are grown, harvested, manufactured, or produced. Many countries, including the United States, have laws requiring certain products to have a COO label. In many cases, the COO is easily identifiable; however, it can be more difficult to identify the COO of products that have been manufactured in multiple locations. People who support COO labeling believe consumers should have as much information as possible about the products they buy.
Background
People have been trading goods between different countries for thousands of years. However, technological advances allowed globalization to become one of the most important factors in business during the twentieth and twenty-first centuries. Producers and manufacturers can now search for the cheapest possible resources and supplies from around the world. Governments and businesses have developed new rules and laws to regulate international trade because of its popularity. Many countries require products to be identified with a COO label because there is so much international trade.
For some products, determining the COO is very straightforward. If an object is grown or produced entirely in one country, that is the product’s COO. Nevertheless, some products’ COOs are not as clear. Globalization has encouraged people and companies to produce items using parts and pieces from many different places. It has also encouraged more companies to have production of certain goods take place in multiple countries. Products that are made in many locations or made of pieces from many places may not have a clear COO. Countries generally have rules about how to determine a product’s COO, and these rules are called rules of origin.
Overview
COO labeling laws are important for a number of reasons. The first is because it gives consumers more information about what they are buying. Some consumers prefer to buy their products from domestic farmers, and they can identify which food or products were made in the United States or in other countries because of the COO label. Another reason why COO labeling exists is because consumers want to know if certain products came from certain places. For example, when a country has an outbreak of a particular foodborne illness, consumers may want to avoid buying food from that country. Consumers might also want to buy some products from specific countries. For example, some people prefer to buy certain items, such as olive oil, from specific countries where the food is made. Some people also want to buy as many products as possible from their own countries. The COO labeling laws also deal with foods sold to the public. Grocery stores and other businesses have to label the COO for products such as meat, vegetables, and fish. Food COO labeling laws became stricter in the United States in the 2000s.
Countries and organizations determine COO in a few different ways. Businesses and people have to follow the rules based on where they are located and where they are shipping their goods. One of the most popular ways of determining a COO when a product is produced is multiple countries is an idea called substantial transformation. This idea states a good’s COO is the place where it underwent a substantial transformation to become the good that people buy in the end. This can mean the place where the good got its most important characteristics or where it became a new product.
Another way governments and companies use to determine COO is to use a value-added percentage. A value-added percentage breaks down the different processes that took place to create a final consumer good. The step that added the most value is the step that determines the COO. The location where that step took place is the good’s COO. The value-added percentage test is an objective measure for determining COO; however, it can also be very costly for companies because it takes a great deal of data and information to determine. Therefore, many companies support using methods other than the value-added percentage test to determine COO. Additionally, some companies use COO as a marketing tactic.
In the United States, federal law required items produced, grown, or made outside the United States to be labeled with their COOs. For example, clothing made in China includes a label stating where it was made. Shrimp caught in Mexico has a label about where it was caught. Some products are difficult to label with the COO. These products sometimes have their containers labeled because the individual items are difficult to label. The COO labels must be legible and permanent enough to stay on the product by the time the consumer purchases it, so the consumer is aware of the COO. The labeling laws are controversial, with some groups strongly supporting them and some groups strongly opposing them.
Just as the United States has laws and restrictions about disclosing foreign COOs, the government also has regulations about identifying products made in the United States. Some products—such as automobiles and textiles—that are made in the United States have to include labels that indicate they were manufactured there. Other products do not require labels, but producers can choose to give items a Made in USA label. To have a Made in USA label, a product must be mostly produced in the United States. The Made in USA standards apply only to goods sold in the United States. Goods made in the United States and sold in other countries are subject to the countries’ COO laws and regulations.
The COO is also significant because of the duties, quotas, fees, tariffs, and other customs rules placed on certain objects that are important to the United States. The United States puts duties and tariffs on products from other countries because they want more Americans to buy products made in the United States. The United States puts different tariffs on products from different countries, so it is vital for officials to know where all the products originated. Therefore, determining COO for all products imported to and exported from the United States is important.
The Federal Trade Commission finalized updates to the Made in USA Labeling Rule (the Labeling Rule) in August 2021. This update codified labeling standards for the “all or virtually all” language in the previous guidance. Some exceptions to the COO roles exist. For example, items that would be damaged by adding a label are not required to comply. If COO rules are not followed, the items may be seized and destroyed, delayed at the border, or financial penalties may apply.
Bibliography
“Complying with the Made in USA Standard.” Federal Trade Commission, July 2024, www.ftc.gov/business-guidance/resources/complying-made-usa-standard. Accessed 2 Nov. 2024.
“Country of Origin Labeling (COOL) Frequently Asked Questions.” USDA, www.ams.usda.gov/rules-regulations/cool/questions-answers-consumers. Accessed 2 Nov. 2024.
“Globalization in Business with History and Pros and Cons.” Investopedia, 27 June 2024, www.investopedia.com/terms/g/globalization.asp. Accessed 2 Nov. 2024.
“Marking of Country of Origin on U.S. Imports.” Customs and Border Protection, 22 May 2024, www.cbp.gov/trade/rulings/informed-compliance-publications/marking-country-origin-us-imports. Accessed 2 Nov. 2024.
Mariani, Michael. "What Is Country of Origin (COO) and How Does It Affect Your Risk Profile?" Z2Data, 6 Sept. 2024, www.z2data.com/insights/what-is-country-of-origin-how-does-it-affect-your-risk-profile. Accessed 2 Nov. 2024.
“Rules of Origin: Substantial Transformation.” International Trade Administration, www.trade.gov/rules-origin-substantial-transformation. Accessed 2 Nov. 2024.