Richard Ingrao

"...considerations that build brand loyalty can be more important than country of origin." "country of origin markings today have less to do with...consumer's rights...[than] with managing trade agreements"

Country of Origin? Who Cares, Really?

Section §134.11 of the Customs regulations provides that:

"Unless excepted by law, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), requires that every article of foreign origin (or its container) imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit, in such manner as to indicate to an ultimate purchaser in the United States the English name of the country of origin of the article, at the time of importation into the Customs territory of the United States."

Make no mistake about it; that's the law. And importers will save themselves a lot of trouble by ensuring that their imported goods are properly marked. The law is enforced every time a U.S. Customs inspector conducts a physical, or so called intensive, examination of imported merchandise - country of origin markings on the goods are the first thing the inspector will look for. Goods found to be not legally marked with the country of origin, whether marked prior to release or even if released for marking at the importer's premises, will be subject to delay and a second time consuming and burdensome Customs authorization process before they may be used or sold. Furthermore, the incident will count as a mark against the importer on Customs' books. Repeat offenders will have their goods seized, further ratcheting up the costs and delays.

Customs regulatory compliance issues aside, there are certainly some other very good reasons why importers should be interested in knowing where and even under what conditions their imported goods are "made." Varying political views notwithstanding, legitimate trade importers have no desire to support rogue states or companies that produce goods under dire conditions that violate basic human rights. But beyond that, do importers and consumers really care about country of origin? Are the country of origin marking laws obsolete in today's global economy? Are the laws an example of Customs forcing something upon disinterested importers simply because "it's good for you"?

The original intent of country of origin marking laws, which have been in existence for more than 100 years, was to inform consumers and protect domestic producers. However, this implies a general aversion to imported goods, which certainly does not exist today.

In United States v. Friedlaender & Co.(277 CCPA 297, 1940), even the court recognized that country of origin markings may not always be important to the ultimate purchaser by stating: "Congress intended that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will." [Emphasis added].

In the case of imported goods that are not for resale, the importer normally qualifies as the "ultimate purchaser" in the Customs regulations and usually sees no need for country of origin markings. After all, the importer knows he is buying imported goods. Goods of this type are typically those used in domestic manufacturing (machinery and tooling) or those that will be subjected to a manufacturing process that necessarily obliterates any country of origin marking. In fact, these cases are even eligible for a marking exemption under the regulations.

But what about an "ultimate purchaser" who is not the importer but rather a consumer at the retail level? A January 2001 National Highway Transportation Safety Administration report on a survey examining the effectiveness of the American Automobile Labeling Act (AALA) provides some interesting answers to this question, at least as it relates to the purchase of automobiles.

Although not a country of origin marking law administered by the Customs Service, the AALA deals with the same origin concept but in a specialized way unique to the auto industry. The AALA requires that new passenger cars, pick-up trucks, vans and sport utility vehicles manufactured after October 1, 1994 have labels specifying the percentage value of the U.S./Canadian parts content of each vehicle, the country where the vehicle was assembled and the countries of origin of its engine and transmission.

According to NHTSA's reportⁱ :

"In a survey of 646 people who had bought or leased new vehicles during the past 6 months or were planning to do so within 3 months:

• 23% knew of the existence of the AALA label
• 15% said they had seen an AALA label
• 7% had read the label at a dealership
• 5% said they were influenced by the label to any degree whatsoever
• 2% were moderately or strongly influenced by the label because it identified the vehicle's country of assembly
• No one said they used the labels to comparison-shop among make-models according to their percentages of U.S./Canadian parts content."ⁱⁱ

The report goes on to say: "The average new-vehicle customer considers 'Made in the U.S./Canada' less important than most of the other factors typically considered decisive in selecting a vehicle: eg., reliability, safety, price, styling."ⁱⁱⁱ On the other hand one sixth (17%) of the survey participants rate it critically important that new vehicles be made in the U.S. or Canada and, more generally, always try to "buy American" when they go to a store.^iv

The report tends to support the argument that country of origin is important to some people but none of the reports' many statistics seems to make the case that the percentage is very high. The report also tends to support the argument that considerations that build brand loyalty (reliability, safety, price, styling) can be more important than country of origin.

An International Trade Commission report^v is similarly unable to confirm that country of origin is critical important to consumers. The report states:

• "Country of origin is only one of many factors that consumers consider when making a purchasing decision. Often country of origin is less important than other factors such as price, quality, warranty, product features, brand name and the reputation of the seller; however, it can be the determining factor when making a purchase decision. Also, research suggests country-of-origin is more important to older than to younger Americans.
• The benefits of country-of-origin marking to consumers are not easily quantifiable…Research on whether consumers would pay to know the origin or products is limited, but several studies show that consumers are willing to pay more for products made in the United States.
• Consumer studies assessing the value of country-of-origin marking have yielded somewhat inconsistent results, although most domestic consumers indicate a preference for U.S. products over imported products…
• Country-of-origin marking is more important in certain product areas than others. Products most consistently identified in consumer surveys as being scrutinized for country of origin are automobiles, clothing, and electronics. Some surveys provide evidence that origin may be less important to consumers for certain products such as shoes, furniture, food, and toys."^vi

Importers should not come to the conclusion from this data that the requirements for country of origin marking will fade away due to lack of interest. Rather, rules of origin and their related country of origin marking regulations are here to stay. It's just that their use or effect has changed. The above studies suggest that country of origin markings today have less to do with protecting domestic industries or guaranteeing the consumer's right to make an informed "buy American" decision and more to do with managing trade agreements and a global economy of which they are a critical part. Nevertheless, as long as at least some consumers are making purchasing decisions based on brand loyalty and not on country of origin, importers would be well advised to remain country of origin marking compliant to avoid any violations, the legal consequences of which could have an adverse effect on their brand name.

1. NHTSA Report Number DOT HS 809 208, Evaluation of the American Automobile Labeling Act, Juanita S. Kavalauskas and Charles J. Kahane, PhD.
2. Id. at 3.
3. Id. at 4.
4. Id.
5. COUNTRY-OF-ORIGIN MARKING: LAWS, REGULATIONS, AND PRACTICES (Publication 2975; July 1996) Investigation 332-366.
6. Id. at 8.

RICHARD INGRAO, Principal, U.S. Import Compliance Group, Expeditors Tradewin, LLC. A licensed Customs Broker for nearly twenty years, Richard provides companies of all sizes with special expertise in the areas of classification, valuation and special trade programs management, including prototype, U.S. Goods Returned, GSP and NAFTA. Richard can be reached at (734) 857-5000 or at >richard.ingrao@expeditors.com

| back |