KPMG report: Recent U.S. Trade Court decision on customs “origin”

How the decision arguably challenges precedent concerning CBP's “substantial transformation” standard

Challenges precedent concerning CBP's “substantial transformation” standard

Determining the “country of origin” of imported goods for customs purposes is generally not a straightforward or objective exercise, and the consequences of getting it incorrect can be costly, subjecting imported goods to marking penalties and potentially significant Section 301 tariffs as high as 25 percent. Goods not properly marked with the country of origin may also be considered restricted and excluded from entry into the United States. These determinations have been made more challenging over the years by seemingly arbitrarily and subjectively applied tests which the Court of International Trade (CIT) recently called into question in Cyber Power Systems (USA) Inc v. United States, Slip-Op. 23-24 (February 27, 2023). 

Read a March 2023 report [PDF 277 KB] that discusses how the decision in Cyber Power Systems arguably challenges precedent concerning U.S. Customs and Border Protection’s (CBP) “substantial transformation” standard for determining the country of origin of imported goods, and may spur companies who have considered altering supply chains or manufacturing operations in order to obtain different “origin” outcomes for tariff purposes to reassess their analysis or seek reconsideration of past CBP origin determinations.


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