Recently, the U.S. administration has expanded the scope of retaliatory tariffs on Chinese goods under Section 301 of the Trade Act.* Consequently, additional caution is needed when exporting products to the U.S. that are manufactured or assembled in Korea but include certain component parts sourced from China (hereinafter referred to as “Korean-Chinese Finished Products”). If the U.S. Customs and Border Protection (“CBP”) determines these Korean-Chinese Finished Products to be of Chinese origin rather than Korean origin, there is a risk of tariffs being imposed at rates ranging from 25% to as high as 100%, depending on the product.
Therefore, when manufacturing products intended for export to the U.S., a close review must be conducted on the compliance standards for determining the country of origin of U.S. imports. The CBP operates an advance ruling program, allowing importers to verify in advance whether their intended imports meet the rules of origin. Since these rulings are legally binding, obtaining an advance ruling that designates the goods as of Korean origin can effectively mitigate the risk of the products being classified as Chinese origin and subjected to additional tariffs during U.S. customs clearance.
When two or more countries are involved in the manufacturing process, as in the case of Korean-Chinese Finished Products, the country of origin is determined by evaluating the source of the core components forming the final product and assessing whether the manufacturing process in a specific country resulted in a “substantial transformation” of the product. This determination is based on various factors, including the product’s characteristics, relevant legal precedents, and CBP interpretations, and may vary depending on the specific circumstances of each case.
We were retained by Company A, an affiliate of a Korean conglomerate, to apply for an advance ruling request on country-of-origin classification to the CBP for a machinery product manufactured domestically using partially Chinese-made materials, intended for export to the U.S. Collaborating with a leading U.S. law firm, we oversaw the entire process, from preparing the necessary documentation to submitting the application on behalf of the client. As a result, in 2024, we successfully obtained CBP rulings of Korean origin for a total of six cases involving Korean-Chinese Finished Products.
By obtaining an advance ruling that determined the products’ country of origin as Korea, our client was able to eliminate the risk of paying additional tariffs applied to Chinese-origin products. This process also helped our client establish a clear guide for clarifying the terms and conditions of their contracts with U.S. customers, which helped shape their export strategies. Furthermore, by enabling an analysis of whether the domestic manufacturing processes for the relevant product lines meet the requirements set by U.S. customs regulations, we provided valuable guidance for the client’s future business endeavors in the U.S., earning high praise from our client. This case is regarded a noteworthy accomplishment that showcases our firm’s capabilities.
* Section 301 of the Trade Act of 1974 authorizes the U.S. President to take trade retaliatory measures, such as imposing tariffs, against trading partners engaging in unfair practices that restrict U.S. trade.
