Country of Origin (COO)

From the perspective of the producers . . .

When, as consumers, we walk into a store to buy a new piece of kitchen equipment, many of us turn the item over to check the price, and some of us also make a point of noting the label “Made in . . . (a specific country).” Research* (over a thousand studies) has demonstrated that what the label says can affect buying decisions to some degree, with positive reactions when goods are made in the country in which we live, and a range of reactions from “affinitive” (friendly) to “aversive” (less friendly or hostile) to goods produced in other countries.

Added to this is the expansion of other criteria used in making buying decision. Where, in the past, price/value predominated, today many are considering the processes used in manufacturing against such criteria as sustainability (how they impact the environment), labor relations, and the humane treatment of animals. Books and articles began to be published that traced such ordinary goods as coffee, bicycles, newspapers and automobiles back along each link of the supply chain, domestically and abroad, to quantify and illustrate the impact each link has on factors that go far beyond price/value. The examination of automobiles includes analyses all the way down to how many pounds of steel, iron, plastics, fluids and lubricants, aluminum, rubber, glass, copper and brass, and other materials it is composed of, how those materials are produced, where they come from, as well as their impacts on the physical and political environment. ** Country of Origin labeling (COOL) then began to increase in significance because countries themselves acquired reputations, both deserved and undeserved, stemming from practices that companies within their borders employed as producers of raw materials as well as manufacturers of sub-components flowing through a multi-tiered network into final products.

Taken together, the complexity of multi-tiered supply chains, and the changes in levels of consumer awareness, have made Country of Origin (COO) labeling a factor in competition, and along with that, a subject for regulation. Every country has drawn up guidelines for labeling goods so that similar criteria are used to level the playing field for competitors in the marketplace. In the US, a set of regulations emerged by 1998 to support claims of having been made in the US, because of the factors that affect competitive position. *** Various calculations are used to make a final determination of the Country of Origin. Among them are estimates of the proportion of value has in the cost of goods sold, as well as the location where the last significant transformation to the product occurred.

From the perspective of the producers – our customers and their suppliers - Country of Origin (CoO) labeling plays an essential role that goes beyond the marketing aspect described above. Accurate labeling and tracking of the Country of Origin for every component of a product is much more than a marketing or government regulation issue. Along with Certificates of Analysis (CoA) and Certificates of Conformance or Compliance (CoC), Country of Origin (CoO) labeling applied to everything that goes into a finished product allows our customers to speedily pinpoint and respond to disruptions anywhere in a complex, multi-tiered supply chain.

For example, the production of something as complex as a computer might depend on something as simple as a raw material that comes from a far-off mine, a mineral used in making a key component of yet another component. Any disruption of this small link in the chain, through natural disasters, weather events or political upheavals could disrupt the production of the much more complex end product. By tracking each component in the supply chain through its Country of Origin labeling, customers using GSQA can search them by country as soon as they have word of a threat of any kind. With accurate and accessible tracking, our customers have the tools to identify the threats, and to go into action, generate alternative sources of supply, and therefore keep their production and revenue generation cycles intact.

Country of Origin (CoO) labeling and effective tracking saves lives. The complexity of multi-tiered supply chains in the food and agriculture sector makes it almost inevitable that some sub-standard products will make their way into the food supply. How powerful and effective a producer’s response is to such situations determines how damaging these breakdowns are to both people, and to the reputation of the producers and its network of suppliers. Our customers are able to quickly identify their sources of agricultural goods, and act effectively to isolate and stop the problems from spreading out of their control. The passage of the Food Safety and Modernization Act of 2011**** means that the Food and Drug Administration now has the authority to order a recall of food products that, except for infant formula, had been in the hands of food manufacturers and distributors. Along with Certificates of Compliance or Conformance (CoC), and Certificates of Analysis (CoA), the significance for Country of
Origin (CoO) labeling becomes even clearer now that the law enhances the FDA’s power to oversee foods produced overseas and imported into the US; the FDA can prevent food from entering the country if some facility in the supply chain has refused US inspection. The law calls for new tools to support this ability to secure the food supply. As the following excerpt from the FSMA of 2011 (Sec. 204, Note 21 USC 2223) describes a part of its mandate, it is to:

A) develop and demonstrate methods for rapid and effective tracking and tracing of foods in a manner that is practicable for facilities of varying sizes, including small businesses;

(B) develop and demonstrate appropriate technologies, including technologies existing on the date of enactment of this Act, that enhance the tracking and tracing of food;

The existence of multi-tiered supply networks in the food and agriculture industry makes Country of Origin (CoO) labeling and tracking critical to enable a company to respond with speed and power to stop damage to people and to its reputation. ****
____________________

*Usunier, J.-C. 2006. Relevance in Business Research: The Case of Country-of-Origin Research in Marketing. European Management Review, 3: 60-73

** STUFF: The Secret Lives of Everyday Things, John C. Ryan, Alan Thein Durning, ISBN 1-886093-04-0, published by Northwest Environment Watch, since then renamed to http://www.sightline.org/

*** http://business.ftc.gov/documents/bus03-complying-made-usa-standard

“Should manufacturers and marketers rely on information from American suppliers about the amount of domestic content in the parts, components, and other elements they buy and use for their final products?

If given in good faith, manufacturers and marketers can rely on information from suppliers about the domestic content in the parts, components, and other elements they produce. Rather than assume that the input is 100 percent U.S.-made, however, manufacturers and marketers would be wise to ask the supplier for specific information about the percentage of U.S. content before they make a U.S. origin claim.

Example: On its purchase order, a company states: "Our company requires that suppliers certify the percentage of U.S. content in products supplied to us. If you are unable or unwilling to make such certification, we will not purchase from you." Appearing under this statement is the sentence, "We certify that our ___ have at least ___% U.S. content," with space for the supplier to fill in the name of the product and its percentage of U.S. content. The company generally could rely on a certification like this to determine the appropriate country-of-origin designation for its product.

**** Food Safety Modernization Act of 2011
http://www.foodsafety.gov/news/fsma.html (FDA blog with FSMA of 2011 summary)
(www.fda.gov/Food/GuidanceRegulation/FSMA/ucm247548.htm)  (for article, paste url in browser)

For more information . . .