U.S. Country-of-Origin Rules for Goods Imported From Canada and Mexico

Last Updated: Feb. 10, 2026

O​​​​n July 6, 2021, the U.S. Customs and Border Protection (CBP) and the U.S. Department of the Treasury published an interim final rule implementing USMCA provisions related to marking rules, tariff-rate quotas, and other USMCA requirements. On the same date, CBP published a separate proposed rule on non-preferential origin determinations for merchandise imported from Canada or Mexico. The proposed rule sought to expand the use of the Part 102 rules for non-preferential origin determinations beyond their existing applications.

The proposed rule should not be confused with the rules CBP currently applies. Current CBP rulings continue to distinguish between the Part 102 rules for marking purposes and the substantial transformation test for Section 301 trade remedies.

For Canadian exporters, understanding this distinction can help prevent incorrect assumptions about a product’s U.S. country of origin.

The 2021 Proposed Rule

The 2021 proposal addressed differences in how CBP could determine the country of origin of goods imported from Canada and Mexico for different non-preferential purposes.

CBP explained that the Part 102 regulations provide tariff-based rules for determining origin for marking purposes. The proposal would have expanded those rules so CBP could use them for other non-preferential origin determinations as well.

The proposed change aimed to create greater consistency when determining the origin of the same merchandise for different customs purposes. CBP said the proposal could reduce administrative burdens and inconsistencies associated with applying different origin methodologies.

However, exporters should not treat the 2021 proposal as the current general rule for all non-preferential origin determinations. Current CBP rulings continue to apply Part 102 for marking purposes and substantial transformation for Section 301 trade-remedy purposes.

What Are the Part 102 Rules?

The Part 102 regulations establish a hierarchy for determining the country of origin of certain imported goods for marking purposes.

For goods imported from Canada or Mexico, CBP applies the Part 102 rules to determine country of origin for marking purposes. Section 102.11 establishes a hierarchy that considers whether the good is wholly obtained or produced, produced exclusively from domestic materials, or meets an applicable tariff-shift requirement.

When the first two steps do not establish the origin, Section 102.11(a)(3) directs CBP to examine whether the foreign materials incorporated into the good undergo the applicable change in tariff classification under Section 102.20 and satisfy any other applicable requirements.

The Part 102 framework provides a structured approach to marking determinations for goods from Canada and Mexico rather than requiring CBP to apply the substantial transformation test to every marking determination.

For a Canadian exporter, the country shown for U.S. marking purposes can therefore depend on the specific manufacturing process, the materials used, and the applicable Part 102 rule.

What Is the Substantial Transformation Test?

The substantial transformation test provides a different method for determining country of origin for certain non-preferential purposes.

CBP generally considers whether processing in one country results in an article with a new name, character, or use compared with the article before processing. CBP bases the determination on the totality of the evidence and the specific facts of the transaction.

Depending on the product and circumstances, CBP can consider factors such as:

• The nature and extent of the manufacturing process
• The origin and importance of the components
• The extent to which components lose their individual identities
• The complexity of the processing
• The resulting product’s name, character, or use
• The overall circumstances surrounding production

CBP evaluates these factors based on the specific facts presented in each ruling.

Part 102 and Section 301 Can Produce Different Results

The distinction between Part 102 and substantial transformation remains relevant for Canadian exporters.

CBP’s rulings state that Part 102 determines country of origin for marking purposes, while the substantial transformation test determines country of origin for purposes of applying Section 301 trade remedies.

As a result, the same merchandise can potentially have one country of origin for marking purposes and another for Section 301 purposes.

For example, a Canadian manufacturer may perform processing on materials imported from another country. CBP could determine that Canada is the country of origin for Section 301 purposes if the Canadian processing substantially transforms the imported materials. The marking determination would follow the applicable Part 102 rules instead.

The outcome depends on the product, materials, and manufacturing process.

What Canadian Exporters Should Do?

Canadian exporters should review their products before assuming that manufacturing in Canada eliminates additional U.S. duties or changes the applicable country of origin.

Review the Manufacturing Process

Document the materials used in production and the processing performed in Canada. Detailed production records can help support an origin analysis and demonstrate what operations occurred in Canada.

Confirm the HS Classification

The tariff classification can affect the applicable USMCA rule of origin and the Part 102 tariff-shift analysis. Businesses should confirm the classification before making an origin determination.

Separate Marking From Trade-Remedy Analysis

Do not assume that one country-of-origin determination applies to every customs requirement. Determine whether the analysis concerns:

• Country-of-origin marking
• USMCA preferential treatment
• Section 301 duties
• Another trade remedy
• Quotas
• Government procurement
• Another customs requirement

Review CBP Rulings

CBP publishes binding rulings through its Customs Rulings Online Search System (CROSS). Businesses can search CROSS for previous rulings involving similar products, manufacturing processes, and origin questions.

A ruling involving another company’s merchandise does not automatically determine the outcome for another product. The facts must be sufficiently similar for the ruling to provide useful guidance.

Consider a Binding Ruling

When the country-of-origin determination has significant duty or compliance consequences, businesses can consider requesting a binding ruling from CBP.

CBP’s regulations on binding rulings explain the procedures for obtaining advance decisions on prospective transactions. A ruling can provide CBP’s position based on the facts and documentation submitted with the request.

Conclusion

The 2021 proposed rule concerning non-preferential origin determinations remains relevant background, but Canadian exporters should not treat the proposal as the current rule governing all country-of-origin determinations.

The proposal sought to expand the Part 102 rules to non-preferential origin determinations beyond marking. Current CBP rulings, however, continue to distinguish between the Part 102 rules used for marking purposes and the substantial transformation test used for Section 301 trade-remedy purposes.

For Canadian businesses exporting to the United States, the correct country-of-origin analysis depends on the purpose of the determination. A product’s marking origin, USMCA preferential origin, and trade-remedy origin can involve different rules.

Canadian exporters should review their manufacturing processes, tariff classifications, sourcing information, and applicable U.S. trade measures before making origin claims or calculating landed costs.

Book a meeting with GHY International to discuss your U.S. import and export requirements with a trade specialist. GHY can also assist with customs compliance, origin analysis, and duty planning to help you make informed decisions before shipping your goods.