more-arw search

Q&A Forum

Country of Origin

We are bidding to supply software to a company in South America and have been told to provide a NAFTA certificate of origin to secure tax advantage ( or rather lessen the disadvantage of withholding tax on remittance of royalties by our customer).

We are a California company with sales, marketing, management and corporate finance all managed and controlled in CA. Our software products were conceived specified and designed in CA, but most of the coding was done in India, although the IP is owned in the US.

Our product will be delivered to the customer from our server in Texas.

What is the country of origin of our product?

Answers

Randall Hylek
Title: President
Company: RJH Consulting
(President, RJH Consulting) |

USA given that IP is owned by US company. Have you pulled together a Certifcate of Origin for other reasons? Randy

Topic Expert
Patrick Dunne
Title: Chief Financial Officer
Company: Milk Source
(Chief Financial Officer, Milk Source) |

I agree with Randy. I have had coding done overseas and then sold the product elsewhere, and it was always considered US IP. I would also assume you managed the development of the coding in the US which would also point to the US.

Topic Expert
Keith Perry
Title: Consulting CFO and Business Operations A..
Company: Growth Accelerator
(Consulting CFO and Business Operations Advisor, Growth Accelerator) |

Restating: Randall is correct; original origin only matters in the transfer of IP event, not in subsequent events. The original coding location could matter for things like off-setting credits for the engineering work, but you are well past that.

Topic Expert
Stephen Roulac
Title: CEO
Company: Roulac Global LLC
(CEO, Roulac Global LLC) |

Working globally and creating/developing/applying/monetizing original intellectual property in multiple diverse places, I know well the subtlety, complexity, and difficulty that can apply to defining 'country of origin.'

While in your fact situation the United States most probably is the indicated 'country of origin', the determination of place of origin can be daunting, even circuitous. In this regard, a pertinent reference is the Red Queen's admonition to Alice: 'A word means exactly what I choose it to mean,' for defining 'place of origin' is more interpretative than absolute, more nuanced than concrete, more dynamic than anchored.

Whereas 'made in ______' was once straight forward, clear cut, and unambiguous, place of origin is ever more complicated today, because work is done in many places, stimulus for innovation comes from many places, and defining places can be elusive as boundaries are porous/borderless/shifting.

Critical considerations influencing place of origin determination are social/economic and rules/regulation. Is the idea traceable to the place(s) of its originator OR to the place(s) in which the idea occurs to the person(s) who recognizes the idea? If the idea is developed in another place(s) by persons who are based in and/or have connections to still a different set of places, the 'place of origin' could be interpreted as not one place but many places. Does idea origination extend to development and implementation? The question becomes more subtle if stimulus for idea could occur when an individual is traveling in one place, which stimulates the idea, and then is recognized, articulated, and developed in another place(s). To the extent multiple people in more than one place are involved, the determination is more complex.

From the rules/regulations perspective, considerations of internal legal initiatives and regulations of jurisdictions in which certain economic activities occur apply. Influencing factors include where entities are domiciled, which entity(its) are credited with having done and/or holding title to the work, plus relationships between various parties: ownership, minority/majority interests, joint venture agreements, supplier contracts. Then, place status of various involved parties plus regulations may govern, explicitly or implicitly, the determination of place of origin.

Ultimately, the determination may lead to an idea attribution analysis, through tracing the many places and their relative contributions along the 'place path' to the different aspects of how ideas are originated, articulated, developed, deployed, marketed, and monetized.

Topic Expert
Jake Feldman
Title: Managing Director
Company: Global TaxFin Advisory Group LLC
(Managing Director, Global TaxFin Advisory Group LLC) |

Hi Simon,

I basically agree with the other responses about the US being the country of origin. Rules of origin focus on where the greatest value add was contributed and this is usually associated with the IP-owning entity. For a general overview on rules of origin, please see the WTO link below and other related pages on their website.

http://www.wto.org/english/tratop_e/roi_e/roi_e.htm

However, you should ideally consult the importing country's rules of origin for the sometimes surprising details. Try a web search with the country name and "rules of origin". or "certificate of orign".to find the government's trade website -- many have English language versions.

Alternatively, if deciphering the legalese and prepariing the form is too daunting and you need assistance finding trade, international business or international tax specialists, please get in touch.

Jake

Topic Expert
Simon Westbrook
Title: CFO
Company: Aargo Inc.
( CFO, Aargo Inc.) |

Thanks for your input. I will send for the red Queen if the going gets tough!

2058 views
Topics

Get Free Membership

By signing up, you will receive emails from Proformative regarding Proformative programs, events, community news and activity. You can withdraw your consent at any time. Contact Us.

Business Exchange

Browse the Business Exchange to find information, resources and peer reviews to help you select the right solution for your business.

Learn more

Contribute to Community

If you’re interested in learning more about contributing to your Proformative community, we have many ways for you to get involved. Please email content@proformative.com to learn more about becoming a speaker or contributing to the blogs/Q&A Forum.