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This is Planet Money from NPR. Maureen Thorson is a poet. She's published three books of poems. She's been featured in fancy literary journals from The Horseless Review to Ploughshares.
If you ask poets if they're having fun writing poetry, I think you would get very mixed reactions. I'm not sure we do it for fun in the typical sense of fun. As a poet, Maureen often finds herself puzzling over the fundamental nature of things. Like what makes a chair a chair or a hat?
A hat? What makes this, this, and that? That. And asking those questions is kind of her job, but not just because she's a poet.
You see, Maureen also happens to be one of the top international trade lawyers in America, sort of poet by night, trade lawyer by day. So you're like Hannah Montana, basically. I don't know which part is my website. I don't know why either.
It's the trade lawyer part that Hannah Montana part and then poet part is the man. Yeah, I'm not sure. As an international trade lawyer, Maureen helps companies navigate the complicated world of tariffs. A world that is also full of questions about what makes this, this, or that, that.
Pretty famous ones are our X-Men dolls or toys. I think we did an episode on that. Our hockey pants, clothing or equipment. Our certain cough drops are the candy.
Okay, so the answers, by the way, are that most X-Men are toys. Hockey pants are considered sports equipment, and cough drops, well, it actually depends on the ingredients. Some of these questions really get, I mean, you can, it kind of feels like you're staring into the void and it's staring back and whispering at you. Is it?
Recently, the questions vexing Maureen have taken an even stranger in more philosophical turn. Maureen's clients, CEOs at Companies Big and Small, have been asking her about where things come from, their national identity, their country of origin. Like, what makes a Canadian product Canadian or a German product German, or especially what makes a Chinese product Chinese? And when does it stop being Chinese?
For Maureen's clients, those questions matter now more than ever. On April 2nd, President Donald Trump announced his plan to put big new tariffs on dozens of countries, and we caught up with Maureen just a couple days later. Oh man, the past 48 hours have been completely bonkers. I am the human equivalent of a computer with 90 browser tabs open, so if I see them a bit dazed, I am dazed.
That's why. Maureen's clients have been bombarding her with questions, because millions of dollars are at stake, whether something's a product of Canada or Germany or China could soon mean the difference between no tariffs or 20% tariffs or more than 145% tariffs. These tariffs all depend on a product's country of origin. But figuring out something's country of origin is far from simple.
So, US law is very unique in its approach to country of origin. What's the part that is shocking to people? That there's not a nice bright line one size fits all origin tests. For example, imagine you take peanuts that were grown in China, ship them to a factory in Brazil, and grind them into peanut butter.
Is that peanut butter a product of China, or has it become a product of Brazil? Maureen says people often assume that there must be some logical method, like maybe just to compare the costs of the ingredients and the labor that come from each country or something. And she has to tell them, oh no, the way we do it in the United States is a lot weirder, a lot more confusing, and a lot more unpredictable. Hello and welcome to Planet Money, I'm Jeff Guo.
And I'm Lexi Horwitz-Gazi. Virtually everything that's imported into the United States, by law, must have a so-called country of origin, the place where it officially came from. And figuring out that country of origin matters, because that's what customs goes by when it's enforcing tariffs. Today on the show, when you buy something at the store and it says made in China, or made in France, or made in the USA, what does that actually mean?
How much of it actually came from China or France or the USA? And in this age of supply chains that crisscross the world, does our system even make sense anymore? A grassy green lawn might look nice, but it's going to eat up resources, like drinking water and the gas you put in the mower. You can do a solid for the environment by ditching even just some of your lawn and replacing it with a wildlife friendly garden.
LifeKit has kept you started, no green thumb required, listen to the LifeKit podcast in the NPR app, or wherever you get your podcasts. Take any object that might be around you. I mean it, like a pencil, TV remote, a pair of earbuds. Hold it in your hand and look closely.
Chances are you're going to see a little label. Maybe it's engraved, maybe it's printed, that says made in China, or made in Malaysia, or made in USA. Marine says her clients are often surprised to find out that those words can mean very, very different things. There are actually two sets of rules here, one for American products and one for products from the rest of the world.
So let's start with the rules for American products. When something says it's made in USA, that doesn't just mean that it's manufactured in the United States. It also means that virtually all of the parts and ingredients and labor came from the USA. Made in USA means this is pretty much fully USA down to the souls of its little American shoes.
And it doesn't have almost any foreign material in it. There are some exceptions for things like clothing and some types of meat. But basically, if an American product isn't 100% American, it cannot say made in the USA. This is why you sometimes see things that say assembled in America with foreign parts.
But for American products, there is also the option to just not have a label at all. So when you go to the store, you might notice some products that don't tell you where they come from. I see it a lot with some sort of cosmetic adjacent goods like shampoos. And my assumption is they are actually making the shampoo in the United States, but they're probably importing fragrance from abroad and other things.
Yeah, these are American products. They're just not 100% American. So they can't use the made in USA label. The rules are very different for products that are not American.
Basically, anything that's imported, it has to be labeled with the main country it came from. It's so-called country of origin. That's been the law since 1890 when Congress wanted consumers to know where their imported products were coming from. So those labels that say product of China or product of France, they are not optional.
You can think of country of origin as kind of like a product's citizenship. But in the US, how we determine that country of origin can be wildly counterintuitive. It's not necessarily where that product got on the container ship to come here. It's not necessarily where most of its ingredients are from or even where most of the manufacturing happened.
You can have products, including fairly sophisticated products where most of the components and the assemblies all happening in China. But the product is not deemed Chinese under US laws. Marine has helped companies import a lot of different products. She's not allowed to say exactly what she's worked on, but it's things like industrial engines and smartphones and also flower pots.
She helps companies figure out that products country of origin, get it labeled right, and declare it to customs. And this is something that a lot of importers are confused about. US Customs doesn't have some kind of giant list of all the products in the world with a big chart of their origins and their tariff classifications. Wait, they don't?
No, they don't. It seems like that's their job. No, that's your job, Mr. importer.
So you have to self-declare. You do. And then customs can come back and say, hey, so I noticed this particular product shipped out of Thailand, but you claimed it as Japanese. Prove it.
Now we should say for many years, companies didn't think too too hard about country of origin. Most of the time what you labeled something or what you declared to customs didn't matter that much because for most countries, tariffs didn't really differ that much. But then Donald Trump was elected president for his first term. And country of origin suddenly started to matter a lot.
Because in 2018, Trump put big tariffs on lots of Chinese products. And how does customs determine what is a Chinese product? Well, it's anything whose country of origin is China. That is when Maureen's phone started ringing off the hook.
So suddenly companies were coming in and saying, well, I do do some manufacturing in China, but a lot of my parts are coming from outside of China, or I'm really only sending this thing to China for packaging or testing. Do I still have to pay duties on this as a product of China? Even though I'm exporting it from China, but am I really making it in China? Other companies were trying to switch up their manufacturing, so their products wouldn't count as made in China anymore.
They're asking Maureen, how much can I bend the definition of made in China? If I move some or all of my manufacturing operations from China to Malaysia or China to Vietnam, how much do I have to move before the goods will no longer be considered Chinese by US Customs? And I don't have to pay duties on Chinese products. And whenever clients ask Maureen questions like this, which they are doing more and more these days, she has to take a deep breath, sit them down and say, okay, here's how we determine a product's country of origin.
There's one main rule in the US is called the substantial transformation test. And it says a product gets its country of origin from the last place where it went through a substantial transformation. A substantial transformation is processing from which the article emerges with a new name, use or character. Are you literally quoting this test?
I believe I am. I have had to memorize it. I'm intimately familiar with this. Raising a new name, use or character.
That is the entire rule. And the way it works is if you send something to say Vietnam, and there you change it enough that you're basically turning it into a new thing, you're giving it a new name, user character, then that thing now counts as a product of Vietnam. A new name, use or character. Wow, that's super easy to say.
But as you try to apply it to everything in the universe, from lawn chairs to fruit salad to a bottle of aspirin, you can do some philosophical questions about the thinginess of things. Where is the fruit salad? Nisabas fruit salad imparted to the fruit salad. Okay.
Rien says to really understand the substantial transformation test, you have to understand where it came from and the history of how courts and customs officials have tried to apply it. For that, we called up someone who is an expert in this history. He's kind of a legend of trade law. His name is Larry Friedman.
And Rien actually knows him pretty well. Hey, Larry, I just had emails with Larry today. Did you really? Yeah.
He's so nice about answering my emails and I try to repay that kind of by not emailing him unless I'm like, I have so genuinely stumped. Wait, so is Larry like your Yoda? I think he's kind of like a universal Yoda for the customs car. That's a funny thing.
I did tell her the other day. There is no try. There's only do. I did not say that.
Larry is a longtime trade lawyer. He's taught trade law at the University of Illinois and he co-wrote the textbook on customs law. Larry says the origin of the substantial test was this Supreme Court case from 1908 involving corks. A US company was importing corks from Spain, cleaning them up a bit, standing on a logo.
And the Supreme Court said that is not a substantial transformation because cleaning up the corks did not give them a new name. It didn't change how they were used and it didn't really even change their character. They started out as corks and they were still corks here in the US. This Supreme Court case created the idea that in order for something to really be transformed, you have to give it a new character or name or use.
Is that phrase new character name or use? Is that just like tattooed on your heart? It is embedded in my brain. It'll probably be tattooed on me someplace sometime.
Or just put it on your tombstone. I don't know. Put that in my will. Here lies Larry with a new name character.
No, I'm sorry. It took us there. To tell the story of how the thinking around name character and use has evolved over the decades. We're going to walk through three examples.
The first one is from the 1940s and it involves hair brushes. A company in the US made brushes. So they imported wooden handles from Japan. The handle had no bristle on it.
In the United States, they put the bristles on and it became a brush. Now, customs wanted the company to call these hair brushes Japanese because the majority of the brush was the wooden handle, which came from Japan. But the company disagreed. So the question for the court was, did this simple act of adding bristles to that wooden handle transform it into an American hairbrush?
That's going to be a big yes for me, Doug. Look, this thing's getting a new name, a character and a new use. You can't just use some block of wood to brush your hair. Come on.
Right. And that is exactly what the judge said. The judge said there is a substantial transformation here. What you now have is an American hairbrush.
And Larry says this hairbrush case shows you how even a basic manufacturing step, like gluing some bristles on, can change the product's country of origin. But by the 1980s, manufacturing was getting way more complicated. You could argue that any step in the process changed a product's name, character or use. So where would courts draw the line?
All of this came to a head in a fight over boat shoes. That's coming up after the break. Richard Reeves is unimpressed by online influencers who peddle ideas about hyper masculinity. You're talking about boys and men.
Where's your policy agenda? You're good on podcasts, but we've actually done a bunch of stuff for boys and men. Sorry. What have you done?
Ideas about the next era of manhood. That's on the Ted Radio Hour podcast. Listen on the NPR app or wherever you get your podcasts. If you look at how modern manufacturing works these days, it's hard to pinpoint exactly where a thing even becomes a thing, because most things are manufactured in many different steps scattered across the world.
Yeah, a smartphone might be made out of parts from dozens of countries. And those parts themselves are made up of other smaller parts from dozens of other countries, all of which makes the process of trying to figure out something's country of origin incredibly tricky. In the 1980s, courts were just starting to confront this confusing new reality in a case about both shoes specifically, spare top ciders, you know, those prypy looking leather shoes with the rubber sole, the company making those shoes, they were getting the upper half from Indonesia. The upper included everything that you see basically above the sole of the shoe.
So it was kind of like a sturdy sock with the shoe, but without the rubber part that makes you able to use the shoe as an implement to walk on, basically. The company would take those leather uppers and then in the United States glue and stitch on the rubber soles. And the question was, did that count as a substantial transformation? Did the act of attaching soles onto those uppers turn them into American shoes?
Or was the finish shoe still a product of Indonesia? Well, based on the hairbrush case we talked about, it seems like you wouldn't have a functioning shoe here until you glued on that sole. Like that's the step that would create a change in the name and use and character, right? Yes, right?
But no, the court said what is happening here in the US is just too simple. They're like, you're just assembling these pre-made parts, the real work to make the shoe, the complicated process of cutting and sewing all this leather, that happened in Indonesia. So this shoe, if you know you finished it in the US, has to be labeled as an Indonesian shoe. The name of this big boat shoes case was Uneroil.
And Larry says, Uneroil spread the idea that a substantial transformation involves more than just giving something a new name or character or use. You might have to change something's essence. According to the judge, the essence of the shoe was not substantially transformed and it remained a product of whatever country that upper came from. Maybe I misunderstand what a shoe really is.
And if so, that's my bad. But if the shoe doesn't have the sole, if it doesn't have the literal rubber or whatever, that protects your feet from the harsh realities of the ground, then it's not a shoe. Yeah, you're right. I think Uneroil is not a good decision.
Yeah. Larry is not the only one who thinks this was not a good decision. But the boat shoes case set a really influential precedent. As manufacturing has gotten more complicated, courts and customs officials have focused more and more on what is the essence of a product?
And when does that change? And you can see this maybe as a more stringent way of looking at a product's character. So it's no longer enough to just change a product's character. You have to change something essential about its character.
These days, you can build an entire laptop in China where most of the parts and labor come from China. But if the motherboard is from Vietnam, customs might say that laptop is actually Vietnamese, because the essence of the laptop is in the motherboard. So what is the essence of something? What is the essence of anything?
This is the new question at the heart of the substantial transformation test. And it's now creating all kinds of strange puzzles, like in our final example, which involves sticky notes, like Post-its, those paper, you peel off a sheet and stick it to the wall, stick it to the fridge, stick it to the forehead. Yes. And this sticky sticky note situation happened back in 2020.
This was shortly after Trump put a bunch of tariffs on products from China, and Staples, the office supply company, was trying to figure out what is the country of origin of our sticky notes? Like do we have to pay the tariffs on China? And Staples was wondering this because they had a whole multinational plan for manufacturing these sticky notes. First, they would start with the paper, a jumbo roll about three feet long, and this would come from either Japan or Indonesia.
Then the sticky stuff, a special patented glue, and this would come from Taiwan. Finally, the assembly, a machine would unspool that giant roll of paper, apply the glue, cut the paper into sheets, and that would come the Post-its. All these final steps would happen in China. And the decision that customs came to about where the sticky notes were last substantially transformed, it really threw us for a loop.
So we asked Maureen Thorson to help us make sense of their logic. I'd actually read that ruling before, so I was like, oh the sticky note one, okay, okay, no sticky notes. So in this ruling, customs wrestled with the question of, what is the essence of a sticky note? Is it the paper that you write on?
Is it the glue that makes it sticky? Or is a sticky note not really a sticky note until you put the glue and the paper together? Yeah, I'm gonna go on an obvious limb here and say that it seems like the essence of a sticky note is like the meeting of paper and glue. It's like a moment where the paper and the glue are together.
Right? I feel like that is what most people would say. And yet, here's what customs decided. They said, when you get down to it, we think that the essence of a sticky note is really the paper.
Sticky note kind of started its life as paper, ends its life as paper, and it's not particularly heavily processed paper. And so the underlying material is really what's important here, and that's paper and the paper is the dumbo roll. Okay, but Maureen. Yeah, I have a paper right here.
Yes, I have a paper right here. Okay, it's not a sticky note. It's just a piece of paper. And look, it's not sticking.
It's not sticking. It's not sticking to the wall. Yeah, that's the goofy bit about the sticky notes ruling is I think it is a perfectly rational point of view to say the sticky note is a sticky note is the sticky bit. That's what makes, so putting glue on it should be what substantially transformative.
But customs did not see it that way. And partly they were thinking, well, is it that big of a deal to just cut up some paper and add glue to it? We should be focused on the more complicated step of actually making the paper, because the paper is the essence of a sticky note. So the sticky note ruling is a bit unusual.
But if you dig into their logic, I think they were persuaded by the fact that what do you use a sticky note for to write on, like paper, because it's not paper. So it's not paper that is important here. The stickiness is a bell and whistle to the sticky note, not the essence of the sticky note, not the character of the sticky note, even as you're scratching your head and going, but it's sticky, sticky note. So according to customs, the country of origin of these sticky notes would not be Taiwan, where the glue came from.
It wouldn't be China, where the roll of paper would actually get chopped up and glued up and turned into sticky notes. No, customs said these sticky notes would be considered products of the country where the original paper came from, either Japan or Indonesia. So, staples would not have to pay the tariff on Chinese products. The sticky note case really shows you what has happened to the substantial transformation test.
How unpredictable it can be nowadays. Because more than ever, courts and customs officials are asking these weird philosophical questions, like what is the essence of a sticky note? When does a sticky note become its true self? Questions that are hard to answer in any kind of consistent way.
Which can land you in some pretty absurd places. And there is another way to do this. Whenever we sign individual free trade agreements with other countries, they will often insist on not using our weird, loosey, goosey substantial transformation test. For our free trade deal with Canada and Mexico, we had to agree on a new system with a whole compendium of extremely specific rules for determining a product's country of origin.
Depending on the product, the rules might have to do with how much labor came from a country, or the value of the parts that came from a country. Or even whether a key chemical reaction happened in a given country. Now, there are a few reasons why the substantial transformation test is still, by and large, the law of the land in the US. For one, this is just the way we've always done it.
And the test is really flexible. It doesn't require any complicated accounting, or record-keeping, or compendiums of rules. But also, country of origin just didn't matter as much in the past. For decades, our tariffs treated most countries more or less the same.
But recently, that has all started to change. Since April, Maureen spent on the phone with her clients at all hours trying to explain to them our weird and wacky system of determining country of origin. What's the reaction from your clients when they're like, Maureen, can you just tell me what country of origin is this product? And you're like, oh, hold on.
There's a whole... Yes. What is the reaction? It really depends.
Everything from stunned disbelief where the reaction was... It can't possibly work like that. That can't possibly be right. So, okay, let's figure it out.
Maureen figures it out by talking to the engineers, asking for design sketches, getting a whole list of materials. And then she sees if she can try to make an argument for whatever country she thinks the country of origin is. For companies trying to avoid China as their country of origin, Maureen might help them figure out how much of their manufacturing they actually have to move out of China. Or maybe they can keep making the product in China.
They just have to get a key component, the essence of the product from a different country. That's kind of the game these days. And lawyers like Maureen are in high demand. Lawyers who can, you know, wax poetic about the real deep-down essences of things.
This episode of Planet Money was produced by James Need with help from Silly Douglas, was edited by Jess Jang, back checked by Sero Hwadez, and engineered by Quacey Lee, Alex Goldmark, his executive producer. Special thanks to Bill Ryan, Robert Shapiro, and Damon Hike. I'm Alexi Horowitz-Gazi. And I'm Jeff Guo, this is NPR, thanks for listening.