What are Certificates of Origin?
Certificates of origin are documents issued by authorities to certify that products were made in a specific country. These documents are used by authorities in importing countries to validate the origin status of products that traders try to import.
This information can be used in many ways, such as to:
- Determine import duty rates
- Determine import prohibitions
- Validate pre-import licensing information
There are 2 types of certificates of origin.
- Preferential Certificates of Origin
- Non-Preferential Certificates of Origin
Preferential Certificates of Origin
These forms are usually issued by Customs or Foreign Trade authorities to prove that product qualify for origin status according to the legal text requirements of Free Trade Agreements. For example, a manufacturer in Singapore would make an application to Singapore Customs to issue Form E, in order to show proof that the products they manufactured in Singapore qualify for FTA benefits in China. If approved, this Form would be couriered over to the importer in China to present to China Customs upon entry. If China Customs has no issues with the Form, the importer would be able to enjoy lower duties on the products. It must be noted that prior to applying to Singapore Customs for the Form E, the manufacturer must have already completed several administrative processes such as submission of the Manufacturing Cost Statement to Singapore Customs.
FTA Certificates of Origin are typically referred to as “Form XX”, for example:
- ASEAN China FTA: Form E
- ATIGA FTA: Form D
- ASEAN India FTA: Form AI
- ASEAN KR FTA: Form AK
These types of certificates directly impact revenue collection by Customs and when compared to other shipping documents are very sensitive and hence traders should exercise care when preparing them. Importers should also ensure that checks are done on the form’s information and format being attempting to submit them to authorities.
The legal text of all FTAs are published online and most include a section called the operational certification procedures that provide details relating to the administrative processes relating to the use of the specific FTA. Many FTA forms also provide overleaf notes that provide details regarding how the form should be filled in, who should sign and what stamps should be presented.
Traders should review these requirements in the operational certificate procedures and overleaf notes and ensure they are met.
Non-Preferential Certificates of Origin
These certificates are usually issued by a Chamber of Commerce or such similar entity. Non-Preferential Certificates of Origin (NPCO) do not allow the importer any duty privileges under Free Trade Agreements. However in many cases they are necessary. For example, if a pharmaceutical company has registered itself to import medical products manufactured in Malaysia into Thailand, upon entry into Thailand, Customs or some other authority like the Food Drug Administration may request to see the Non-Preferential Certificate of Origin to validate that the products were indeed made in Malaysia. Sometimes other documents such as the Certificate to Foreign Government or the Free Sale Certificate may be used in lieu of the NPCO.
Some countries may also accept self-declaration on rules of origin if provided by the supplier.
Rules of Origin
For a product to qualify for either type of certificate of origin, it must meet specific requirements such as containing more than a specific amount of locally originating content. Some common rules used to determine country of origin qualification are:
- Tariff shift rule. This means that the raw materials used in a manufacture of a product all have a HS classification that is different from the finished product at either the Chapter, Heading or Sub-Heading level.
- Local value content. This means that the raw materials or local costs of production meet a specific threshold percentage.
- Processing. This rule of origin requires that the finished good was manufactured using a specific process.
- Wholly obtained. This means that the product must have been grown or sourced entirely from the export country
- Combination of the above or others
Which rule can be used depends on the legal text of the FTA the trader is trying to use and/or the local regulations concerning determination of origin status, for non-preferential forms. Some FTAs also allow the trader to use cumulation or apply de minimis but these concepts will not be covered in this article. It must be noted that the rules of origin between 2 countries for a preferential form and a non-preferential form can be different, so technically it is possible for a product to qualify for a preferential certificate of origin but not a non-preferential one.