If you are in the business of international trade you would have no doubt heard about a Certificate of Origin.. But not everyone is familiar with what is a certificate of origin, why it is required, who issues it etc.. This article aims to clarify these points..
A Trade agreement is a contractual arrangement between countries concerning their trade relationships and how they conduct trade with each other..
Trade agreements may be bilateral or multilateral and could be in the form of
- a Regional Trade Agreement (RTA) which is a reciprocal trade agreement between two or more partners or
- a Preferential Trade Agreement (PTA) under which developed countries grant preferential tariffs to imports from developing countries
- a Free-Trade Agreement (FTA) is an agreement (like The African Continental Free Trade Area (AfCFTA) agreement) under which the participating countries agree to reduce trade barriers (import quotas and tariffs) and to increase trade of goods and services with each other..
Customs department in the importing country may require a “proof of origin” in order to determine whether or not the cargo that is imported may be subjected to trade measures such as the preferential duty tariff (for stuff that is imported from with the PTA bloc), free trade deals, prohibited goods etc..
As per WCO’s (World Customs Organisation) definition, a “proof of origin” is a document or statement (either in paper or electronic format) which serves as a prima facie evidence as to the origin of the goods.. A proof of origin may be
1. a “certificate of origin” which means a specific form, whether on paper or electronic, in which the government authority or body empowered to issue it expressly certifies that the goods to which the certificate relates are considered originating according to the applicable rules of origin;
2. a “self-issued certificate of origin” which means a specific form in which the producer, manufacturer, exporter or importer expressly certifies that the goods to which the certificate relates are considered originating according to the applicable rules of origin;
3. a “declaration of origin” which means a statement as to the originating status of goods made by the producer, manufacturer, exporter or importer on the commercial invoice or any other document relating to the goods;
In simpler terms, the ICC (International Chamber of Commerce) defines a Certificate of Origin (CO) as
“an important international trade document that certifies that goods in a particular export shipment are wholly obtained, produced, manufactured or processed in a particular country. They also serve as a declaration by the exporter.”
Below are two samples ..
The government authority or body empowered to issue this document is usually a Chamber of Commerce in the issuing country..
A Chamber of Commerce is an organisation setup to promote, protect and represent the interests of the various businesses in the community or area in which they are present..
A chamber of commerce plays an important role at a local, regional or national level in promoting business activity, representing the business interest of the chamber members, in discussing, setting up and shaping trade policies relating to the area in which they are present.. Chamber members also may get some preferential treatment in terms of business opportunities within their areas..
Chambers of Commerce often organise trade promotion programs including overseas trips, export and import seminars, training related to trade and commerce, provide sales leads for the development of business, contacts with various trade missions of other countries and last but not least also issuing Certificate of Origin..
The Origin of the Certificate of Origin
The practice of the Chambers of Commerce issuing these documents is said to have originated following the 1923 Geneva Convention relating to the Simplification of Customs Formalities..
Under this Convention (updated by the Kyoto Convention), the signatory countries agreed to make the process and procedures for the issuance of Certificate of Origin as quick and simple as possible..
Chambers of Commerce were the obvious choice due to their involvement with trade and business development, commerce, their widespread network in many of the business districts in various cities around the world and their reputation of serving the business communities..
In some countries other competent authorities such as ministries or customs authorities may also offer the service of issuing certificate of origin..
An exporter can apply for two types of Certificate of Origin :
- Non-Preferential Certificate of Origin, certifies that the country of origin of the goods does not qualify for any preferential treatment. This is the most common type of Certificate of Origin issued by a Chamber of Commerce and is aptly termed as “Ordinary Certificate of Origin”..
- Preferential Certificate of Origin certifies that goods are subject to reduced tariffs or exemptions when they are exported to countries extending these privileges.. This Certificate of Origin may be needed to comply with Letters of Credit, foreign Customs requirements or a buyer’s request..
In order to keep up with the business environment’s digital evolution, many of the Chambers of Commerce around the world have started issuing Electronic Certificate of Origin (eCO)..
This Electronic document comes with safeguard measures, such as online verification of the authenticity of the Certificate of Origin.. Customs authorities and chambers simply need to enter the unique CO number along with the chamber’s accreditation code into the site.. This information provides access to basic references, the date of issuance and name of the applying company..
The use of this eCO system affords the customer a greater level of transparency, reduces cost and save time with customs administrations, exporters, importers, banks and stakeholders..
This will become especially important and essential bearing in mind the onset of blockchain technology and its entry into the shipping and freight arena..
This article was originally published on Shipping and Freight Resource