Preferential Origin
In some cases, a reduced tariff can be used when importing goods into the third country. This is possible, for example, if your customer imports certain goods into a third country with which the EU has concluded a free trade agreement. The so-called protocol to the trade agreement contains the origin provisions that the third country and the EU have agreed on. The different protocols are structured in the same way and are very similar. However, the following example shows that there are indeed differences.
EUR1-certificate, the right certificate of origin?
Goods are exported from the Netherlands into Switzerland. The importer in Switzerland can apply a preferential tariff if a correct preferential certificate of origin is presented. Before the goods are exported, the exporter has applied for a EUR1 certificate from the Chamber of Commerce ("KvK"). The KvK issues the EUR1 certificate, which proves preferential EU origin.
When the goods are imported into Switzerland, the importer presents the EUR1 certificate. The customs authorities accept the certificate of origin and apply the preferential import tariff.
Now the same procedure is applied for identical goods that are imported into South Korea from the EU. What turns out? The South Korean customs authorities refuse the EUR1 certificate and therefore also refuse to apply the reduced import duty!
The EU has agreed on rules of origin with South Korea, but also with Switzerland, and has laid them down in a protocol. The protocol with Switzerland states that a EUR1 certificate is a preferential certificate of origin. In the Protocol with South Korea, a EUR1 certificate is not an agreed preferential certificate of origin. The protocol between the EU and South Korea states that only goods of EU origin are eligible for preferential tariff treatment on import into South Korea upon presentation of an invoice declaration.
Invoice declaration still possible after export?
The goods are already physically in South Korea. The importer would like to use the preferential tariff. However, the customs authorities refuse the EUR1 certificate because the importer needs an invoice declaration from the exporter. Is this still possible when the goods are already in South Korea?
In the protocol between the EU and South Korea, it says it is possible to draw up an invoice declaration afterwards. In the protocol it has been stipulated that the invoice declaration can be drawn up by the exporter at or after the export of the goods. The Customs Handbook shows that the Dutch Customs takes the position that the invoice declaration must be submitted to the customs authorities at the latest one year after import into South Korea.
Exporters may draw up an invoice declaration for consignments with a value not exceeding EUR 6,000. For invoice declarations drawn up by the exporter for consignments with a value exceeding EUR 6,000, an authorized exporter's authorisation is required.
Suppose the exporter does not yet have an authorized exporter's authorisation and the value of the consignment is more than EUR 6,000. The exporter will still have to apply for the authorised exporter's authorisation from Customs. This is not a simple application. Customs assesses whether the permit can be granted on the basis of information from available documents and the results of an initial investigation into the exporter's administration. I will not go into this further in this publication. However, it appears that Customs does not issue this authorisation lightly.
Invoice declaration: who can issue it?
Suppose the exporter, who is based in the Netherlands, has obtained the approved authorised exporter authorisation. The trade flow still goes from the Netherlands to South Korea. The exporter regularly places invoice declarations on the invoice to demonstrate the EU origin. Upon importation into South Korea, the importer applies a preferential tariff.
The trade flow is then adjusted. The goods still go via the Netherlands to South Korea. However, the invoice is not routed through the Dutch company to the South Korean company, but via a Swiss company (an affiliate of both companies) to the South Korean company. Who is authorized to place an invoice declaration in this case?
An invoice declaration can still be issued by the authorised exporter. According to European legislation, an exporter must be established in the EU. Therefore, the Swiss company is not authorized to issue an invoice declaration.
Can the Dutch company then issue an invoice declaration for the aforementioned flow of goods? The Dutch company does not issue the invoice. Under certain conditions, the Dutch company may issue the invoice declaration. However, there are several nuances and conditions attached.
The invoice declaration does not necessarily need to be placed on the invoice. It can also be placed on a packing list or other commercial document. An invoice declaration can only be issued by the correct (authorised) person. If the declaration is not issued by the correct person, it will impact the application of the preferential tariff.
Conclusion
Proper preparation is crucial! To avoid presenting an incorrect or invalid proof of origin, you must determine which documents you need before the goods are exported. In practice, mistakes are often made in this regard. Issuing an invoice declaration by an unauthorized person can also have significant consequences. When the trade flow is changed, the customs implications must be determined. Do you have any questions or comments on this topic? Please feel free to contact Samantha Zwart.