Why non-preferential measures?
Non-preferential measures have been introduced by the European Union for political as well as market-regulating reasons. Some examples include:
- anti-dumping duties;
- countervailing measures; and
- agricultural measures.
Import and export bans also fall under non-preferential measures.
The European Union uses these measures to ensure that European producers are not disadvantaged by producers from outside the EU who have lower costs and lower sales prices.
Determining non-preferential origin
For the application of various non-preferential measures, it is important to establish which origin applies. In other words, the non-preferential origin must be determined. Often, a certificate of origin is issued for this purpose. These certificates can then be presented to Customs during an audit. A set of origin rules, established in the Union Customs Code ("UCC"), applies to the determination of this origin.
Article 60(1) UCC includes the concept of "wholly obtained." Goods that are wholly obtained in a particular country have the non-preferential origin of that country. For example, a lamb born in Australia, raised there to become a sheep, and then imported into the European Union has the non-preferential origin of Australia, as this sheep was wholly obtained there.
If there is no wholly obtained product in a particular country, it must be determined whether there is sufficient processing or working, as outlined in Article 60(2) UCC. It is then necessary that the goods “underwent their last, substantial, economically-justified processing or working, in an undertaking equipped for that purpose, resulting in the manufacture of a new product or representing an important stage of manufacture.” This is further elaborated in Article 33 of the Delegated Regulation of the UCC (DRUCC).
Article 34 DRUCC specifies which operations cannot lead to non-preferential origin, i.e. the minimal operations.
OLAF investigations
Non-preferential origin is not always determined correctly. Sometimes, an incorrect origin is deliberately established to avoid paying anti-dumping duties.
The European Anti-Fraud Office ("OLAF") conducts many investigations related to the use of incorrect non-preferential origin. Often, a mission is carried out to the countries to inspect production facilities and conduct interviews with the involved companies and individuals.
The results of these investigations can then be used by national customs authorities to subsequently collect the customs debt. This happens frequently.
For example, if the declared (non-preferential) origin of ironing boards was Taiwan, but an OLAF investigation reveals that the ironing boards actually originate from China. Although the ironing boards were indeed shipped from Taiwan, and a certificate of origin was issued by the Taiwanese authorities, the goods did not undergo sufficient processing. In such a case, Customs is likely to successfully issue an additional assessment for the anti-dumping duty. Note that there may still be some remarks and questions regarding the OLAF investigation. Be critical in this context.
Proof of origin
In practice, fraud occurs with origin documents. It is therefore important to perform adequate checks. While a certificate of origin can be important for determining origin, it is often more crucial to provide actual proof that processing was sufficient. This might include a description of the production process, along with a bill of materials. It also happens that a supplier refuses to provide a bill of materials. In such cases, it is important to prove the origin and production process of the goods through alternative means.
In this context, it is also important that a certificate of origin must be issued by the competent authority in the country of origin or provenance. Certificates of origin can only serve for non-preferential origin. Even if you have received a EUR1 or statement on origin for the same goods, the EUR1 or statement on origin cannot directly serve for determining non-preferential origin.
However, in practice, we also frequently encounter cases where certificates of origin are issued by the competent authorities, but later it turns out that the certificates were incorrectly issued. Although this may not feel fair, no trust can be placed in such a certificate.
Prevention is better than cure
Determining non-preferential origin remains a challenging issue. As various OLAF investigations show, a lot of fraud occurs with the issuance of non-preferential origin documents. It is therefore crucial to perform checks.
As discussed above, it is essential to ensure that the correct origin is used. Several measures can be taken to ascertain this. For example, the certificate of origin can be sent to the National Origin Team of Customs for verification if there is any doubt.
Often, it is even better to have a direct relationship with the supplier and incorporate various checks.
More information
Customs Knowledge is happy to assist you with any questions about these matters. For questions or comments on this topic, please contact one of our experts.