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Certificate of Origin, often abbreviated as CO or COO, is a
frequently used document
in international trade such as imports exports. It traditionally states from what country the shipped
goods originate, but "originate" in a Certificate of Origin does not mean the country
from which the goods
are shipped from, but the country where the goods are actually made or
finally assembled. This
certainly raises a definition problem in the cases where less than 100% of the raw materials
and, processes and added value are not all from one country. An
generally accepted
practice is that if more than 50% of the sales price of the goods originate
from one country, i.e., the "national content" is more than 50%, that country is
considered as the country of origin. However, in various international
trade agreements,
other percentages of "national content" are often acceptable.
When countries unite
in trading agreements, they may allow Certificate of Origin to state the
trading bloc as origin, rather than the specific country.
The document may
be informal, i.e. issued for example by the exporter, but often the importing
country may require a formal document, often to be confirmed by an official
body in the exporting country. In many cases specific formal documents are
required, such as for shipments under the North American Free Trade Agreement,
or for preferential customs treatment in importing countries for shipments
of processed/manufactured goods from less developed countries to developed
ones, often referred to as the green Certificate of Origin form "A", or GSP (generalized
system
of preferences) Form A Certificate of Origin.
The CO is primarily important for classifying
the goods in the customs regulations of the importing country, thus defining
how much duty shall be paid. But it may also be important for import quota
purposes and for statistical purposes, and especially for food shipments,
it may also be important for health regulations.
Before concluding a transaction,
the exporter and importer should always clarify whether a CO is required,
and if so, agree on exactly the form and content of the CO.
A preferential
certificate of origin is a document attesting that goods in a particular
shipment are of a certain origin under the definitions of a particular bilateral
or multilateral free trade agreement (FTA). This certificate is required
by a countries customs authority in deciding whether the imports should
benefit from preferential treatment in accordance with special trading areas
or customs unions such as the European Union or the North American Free Trade
Agreement (NAFTA) or before anti-dumping taxes are enforced.
The definition
of "Country of Origin" and "Preferential Origin" are different. The European
Union for example generally determines the (non-preferential) origin country
by the location of which the last major manufacturing stage took place in
the products production, or in legal terms: "last substantial transformation".
Whether a product has preferential origin depends on the rules of any particular FTA being applied, these rules can be value based or tariff shift based.
The FTA rules are commonly called "Origin Protocols". The Origin Protocols
of any given FTA will determine a rule for each manufactured product, based
on its HTS (Harmonised Tariff Schedule) code. Each and every rule will provide
several options to calculate whether the product has preferential origin
or not. Each rule is also accompanied by an exclusion rule that defines
in which cases the product cannot obtain preferential status at all. A typical
value based rule might read: raw materials, imported from countries that
are not members of this FTA, used in production do not make up for more
than 25% of the Ex-Works value of the finished product. A typical tariff
shift rule might read: none of the raw materials, imported from countries
that are not members of this FTA, used in production may have the same HTS
code as the finished product.
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