Certificate of origin: holding the certificate and still being refused the preference
Preferential tariff treatment under a free trade agreement is the largest saving an importer can create for itself. It is also the easiest one to lose.
Many people picture the process like this: the goods are produced in a country that has an agreement, you obtain a certificate of origin, you submit it to customs, you get the preferential rate. In practice there are three layers of conditions that must all be right at the same time, and the certificate is only the third layer.
Three layers of conditions
The goods must meet the specific origin rule for that tariff line
Being produced in a member country does not by itself confer origin in that country. Every tariff line has its own criterion, which may be regional value content, a change in tariff classification, or a specific processing operation.
The consignment must meet the transport rule
The goods must be shipped directly, or, if they pass through a third country, the case must fall within the permitted exceptions and be supported by documents proving no further processing took place.
There must be a valid proof of origin, submitted within the time limit
On the correct form for the agreement under which preference is claimed, issued by a competent authority or body, or self-certified by the exporter where the agreement allows that mechanism.
The general rules on origin of goods in Vietnam are in Decree 31/2018/ND-CP guiding the Law on Foreign Trade Management, together with separate circulars for each agreement. Before applying them to a specific tariff line, look up the circular for that agreement and check that it is still in force.
The seven reasons for refusal I see most often
- Wrong form. Preference is claimed under one agreement while the proof submitted is on the form of another.
- The goods description on the proof of origin does not match the invoice and the declaration, or is so general that it cannot be reconciled with the commodity code declared.
- The invoice number shown on the proof of origin differs from the invoice actually submitted, which usually happens when the seller reissues the invoice after the proof has been obtained.
- The origin criterion shown on the proof does not fit the tariff line, for example a wholly obtained criterion stated for goods made with imported materials.
- The proof was issued retroactively but does not carry the marking required by the agreement to show retrospective issue.
- The goods passed through a third country without documents proving that the transit did not change the origin.
- The signature or seal on the proof is not among the specimen signatures and seals notified between the member countries.
The work to do before the goods leave, not after
Errors on a proof of origin can be corrected, but correcting them after the goods have reached the border costs storage and demurrage time, and in many cases you have to pay duty at the non-preferential rate first and claim it back later. So the whole checking exercise should be pulled forward to before loading.
- Fix the goods description and the expected commodity code in the contract itself, and require the seller to use that exact description on every document.
- Ask the seller which origin criterion will be stated on the proof, and check yourself whether that criterion fits the tariff line.
- Ask for a scanned copy of the proof of origin so you can check it before the original is sent.
- If the goods pass through a third country, prepare the transport evidence from the outset.
- Put into the contract the seller's obligation to provide a valid proof of origin and its liability if the proof is rejected.
When one shipment contains goods from several factories, each factory obtains its own proof of origin against its own invoice. If the consolidator then issues a single combined invoice, none of the invoice numbers on the proofs of origin will match any more. Agree how invoices will be issued at the very start.
If the preference is refused, what options are left
It depends on the cause. A minor formal error that does not cast doubt on the actual origin is usually allowed to be supplemented or corrected. An error in the origin criterion itself requires a newly issued proof. Where duty has to be paid at the non-preferential rate first, know the deadline for submitting the proof later so you can process the overpaid duty, because once the deadline passes the money is gone for good.