A Certificate of Origin (often abbreviated to CO or COO) is a document used in international trade. It is a printed form, completed by the exporter or its agent and certified by an issuing body, attesting that the goods in a particular export shipment have been wholly produced, manufactured or processed in a particular country.
The “origin” does not refer to the country where the goods were shipped from but to the country where they were made. In the event the products were manufactured in two or more countries, origin is obtained in the country where the last substantial economically justified working or processing is carried out. An often used practice is that if more than 50% of the cost of producing the goods originates from one country, the "national content" is more than 50%, then, that country is acceptable as the country of origin.
When countries unite in trading agreements, they may allow Certificate of Origin to state the trading bloc, for example, the European Union (EU) as origin, rather than the specific country. Determining the origin of a product is important because it is a key basis for applying tariff and other important criteria. However, not all exporters need a certificate of origin, this will depend on the destination of the goods, their nature, and it can also depend on the financial institution involved in the export operation.
Historical backgroundThe background and history of CO dating back to 1898
The first certificate of origin was issued by the Marseille Province Chamber of Commerce at the end of the 19th century. The formalization in the role of chambers of commerce as issuing agencies for certificates of origin (CO) can be traced back to the 1923 Geneva Convention relating to the Simplification of Customs Formalities (Article 11), and has been reinforced with the updated Kyoto Convention. Under these Conventions, signatory governments were able to allow organizations “which possess the necessary authority and offer the necessary guarantees” to the State to issue certificates of origin. Thus due to the widespread network of the chamber of commerce community, in most countries, chambers of commerce were seen as these organizations allowed to issue certificates of origin. As such, seen as “competent authorities”, chambers began to more widespreadly issue non-preferential certificates of origin. In 1968, at the Uruguay Round, an agreement was reached on Rules of Origin which led to more transparent regulations and practices regarding rules of origin (RoO). Later on, in 1999, the Revised Kyoto Convention added an Annex on the Simplification and Harmonization of Customs Procedures to further facilitate the transfer of legal documents in international trade. By 2008, 350 Free Trade Agreements had been reached with provisions on preferential treatment; 400 Free Trade Agreements are expected by 2012, seeing an expansion on the issuance of preferential certificates of origin.
Types of certificates of originNon- preferential
Non-preferential certificates of origin are the most common type of certificate. These certificates of origin see that goods do not benefit from any preferential treatment and do not emanate from a particular bilateral or multilateral free trade agreement. Chambers that are authorized to issue certificates of origin are most frequently authorized to issue non-preferential certificates of origin. The fees charged for the issuing will vary depending on several factors, such as the nature of the merchandise, and may also vary if the exporter’s a member. Indeed, exporters whose companies are member of the chamber often benefit from a preferential price, which is lower than that of non-member firms.
Preferential
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 country's 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, ASEAN 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 (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 (Harmonized 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.
In several countries, customs authorities are delegating the right to issue preferential certificates of origin on their behalf to chambers of commerce. These countries include New Zealand, Australia, Sweden and the United Kingdom.
Electronic Certificates of Origin
Chambers of commerce issue millions of Certificates of Origin (CO) per year. To keep pace with the rapid shift to e-business and improve their efficiency in serving their business community, the implementation of total eCO is a top priority for Chambers. Increasing concerns on fraud and the need to improve the supply chain security, eCOs are seen as a means not only to facilitate and provide a secure trading environment but also save time, costs and increase transparency. A range of eCO platforms have been developed by chambers and other organizations. Some of the solutions available in the marketplace can be found at the ICC World Chambers Federation CO website.
Certificates of origin around the worldIssuing bodies
The certificate of origin must be signed by the exporter, and, for many countries, also validated by a Chamber of Commerce, and in the case of certain destination countries, also by a consulate. Chambers of Commerce offer certificate of origin services, amongst other organizations. Companies may consult the Chamber Directory on the World Chambers Network, the official global portal of Chambers of Commerce dedicated to electronic international trade, to find their nearest chamber who may offer this service.
Chambers of commerce
Despite the vast chain of chambers present around the world, not all certificates of origin issuing practices are harmonized or even alike. Actually, laws and requirements relating to this practice may vary within the country, depending on the authority the chamber derives from. In this perspective, ICC World Chambers Federation has established an international certificate of origin Guidelines to standardize procedures by chambers around the world. This publication is available in six languages – Arabic, Chinese, English, French, Russian and Spanish. Based upon these guidelines, chambers are collaborating in creating a global CO Chain to reinforce their integrity and credibility as competent the trusted competent third parties in the issuance of certificates of origin. Chambers who have signed up for this chain have recognized that they are mutually responsible and globally interconnected with their peers, bringing reassurance to business, traders, banks and Customs Administrations that all COs are issued according to internationally accepted best practices.
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