What is the Certificate of Origin?

A Certificate of Origin

[1] (often abbreviated to CO or COO) is a document used in international trade. It traditionally states from what country the shipped goods originate, but “originate” in a CO does not mean the country the goods are shipped from, but the country where their goods are actually made. This raises a definition problem in cases where less than 100% of the raw materials and processes and added value are not all from one country. An often used practice is that if more than 50% of the sales price of the goods originate from one country, that country is acceptable as the country of origin (then the “national content” is more than 50%). In various international agreements, other percentages of national content are 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 CO form “A”, or GSP (Generalized System of Preferences) Form A CO).

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 (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.

The certificate of origin must be signed by the exporter, and often notarized and then validated by a Chamber of Commerce.[citation needed]

Most chambers of commerce and some trade associations have been authorized by their Customs agencies to certify non-preferential, and in some cases, preferential certificates of origin. Thus, a chambers’ role in the issuance and attestation of Certificates of Origin is both unique and vital in facilitating international trade. International Certificate of Origin Guidelines is the result of 18 months’ work by ICC’s World Chambers Federation (WCF), incorporating the best practice from several national chambers and organizations to produce the first international procedures and guidelines manual for chambers in the issuance of non-preferential certificates of origin.