Benifits of Free Trade Agreements
The European Union has signed Free Trade Agreements (FTA’s) with several Countries or groups of Countries. Every company exporting outside the EU, is familiar with providing export documents with their shipments to customs clear the goods. The most used export document is a Certificate of Origin. However, for countries that have a FTA, an EUR1 certificate or a EURMED can be used in order to pay less duties. Companies do need to provide sufficient records to substantiate their claims that goods meet the preference rule of origin for the specific country that has a FTA or legislated trade program.
If an EUR1 or EURMED is requested, it must be approved and issued by a certified authority. In the Netherlands this is the Chamber of Commerce. The Chamber checks the correctness of the origin, based on the requirements stated in the FTA that is applicable for the type of goods that are being exported. Requirements are always Commodity code related.
The Chamber of Commerce has the authority to check the requirements based on the Tariff code (first 4 digits of the Commodity code). On the website of ‘Market Access Database’ commodity codes can be found for each product. It also shows information on costs/ benefits for exporting to a certain country. This could be:
- Percentage rule
- Editing rule
- Change of Tariff
- or a combination of rules mentioned above
When exporting goods from the Netherlands you need to be aware that once the preferential origin is approved, the Chamber of Commerce attests the documents with a digital stamp. Subsequently, the documents need to be physically stamped by the Dutch Customs Authorities. After their approval the EUR1 or EURMED is officially valid.
The European Union has concluded several Free trade Agreements, for which an EUR1 or a EURMED could be used. A complete overview of FTA countries is available on the website of the Chamber of Commerce.
“The importer has the benefit of a discount or remission of duties, if the documents are issued meeting FTA’s standards. This will save costs, and will make exporting to these countries more attractive.”
The Customs department is of great importance to maintain and execute FTA regulations. They verify post controls initiated from importing countries and are also authorized to grant and judge approval regarding the Approved Exporters or REX License. (Note: Currently an invoice declaration is mandatory for South Korea). Companies who export on a regular basis can become Approved Exporters or get a REX License. For more information on becoming this status or getting this license, we advise to check the information on the website of the ‘Belastingdienst’. The REX-system will replace the current system of Approved Exporters (TE) in the near future. Both licenses grant the use of an invoice declaration on Commercial Invoices.
Benefits for your company
What does this mean for your company? Please make sure that you meet the requirements related to the several FTA’s the EU has signed up upon. Then you are sure that you are exporting under preferential conditions what might lead to cost savings on duties that need to be paid. If your goods don’t have the ‘preferential origin status’, importer needs to pay a country and/or product specific percentage or amount for each import shipment
Challenges in the near future
Currently the UK is still a member of the EU. By exiting the European Union, it is likely that a Free Trade agreement will be conducted to make it sustainable for the EU and the UK to continue their businesses as they do at the moment.
We would like to point out that there is a continuous development regarding different, new or existing FTA’s within the EU. More information about the progress and status of several negotiations can be found on Trade Doc.
If you need more information about preferential origin we would gladly provide you with additional information.