Origin documents: difference between preferential and non-preferential explained
When you're doing business with countries outside the European Union, you will often have to deal with Certificates of Origin and EUR.1 certificates (or the invoice declaration via the Authorised Exporter scheme). Both certificates are often seen as two accompanying documents, however, they differ substantially from each other.
Not only are the certificates needed under different circumstances, there is also other underlying legislation. Moreover, the evidence required for the issue of both documents is different.
Origin documents can be subdivided into non-preferential and preferential documents:
- Non-preferential documents certify that the goods are subject to no preferential treatment. These are the main type of Certificates of Origin (COs) that an authority (like the Chamber of Commerce) can issue, they are also referred to as 'Normal' CO.
- Preferential documents certify that goods are subject to reduced tariffs or exemptions when they are exported to countries extending these privileges. Preferential documents can be issued for destination countries where a Free Trade Agreement (FTA) is in place.
Certificate of Origin - non-preferential
This certificate is often mandatory and it's requested for political reasons (boycott, as a result of which products are refused), trade policy reasons (quantity quota) and as a requirement in a Letter of Credit. The Certificate of Origin has its legal basis in the Customs Code of the Union (DWU). The most important starting points for determining the origin of your goods are the completion of your product or the last substantial processing or adjustment to your product.
Certificates of Origin are issued by the Chamber of Commerce (CoC). The Chamber of Commerce checks the origin on the basis of the submitted evidence. This evidence could be the following:
- If you are a manufacturer, an overview of your production process.
- If you are a trader and buy goods with European Union origin, a supplier's declaration for goods of non-preferential origin can serve as proof of origin.
- If you are a trader and purchase goods from a supplier outside the European Union, a Certificate of Origin from the country in question would serve as proof.
EUR.1 Certificate - preferential
With a EUR1 certificate importers are entitled to a discount or sometimes even exemption from import duties. This only applies to countries with which the EU has a preferential trade agreement (eg Switzerland, South Africa, but also Mexico or Chile). There are countries with which these agreements have been in force for years, but new agreements are regularly added also. In the Netherlands, both the Chamber of Commerce and Customs are involved in the issuing of a EUR.1 Certificate.
Both the Certificate of Origin and the EUR.1 certificate are common in international transactions. Both certificates indicate the origin of the product and it should be noted that the origin criteria may vary considerably. The Certificate of Origin is often mandatory whereas the EUR.1 certificate offers better opportunities on the international trade market because of the lower customs duties you can achieve for your customer.
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