Monday, April 11, 2011
Origin, Certificates of Origin
The term origin is used in two ways. It can be part of a delivery term such as FOB Origin, or it can be used for import / export purposes.
When you negotiate the deliver terms you establish the delivery point and delivery terms, such as FOB Supplier’s Warehouse, Sunnyvale, California. That may be the origin for the delivery, but it would not be the origin from the perspective of Import and Export. From an Import perspective countries are not concerned about where it was shipped from, they care about where the product was made as duty rates may be different for different countries or their may be laws that restrict or prohibit the importation of products from certain countries. For example, while you may be able to go on-line and purchase Cuban cigars from a web site in Canada, you would still not be able to legally import them into the United States because they were made in Cuba and the United States has certain laws that ban the import of product made in Cuba.
The “Origin” of a product is determined by Import Laws and a certificate of origin needs to be prepared by the Supplier to accompany shipments. The certificate of origin is used by Customs at the importing location to determine whether the product may be imported, the rate of duty, any entitlement to special duty or trade preference programs, or whether additional duties such as those that may be required as a result of antidumping suits may apply. This is required as duties frequently will be different depending upon the Country of Origin. For example, if the Origin of a Product is in a location where there is a free trade agreement between that country and the importing country there may be no duties. If it is from a country that provides favorable treatment to imports from the other country it may be low. If it is from a country that has high duties or restrictions on imports from the other country they may be higher. There could also be restrictions on importing products from certain countries or product that contain materials from certain countries
The rules around the determining what is the country of origin vary from country to country. In general if multiple processes performed in multiple countries make a product, the Import people will look for the last location where there was a substantial transformation to the product. For example it could be where the process changed the tariff code of the product, its character or use was substantially changed.
If you were purchasing product for import, you would require the Supplier to identify the Origin of their Products, as that can impact your landed cost of the product. You would also require the Supplier to provide a Certificate of Origin to accompany the Shipment. In some cases you could potentially require a Supplier to only ship you products of a specific Origin. You could also preclude their shipping products of a specific Origin or Products that contain raw materials from a specific origin either to comply with specific laws or embargo programs or for political or socially conscious reasons.