Let’s face the truth, the legal department does not sign off on certificates of origin. In most companies exporting their goods, it is the sales department or the logistics department that prepares and signs the certificates of origin. In many companies, the certificate of origin is just a piece of paper that has to be provided once a year to the foreign buyer or it is a one-off document prepared at the request of a buyer who would like duty relief (or must respond to a request by the foreign government for the certificate of origin).
What is a certificate of origin?
A Certificate of Origin (CO) is an important international trade and legal document that certifies certain information provided therein is correct and attests that the goods identified in the certificate are wholly obtained, produced, manufactured or processed in a particular country. The NAFTA Certificate of Origin (and most certificates of origin) requires certain information be provided by the exporter about the goods described in the certificate. Customs documentation is completed by customs brokers and importers based upon the information provided in a certificate of origin (when they receive a copy prior to the shipment). Whether customs duties are charged and at which preferential rate are determined by the importing country’s customs authorities based, in part, on the certificate of origin.
Except in large corporations (e.g. auto companies), the employees who usually sign or provide the certificates of origin often have not taken customs or free trade agreement courses to understand the importance of the information being provided. They do not have specialized knowledge in customs laws, such as tariff classification. As a result, most certificates of origin we review have errors.
The common errors (but by no means an exhaustive list) include:
- Preferential treatment is not available because the rule of origin has not been satisfied;
- An incorrect country of origin is identified;
- Incorrect H.S. code for the importing country is used;
- An incorrect or incomplete or unclear or ambiguous description of the goods is provided;
- Incorrect preference criteria are used;
- Incorrect producer is identified (or the exporter states it is the producer when the goods are purchased by the exporter for resale);
- An incorrect net cost is stated;
- Incorrect importers are identified; or
- An incorrect “blanket period” is stated.
The exporter is the party who completes the certificate of origin. The mistakes made on the certificate of origin can affect the importer and result in relationship issues down the road. Often, the importer relies on the information provided by the exporter. Much of the information provided by the exporter is in the exporter’s control. Only the exporter knows how the goods are manufactured and from what materials and where those input materials were sourced.
The legal department and/or management of export companies should randomly and periodically review certificates of origin provided by employees to ensure correctness. You may just find that more attention should be given to what is often considered to be a routine and unimportant task.