ROO Customs Brokers Examination Lectures 2024 PDF

General Aspects RULES OF ORIGIN Facilitated by: Ms. Tricia Soberanis Assistant Comptroller Strategic Planning, Policy and Trade  LEARNING OBJECTIVES At the end of this presentation, you will be expec...

General Aspects RULES OF ORIGIN Facilitated by: Ms. Tricia Soberanis Assistant Comptroller Strategic Planning, Policy and Trade  LEARNING OBJECTIVES At the end of this presentation, you will be expected to: ▪ Explain the meaning of rules of origin. ▪ Explain the importance and purposes of rules of origin ▪ Distinguish between non-PRO and PRO. ▪ Define preferential rules of origin ▪ List the key elements of the structure of origin regimes ▪ Identify and explain general and specific rules ▪ Explain what are originating products ▪ List and explain the criteria for originating products ▪ List what are the territorial requirements ▪ Explain what is the purpose of proof of origin. Customs Brokers Examination Lectures 2/3/2024 2  Legal Background  Marrakesh Agreement established the World Trade Organization (WTO)  WTO Multilateral Agreement on Trade of Goods Annex 1-A  WTO Agreement on Rules of Origin (RoO)  Members were desirous to ensure that rules of origin do not create unnecessary obstacles to trade Customs Brokers Examination Lectures 2/3/2024 3 Customs Brokers Examination Lectures 2/3/2024 4  INTERNATIONAL INSTRUMENTS o World Customs Organization (WCO)- Kyoto Convention 1974 (Int’l Convention on the Simplification and Harmonization of Customs Procedures), thereafter… o Revised Kyoto Convention (RKC-Modern and efficient Customs Procedures in the 21st Century) revised and updated in 1999 and came into force in 2006. Customs Brokers Examination Lectures 2/3/2024 5  What are Rules of Origin? Criteria applied by an importing country to determine the origin/national source of a good Customs Brokers Examination Lectures 2/3/2024 6  Definition of rules of origin Customs Brokers Examination Lectures 2/3/2024 7  Two kinds of rules of origin Rules of Origin Non- Preferential preferential Customs Brokers Examination Lectures 2/3/2024 8  Non-Preferential Rules of Origin (PRO) shall be defined as those laws, regulations and administrative determinations of general application applied by any WTO Member to determine the country of origin of goods” (Article 1.1). Customs Brokers Examination Lectures 2/3/2024 9  Non-preferential rules of origin  Used for determining the economic nationality of products subject to commercial policy measures:  Correct unfair trade  Protect local industries  Discriminatory quantitative restrictions or tariff quotas  Most-favored-nation treatment (MFN)  For application of “made in” labelling in some countries  Administer “buy national” policies  Implement environmental or sanitary measures  Control trade of strategic weapons or specific products  Trade statistics Customs Brokers Examination Lectures 2/3/2024 10  Preferential Rules of Origin (PRO)  shall be defined as those laws, regulations and administrative determinations of general application applied by any Member (FTA) to determine whether goods qualify for preferential treatment under contractual or autonomous trade regimes leading to the granting of tariff preferences going beyond the application of the paragraph a of Article 1 of GATT 1994” (Annex II, Paragraph 1) Common Declaration with regard to PRO. Customs Brokers Examination Lectures 2/3/2024 11  Preferential Rules of Origin  Determines the nationality of a product subject to preferential tariff treatments within a free trade agreement/partnership trade agreement “Except as otherwise provided in this agreement, each party shall eliminate its customs duties on originating goods of the other party”  Each agreement has it own sets of rules of origin Customs Brokers Examination Lectures 2/3/2024 12  “Except as otherwise provided in this agreement, each party shall eliminate its customs duties on originating goods of the other party” o 3 pillars of customs clearance: o HS classification o Customs Valuation (WTO Valuation Agreement) o Origin o Preferential Customs Brokers Examination Lectures 2/3/2024 13  Trade deflection/triangulation  mainly to prevent trade deflection and trans-shipment to (falsely) obtain origin and therefore preferential treatment Customs Brokers Examination Lectures 2/3/2024 14  ”The spaghetti bowl” of overlapping FTAs Customs Brokers Examination Lectures 2/3/2024 15  How can RoO distort trade? o Sourcing from third countries is fundamental in a fragmented world economy o RoO are seen by exporters as a cost o Production-related costs o Administrative costs These costs have to be balanced against the benefit from fulfilling the RoO – which is tariff preference Strict RoO often lead to lower utilization of trade preferences The purpose of rules of origin – to prevent trade deflection – has to be balanced against this fact Customs Brokers Examination Lectures 2/3/2024 16  Offensive and Defensive Rules of Origin 1. Offensive Rules: defining rules allowing greater use of the materials that producers need to obtain from third countries 2. Defensive Rules: defining rules which require that a considerable portion of inputs be sourced in signatory countries. Customs Brokers Examination Lectures 2/3/2024 17  General vs Specific Rules 1. General Rule: o lay down the overall rules applicable to all negotiated products o often offers two alternatives: a change in tariff and a change in value o contains exceptions known as Specific Requirements of Origin Customs Brokers Examination Lectures 2/3/2024 18  General vs Specific Rules 2. Specific Rules: o Specific Requirement that are negotiated one by one for all products having tariff preference. o They may or may not be similar to those applicable to other negotiated products o There is not a single or specific way of setting these requirements correctly o They are listed in an annex. o Prevails over general rules Customs Brokers Examination Lectures 19 2/3/2024  Conditions for preferential treatment Customs Brokers Examination Lectures 2/3/2024 20  Conditions for preferential treatment 1. Definition of Originating product - origin criteria (wholly obtained, substantial transformation) 2. Territorial requirements (direct transport/trans- shipment rule, exhibitions, territory) 3. Proof of origin (document and procedure requirement) 4. Other provisions set out in the preferential trade agreement Customs Brokers Examination Lectures 2/3/2024 21 Customs Brokers Examination Lectures 2/3/2024 22  i. Origin criteria ii. Insufficient working and processing / Minimal operations iii. Tolerance rule (de minimis) 1. Definition iv. Cumulation/Acumulation of v. Accessories, spare parts “Originating and tools Product” vi. Unit of qualification vii. Sets viii. Neutral elements ix. Notes in the list of product specific rules Customs Brokers Examination Lectures 2/3/2024 23  Two basic criteria to determine the country of origin of goods (originating goods): i. Origin Criteria 1) Wholly obtained/produced 2) substantial/sufficient transformation Customs Brokers Examination Lectures 2/3/2024 24  1.) Wholly Produced/ obtained Concept o A good may be wholly obtained or produced in one country o Generally this category is confined to agricultural, forestry, fishing and mining products Customs Brokers Examination Lectures 2/3/2024 25  E.g. CARICOM Rules in RTC Customs Brokers Examination Lectures 2/3/2024 26 Customs Brokers Examination Lectures 2/3/2024 27 Customs Brokers Examination Lectures 2/3/2024 28  Wholly obtained: 1006 – Rice: Manufacture in which all the materials of Chapter 10 used are wholly obtained Customs Brokers Examination Lectures 2/3/2024 29  live animals born and raised in that country; products obtained from live animals in that country born produced raised Customs Brokers Examination Lectures 2/3/2024 30 Plant and plant products grown and harvested there WHOLLY OBTAINED Seeds planted growing export harvest Corn grain  Waste and scrap COLLECT EXPORT WHOLLY OBTAINED Customs Brokers Examination Lectures 2/3/2024 32 Customs Brokers Examination Lectures 2/3/2024 33  fishing conducted in that country, or in its territorial waters and exclusive economic zones; fish, crustaceans and other marine species obtained from the sea; goods obtained from the seabed or beneath the seabed Customs Brokers Examination Lectures 2/3/2024 34  2.) Substantial Transformation  Substantial transformation is a type of rule of origin that requires a non-originating material/input to undergo a certain process in order to be considered originating in a given country. Three components of substantial transformation: a) Change in Tariff Classification b) Value Content /test/ percentage rule c) Technical Requirements/ specific process test Customs Brokers Examination Lectures 2/3/2024 35  Origin Determination Criteria Customs Brokers Examination Lectures 2/3/2024 36  a) Change in Tariff Classification  for preferential rules of origin, rules are created for each product specifying what change is required  A product meets the test if it fall in a Harmonized System (HS) Chapter (2 digits)/ Heading (4 digits)/Subheading (6 digits) or tariff item (8 or more digits) that is different from the ones applicable to each of the materials utilized Customs Brokers Examination Lectures 2/3/2024 37  Structure of the Harmonized System Customs Brokers Examination Lectures 2/3/2024 38  Example of CTC rule containing an exception  Change to subheading 1901.90 from any other heading, except from heading 04.02  According to this rule, the food processing classified under subheading 1901.90 may use non-originating inputs from any subheading in the tariff nomenclature, except those falling under heading 19.01 (“from any other heading”)  Additionally, this rule contains the phrase “except from heading 04.02” which extends restrictions on the use of non-originating inputs to all the inputs classified under heading 04.02 (sweetened cream and milk) Customs Brokers Examination Lectures 2/3/2024 39 Change in tariff chapter Chapter 52 fabric Chapter 62 clothing Customs Brokers Examination Lectures 2/3/2024 40  Change in Tariff Classification Heading 1401 Heading 4602 The manufacture of a straw basket, classified in heading 4602 of the HS. The rule for the whole of Chapter 46 is "manufacture in which all the materials used are classified within a heading other than that of the product". As the basket is classified in HS4602, while the straw material was imported in HS1401, the origin criterion is clearly satisfied. Customs Brokers Examination Lectures 2/3/2024 41  b) Value Added (ad valorem percentages)  A good is considered substantially transformed when the value added of a good increases up to a specified level expressed by ad valorem/value percentage  Can be expressed in two ways:  A maximum allowance for non-originating materials or  A minimum requirement of domestic content Customs Brokers Examination Lectures 2/3/2024 42  Example of Value Content Customs Brokers Examination Lectures 2/3/2024 43  EXAMPLE…“manufacture in which the value of all the non-originating materials used does not exceed 40% of the ex-works price of the product” Labor costs and Electronic control manufacturer’s panel (outside profit margin FTA) 250 500 Electric motor (outside FTA) Other parts Case 100 (from FTA member (undetermined origin) origin) 50 Selling price of final drilling 100 machine Percentage of non- (ex-works price) originating materials = 1000 Customs Brokers Examination Lectures 40% 44 2/3/2024  c) Technical Requirement  A good is considered substantially transformed when the goods has undergone specified manufacturing or processing operations to take place in an agreement country.  “manufacture from yarn” Customs Brokers Examination Lectures 2/3/2024 45  Example of Technical Requirement Customs Brokers Examination Lectures 2/3/2024 46  Example of rules containing technical requirements o “Packing cases, boxes, crates, drums and similar packings, of wood of heading 4415 manufactured from boards not cut to size” o “Spirits of sulphate turpentine, purified manufactured from purification by distillation or refining of raw spirits of sulphate turpentine” o “Antibiotics of heading 2941 produced by chemical transformation” Customs Brokers Examination Lectures 2/3/2024 47  ii. Insufficient working and processing o Is a reverse form of the specific manufacturing operations o Specifically identified manufacturing operations that are insufficient to confer origin (e.g. labeling, packaging or assembly) o The minimal operations concept provide that, in the event of a tariff change (CTC) between non-originating inputs and the resulting good as a consequence of the minimal operation, such a change will not be sufficient to confer origin. Customs Brokers Examination Lectures 2/3/2024 48  Minimal Operation o Drying, freezing, placing in salt water and similar operations for transport and storage o Simple cutting or screening o Placing in bottles, boxes and similar packing cases, labeling o Simple mixing, assembly or making up of non- originating products o Repacking, sorting, grading, grouping of packages, breaking bulk * The above processes are Not considered to satisfy the CTC rule for processing operations. Customs Brokers Examination Lectures 2/3/2024 49  iii. De Minimis or Tolerance Rule  the “de minimis” permits a percentage of non- originating materials to be used without disqualifying the final product from originating status  E.g. under CARIFORUM-EU EPA “not withstanding paragraph 1. non-originating materials which, according to the conditions set out in Annex II should not be used in the manufacture of a given product may nevertheless be used, provided that: o Their total value does not exceed 15% of the ex-works price of the product; Customs Brokers Examination Lectures 2/3/2024 50  iv. Cumulation (Accumulation) o contracting parties may source non originating raw materials and components from specified countries and count them as originating when incorporating them into a final good o Is an exception to the originating principle similar as de minimis/tolerance rule o In some cases there is a possibility for cumulation of processes instead of cumulation of originating inputs Customs Brokers Examination Lectures 51 2/3/2024  Cumulation/Accumulation o Why is cumulation/accumulation important? provisions will make it easier for regionally based companies to exploit economies of scale. o What are the requirements for using cumulation provisions? o Countries with same rules of origin in FTAs o Agreement on mutual administrative assistance Customs Brokers Examination Lectures 2/3/2024 52  v. Unit of qualification o According to the Harmonized System o The origin determination is linked to the HS. Thus, the correct tariff classification of a product is of utmost importance for origin determination. Customs Brokers Examination Lectures 2/3/2024 53  vi. Sets o According to the Harmonized System Customs Brokers Examination Lectures 2/3/2024 54  vii. Accessories, spare parts and tools Customs Brokers Examination Lectures 2/3/2024 55  viii. Packing and packaging materials and containers used for protection during transportation are disregarded when determining the origin of Customs Brokers Examination Lectures such goods 2/3/2024 56  ix. Neutral elements (Indirect Materials) o The origin of the power and fuel, plant and equipment, including safety equipment, or machines and tools used to obtain a good or the materials used in its manufacture which do not remain in the good or form part of the good shall not be taken into account Customs Brokers Examination Lectures 2/3/2024 57  2. Territorial requirements PRINCIPLE OF DIRECT EXHIBITIONS TERRITORIALITY TRANSPORTATIO N RULE Customs Brokers Examination Lectures 2/3/2024 58  1. Principle of Territoriality  Exported goods that are re- imported are considered as non originating,  unless proof that  The goods are the same  They have not undergone any operation except for their preservation Customs Brokers Examination Lectures 2/3/2024 59 2. Trans-shipment/Direct Consignment Rule Goods must be:  Directly transported from exporting countries to importing countries; or,  Transported through other countries without being transformed/altered Country A Direct transport EU Third country Transshipment or temporary storage in a bonded Customs Brokers Examination Lectures area under the supervision of the customs 2/3/2024 60 authorities  NON-manipulation Customs Brokers Examination Lectures 2/3/2024 61  3. Exhibitions  Originating goods may be sent to trade, industrial and crafts exhibitions where it can be sold under customs control  Permits direct shipment of exhibits sold at an exhibition without losing the benefits from a preferential treatment at importation Customs Brokers Examination Lectures 2/3/2024 62  RECAP Customs Brokers Examination Lectures 2/3/2024 63 Customs Brokers Examination Lectures 2/3/2024 64  APPLICATION OF RULES OF ORIGIN IN FTAs Customs Brokers Examination Lectures 2/3/2024 65  LEARNING OBJECTIVES At the end of this presentation, you will be expected to: ▪ Explain why proof of origin is important ▪ Explain what certification of origin entails ▪ Explain what is verification origin and its importance ▪ Explain the steps in conducting a verification of origin ▪ Interpret rules of origin ▪ Apply rules of origin Customs Brokers Examination Lectures 2/3/2024 66  PROOF OF ORIGIN o Preferential origin o Need for a proof to claim preferential treatment o Paper form, origin declaration, e-certificate, importer declaration…. o Specific rules relating to proofs are included in the agreement o Non preferential origin o No need for a proof in most cases o Proof needed if quotas or other restrictions apply Customs Brokers Examination Lectures 2/3/2024 67  Proof of Origin IN PREFERENTIAL ORIGIN TREATMENT Document and Procedural Requirements Customs Brokers Examination Lectures 2/3/2024 68  CERTIFICATION  A certificate of origin is a specific form in which the competent authority certifies expressly that the goods covered originate in a specific country.  The competent authority may be the customs administration, a ministry (of trade, agriculture, commerce etc.), a chamber of commerce etc. Customs Brokers Examination Lectures 2/3/2024 69  Certification Of Origin Involving The Competent Authority Of The Exporting Country o A certificate of origin issued by the competent authority has been the most traditional commonly utilized o Requires the exporter submit an application along with the necessary information to substantiate the originating status of the goods. o Then the competent authority verifies the information to check if the goods actually satisfy the origin criteria of the applicable rules of origin o May include a visit to the premises where good is produced. Customs Brokers Examination Lectures 2/3/2024 70  General Guidelines: Scrutiny By The Competent Authority o Competent authority in the exporting country shall appropriately examine the originating status of the goods before issuing a preferential certificate of origin o Including collecting the necessary information from the producer, manufacturer, etc. in order to examine whether the applicable origin criteria is satisfied, such as: o List of materials with HS codes o Calculation of value-added percentage and/or the specific production process of the goods in questions Customs Brokers Examination Lectures 2/3/2024 71  General Guidelines: Scrutiny By The Competent Authority o Conduct a visit to the production sites to confirm the information provided before issuing a certificate of origin. o Shall Keep the record of information used for the determination of originating status for a certain period of time in accordance with applicable laws and regulations. Customs Brokers Examination Lectures 2/3/2024 72  Supplier’s Declaration o Article 35 Proof Supplier’s of declaration origin Country A Country B Supplier (producer/ exporter importer manufacturer) Customs Brokers Examination Lectures 2/3/2024 73  Third Country Invoice / Intermediary Trade Customs Brokers Examination Lectures 2/3/2024 74  Rules of Origin Customs Brokers Examination Lectures 2/3/2024 75 75  Certification Customs Brokers Examination Lectures 2/3/2024 76 Customs Brokers Examination Lectures 2/3/2024 77 Completing a Certificate of Origin Customs Brokers Examination Lectures 2/3/2024 78  INTERPRETING RULES OF ORIGIN Customs Brokers Examination Lectures 2/3/2024 79  Purpose of reading Rules of Origin: o Aids in providing a clear and complete understanding of RoO requirements in order to implement them correctly. How to Read o RoO must ultimately be read and by stakeholders in order to Interpret allow them to perform specific functions. Rules of o Is required to grasp their Origin meaning correctly, so that the reader can examine and understand the standards and requirements. Customs Brokers Examination Lectures 2/3/2024 80  How to Read and Interpret Rules of Origin Customs Brokers Examination Lectures 2/3/2024 81  A change to…”: o In some FTA’s, this expression is introduced at the beginning of each rule, with a two-fold implication or meaning: o what TARIFF CODE the rule APPLIES TO and o which is the final point of the change the INPUTS MUST UNDERGO; o or PUT DIFFERENTLY, IT IS the tariff code applicable to the end product. o In the example, subheading 3502.11 is dried egg albumin. Customs Brokers Examination Lectures 2/3/2024 82  Key Words For Interpreting A Rule Of Origin “From any other…”: o This expression indicates the starting point of the change or shift in the tariff classification that non-originating inputs must undergo to be included in the final product for it to be regarded as originating o In the example it means that, for the products in subheading 3502.11 to be originating, any non- originating input classified in a different subheading may be used. o There is no restriction as to the number or quantity of non-originating inputs, provided that they are classified in a different subheading Customs Brokers Examination Lectures 2/3/2024 83  Key Words For Interpreting A Rule Of Origin Except from…”: o This expression indicates that there is a restriction or limitation to the use of non-originating inputs that meet the change criteria; even when they have met this requirement, the rule excepts some of them o in the example, except from subheading 3502.19: o While these inputs are compliant with the previously defined shift, this exception forbids the use of non-originating inputs. o In other words, inputs in subheading 3502.19 must always be originating. Customs Brokers Examination Lectures 2/3/2024 84  Key Words For Interpreting A Rule Of Origin “Provided that…”: o This expression establishes a condition whereby compliance with the origin requirements of the final product is contingent upon compliance with the requirement set forth immediately after “provided that.” o This expression is actually a connector linking requirements. Customs Brokers Examination Lectures 2/3/2024 85  o ”Member…”: Synonymous with partner country or party to the agreement. Customs Brokers Examination Lectures 2/3/2024 86  APPLICATION OF RULES OF ORIGIN Customs Brokers Examination Lectures 2/3/2024 87  Questions In Ascertaining A Product’s Eligibility For Preferential Treatment 1. Does a free trade agreement (FTA) exist between the exporting and importing countries? 2. Are the goods concerned covered under the scope of the preferential trade agreement (free trade agreement or GSP arrangement) and does the goods benefit from preferences? 3. Does the production of the goods in the exporting country satisfy the origin criteria in the preferential trade arrangement for these goods? Customs Brokers Examination Lectures 2/3/2024 88  Questions In Ascertaining A Product’s Eligibility For Preferential Treatment Cont’d 4. Are the consignment/transport/non- manipulation criteria fulfilled for the transport of the goods? 5. Are the procedural requirements stipulated in the arrangement fulfilled in order to ask for the preferences foreseen? Customs Brokers Examination Lectures 2/3/2024 89  Follow these steps to determine if a good qualifies 1. Need to find out if the countries have an agreement common amongst all parties 2. Next, go to the agreement rules of origin section 3. If eggs is specifically mentioned in the product specific rules then that rule overcede 4. If none, then the general rule apply so this means, have to wholly obtained/produced or substantial transformation in the exporting country 5. name the section of the agreement where the rules are found 6. Explain how you interpret the rules used to state your response of whether yes or no Customs Brokers Examination Lectures 2/3/2024 90  EXAMPLE 1 QUESTION: A producer in Belize mixes spices grown in India with spices grown in Egypt to produce a bag of mixed spices. Is the bag of mixed spices originating in Belize? Customs Brokers Examination Lectures 2/3/2024 91  A factory ship from Finland processes, packages and stores tuna that has been caught by a fleet of Swedish flagged fishing vessels outside of the territorial waters of the EU. Is the tuna considered to be an originating good in the EU? Customs Brokers Examination Lectures 2/3/2024 92  EPA – Protocol I Customs Brokers Examination Lectures 2/3/2024 93  EPA – Protocol I v Customs Brokers Examination Lectures 2/3/2024 94 Customs Brokers Examination Lectures 2/3/2024 95   COPY OF Revised Treaty of Chaguaramas Customs Brokers Examination Lectures 2/3/2024 96  YOUR TURN TO TRY Customs Brokers Examination Lectures 2/3/2024 97  GROUP 1 QUESTION  A farmer in Jamaica imports one-week-old chickens from Mexico, raise, slaughter and package fillet chicken in Jamaica for export. Is the packaged fillet chicken considered to be originating Jamaica? EXPLAIN WHY, ensure to outline the steps taken to determine if it qualifies for preferential treatment. Customs Brokers Examination Lectures 2/3/2024 98  GROUP 2 QUESTION: Ketchup sauce HS 2103201000 is produced using fresh tomatoes HS 07020000 from Mexico. Is the ketchup sauce being exported from Belize to Jamaica originating? EXPLAIN WHY, ensure to outline the steps taken to determine if it qualifies for preferential treatment. FINAL PRODUCT: Ketchup 2103201000 INPUT: fresh Tomato 07020000 Customs Brokers Examination Lectures 2/3/2024 99  GROUP 3 QUESTION: A factory ship from Barbados processes, packages and stores tuna that has been caught outside of the territorial waters of Barbados by a fleet of fishing vessels flying the flag of Mexico. Is the tuna considered to be originating in Barbados under the wholly obtained rules? EXPLAIN WHY, ensure to outline the steps taken to determine if it qualifies for preferential treatment. Customs Brokers Examination Lectures 2/3/2024 100  GROUP 4 INFORMATION: Ballpoint pens (HS 9608.10) are produced in Saint Lucia and are sold ex-works for $1.00. Refills (HS 9608.60) for the pens are $0.20 imported from Suriname. Other parts (HS 9608.99) for the pens are produced in Korea at a cost of $ 0.60. QUESTION:  Are the pens originating in Saint Lucia? EXPLAIN WHY, ensure to outline the steps taken to determine if it qualifies for preferential treatment. Customs Brokers Examination Lectures 2/3/2024 101  GROUP 5  A woven 100% polyester shirt (6205) is made in the Dominican Republic. The fabric (5407.61) is sourced from Tanzania where it has been woven from yarn from India. The buttons (9606.21) are from Indonesia.  Is the shirt originating in Dominican Republic? Customs Brokers Examination Lectures 2/3/2024 102  GROUP 6 Soap bars with Aloe Vera extract (3401.11) are produced in Belgium. Materials used in their production are: distilled fatty acid soap imported from Australia (1522.00) (value 10 % of the ex-works price), disodium distyrylbiphenyl disulfonate imported from the US (3824.90) (value 15 % of the ex-works price), and fragrance imported from India (3302.90) (value 35 % of the ex-works price) and local, originating soap basis (34.01) (value 22 % of the ex-works price). The ingredients are mixed until homogeneous and then stamped into soap bars.  Is the final product originating in Barbados? Customs Brokers Examination Lectures 2/3/2024 103  What is verification in general ? A course of administrative action carried out by the competent authorities to check the authenticity and/or accuracy of the proof of origin or the originating status of the goods applicable for the claim of preferential tariff treatment; Customs in the Fact of importing country production Issuing Exporter Importer 104 Customs Brokers Examination Lectures authority 2/3/2024  Verification process As Stipulated in FTA or as in general: (1)Identification of possible targets (2)Selection of goods for verification (3)Carrying out the verification (4)Feedback of the result o Verification procedures may be undertaken at the phase of import clearance or through post clearance audits Customs Brokers Examination Lectures 2/3/2024 105  1. IDENTIFICATION OF POSSIBLE TARGETS o Documentary Examination of proof of origin o Key points to check during documentary examination o Technical requirements: format, signature and stamp impression, date of issuance, modification o Consistency with commercial invoice and other related documents o Origin criteria, consignment criteria o Minor errors to be disregarded o Standards may be established, either internally or in cooperation with the partner country o Physical examination of goods Customs Brokers Examination Lectures 2/3/2024 106  2. Selection Of Goods For Verification o Gathering information before selection for verification – sources to be consulted: o Results of previous verification o Accessible database of other government agencies o Company websites, company annual reports, competitors’ information o External audit services o Production capacity of the country in question Customs Brokers Examination Lectures 2/3/2024 107  Selection Of Goods For Verification Cont'd o Reasons for selection (1)– authenticity of proof of origin o Inauthentic interventions on proof of origin o Formality errors, but insufficient to refuse without verification o Stamps illegible, or do not correspond to specimen o Suspicious issuance number o Inconsistency with other supporting documents o Value being suspiciously higher or lower than similar imports Customs Brokers Examination Lectures 2/3/2024 108  Selection Of Goods For Verification Cont'd o Reasons for selection (2)– originating status o Reasonable doubt for insufficient working or processing o Origin marking on the product or package differ from country of origin declared o Irrational transport routing o Consideration of industrial structure of the exporting country Customs Brokers Examination Lectures 2/3/2024 109 3. CARRYING OUT THE VERIFICATION & 4. FEEDBACK OF RESULTS Verification methods o Categories of verification methods in general: (1)Administrative cooperation (2)Direct inquiry (3)On-site visit (4)Importer based inquiry o Different use of methods, either: o Only one type allowed o Plural methods allowed (whether in sequence or not) Customs Brokers Examination Lectures 2/3/2024 110  Verification Methods 1. Administrative cooperation: the Customs authority of the importing country requests the competent authority of the partner country to provide administrative assistance. Upon request from the importing side, the competent authority of the exporting country would take the appropriate measures to confirm (or not) the authenticity of the proofs of origin or the originating status of the goods in question. o Acknowledgment of receipt, preferably by email to authorities of importing country o Confirmation of stamp impressions and signatures, cross check with record of issuance o To determine whether the proof of origin is genuine and issued properly Customs Brokers Examination Lectures 2/3/2024 111  Verification Methods Cont'd 2. Direct inquiry: the Customs authority of the importing country directly requests information from the exporter or producer in the exporting country. o Ascertain the precise nature of the verification check in accordance with reasons derived during selection process o Background check on the exporter prior to contact with the company o Contact with the exporter by questionnaire o Should be sent with a formal letter stating conditions of the verification such as: o Reference to the legal grounds o Specific reason for verification o Consequences of failure to reply or insufficient information o The deadline Customs Brokers Examination Lectures 2/3/2024 112  3. On-site visit: verification is conducted by visiting the premises of the exporter or producer in the exporting country. This may be conducted by the competent authority of the exporting country or importing country, or jointly. o Prior to conducting a verification visit, competent authority should, through the appropriate channel specified in the FTA, according to the national legislation: o Deliver in written notification intentions to conduct a verification visit o Obtain in written consent of the exporter/ producer o Where consent is not given, preferential treatment may be denied Customs Brokers Examination Lectures 2/3/2024 113  List of elements to be included in a verification questionnaire or on-site verification o Basic information on the business of the exporter o Production capacity o General production process for the goods being verified o Description of non-originating materials and their HS codes o Use of tolerance / de minimis provision o Inventory management method of interchangeable / fungible goods o Estimate of the qualifying percentage and the source of calculation o Use of cumulation provision o Relationship between the seller and buyer of the goods being verified Customs Brokers Examination Lectures 2/3/2024 114  IMPORTER BASED VERIFICATION Customs in the o Importer based inquiry: the Customs authority importing country of the importing country directs the inquiry for verification only to the importer. Requesting the supporting documents from the importer Treatment of confidential information Importer There might be some production sensitive information that the exporter does not want Exporter to disclose to the importer. He can send them directly to the Customs in the importing country Customs Brokers Examination Lectures 2/3/2024 115  IMPORTER BASED - Commencement Of Verification Procedure o Notification to the importer o The importer should be notified, unless it could interfere with the integrity of the verification o Suspension of granting preferential treatment o Release of goods o Commencement of verification should not prevent the release of goods, subject to certain administrative measures Customs Brokers Examination Lectures 116 2/3/2024 o Deposits to secure duty payable  Consequences In Case Of Negative Or No Response o Possible denial of preferential treatment o Negative response o No response o Reasonable doubt o Random check o Inform the importer about the result of the verification o Review and appeal – importer should be ensured the right to do so Customs Brokers Examination Lectures 2/3/2024 117  Origin Fraud o There is a high risk of fraud within the origin area because of the level of duties and because of the complexity of the rules of origin. o Sanctions relating to fraud in origin depend on the national legislation both in the exporting and the importing country. Customs Brokers Examination Lectures 2/3/2024 118  Origin Fraud o The reasons for fraud in origin are multiple: o Obtaining illicit access to preferential duty rates via a false indication of the country of origin of the imported goods o Evading quantitative restrictions in the importing country o Evading import prohibitions on import of goods o Avoiding anti-dumping or countervailing duties in the importing country. (The good will in fact penetrate the market of the importing country and gain a commercial advantage.) o Illegally satisfying the documentary requirements laid down in the importing country. Customs Brokers Examination Lectures 2/3/2024 119  Authors Of Fraud o Brokers – in order to keep or to attract customers with “good deals” o Exporters on the demand of the importer – to falsely claim preferential duty rates o Exporters – to abuse consumers in the importing country (if there is attraction for o one determined origin) o Exporters – to avoid anti-dumping or countervailing duties and be able to sell at a o good price o Exporters – to realize importation of goods normally subject to prohibitions or o restrictions (quotas, sanitary or phyto-sanitary requirements etc.) in the country of Customs Brokers Examination Lectures 2/3/2024 120 o destination. Customs Brokers Examination Lectures 2/3/2024 121