When it comes to adopting FTA to reduce customs duty, there are so many complicated laws or regulations Traders need to learn.

That knowledge is needed both Importer and Exporter.
One understand but if the other one does not understand the FTA rule, it would be a nightmare when Customs audit carried out.

Let’s say if an Importer had required a self-certificate of origin to an Exporter but the Exporter does not understand the rule of FTA, this self-certificate was issued without evidence that the Customs requires.

In this situation the Importer likely to be denied preferential customs duty rate and to be fined penalty.

In order to avoid this situation, FTA manual should be referred to.
In this article,I’m going to introduce well written FTA manuals.

■OUTLINE OF RULES OF ORIGIN

This manual is written by Japan customs.it has many images to make it clear.

Source:Japancustoms OUTLINE OF RULES OF ORIGIN

■Outline of Rules of Origin for EPA in Japan

This manual can be used as a seminar slide.

Source:Japancustoms Outline of Rules of Origin for EPA in Japan

■Handbook on ROO for preferential Certificates of Origin

This manual is written by Singapore customs, it has many Charts and many examples.

Source: Singapore customs Handbook on rules of origin for preferential Certificates of Origin

■Comparative Study on Preferential Rules of Origin

This manual is written by WCO. Contents are so many that beginner can hardly read.
It is only for professionals.

Source: WCO Comparative Study on Preferential Rules of Origin

When you notice that your trading partner does not have enough knowledge of FTA, then you should send those manuals to the partner to understand the rule.
Otherwise, you would declare customs with a self-certificate of origin without evidence.

What if we claim preferential tariff treatment without any proof in order to reduce customs duties under the FTA?

Customs conduct a verification exercise on the good at random or when they have doubts about the authenticity of the certificate.

Here is an actual case of OriginVerification of a company imported chocolate, claiming preferential tariff treatment under one of Japan’s EPAs.

An importer imported many kinds of chocolate based on self-certification by an approved
exporter, under one of Japan’s EPAs.

The PSR for 1704.90 (white chocolate) is CTH, and the maximum value of non-originating
materials used under Chapters 4 and 17 is 45% ex-works price.

After an application of risk assessment, the Customs clearance section conducted a
documentary examination.

Although Customs requested further information from the importer, and from the exporter via the importer, they could not provide sufficient information and explanations about the originating status of the good.

Customs then requested the exporting country to conduct a verification with regard to the originating status of the good, in accordance with the relevant provision of the EPA.

However, the information provided through verification was not sufficient to substantiate the originating status of the good.

Customs determined that the requirements for claiming preferential treatment under the EPA had not been satisfied, and therefore preferential tariff treatment was denied.

According to this actual case, lack of proof can not be the reason the customs admit its originating status claiming on the certificate.

What if we claim preferential tariff treatment the wrong way in order to reduce customs duties under the FTA?

Customs conduct a verification exercise on the good at random or when they have doubts about the authenticity of the certificate.

Here is an actual case of OriginVerification of a company imported Tin-Plate Can, claiming preferential tariff treatment under one of Japan’s EPAs.

An importer imported Tin Plate Cans from country L and provided a certificate of origin to
Customs when claiming preferential treatment.
A Customs official in the clearance section compared the certificate of origin with the list of
seals registered with Japan Customs, but could not find the same seal in the list. The official, therefore, had doubts about the authenticity of the certificate of origin. Hence, Customs
requested the exporting country to conduct verification with regard to the authenticity of the
certificate of origin.

As a result of the verification, it was discovered that the certificate of origin which the
importer had provided was forged.

Customs determined that the requirements for preferential tariff treatment had not been satisfied. Therefore, preferential tariff treatment was denied.

What if we claim preferential tariff treatment the wrong way in order to reduce customs duties under the FTA?

Customs conduct a verification exercise on the good at random or when they have doubts about the authenticity of the certificate.

Here is an actual case of OriginVerification of a company imported cocoa powder, claiming preferential tariff treatment under one of Japan’s EPAs.

Applicable PSR for 1805.00 (cocoa powder) : CTH, provided that, where non-originating
cocoa beans of heading 18.01 are used, the non-originating cocoa beans are harvested,
picked or gathered in a non-Party which is a member country of ASEAN.

The Customs clearance section ascertained, through documentary examination, that the
certificate of origin showed the goods to be produced from cocoa beans of a non-Party
which is an ASEAN member country.

Then, the Customs clearance section asked the importer about the origin of the cocoa beans, and was informed that the origin was
country E (a member country of ASEAN) (30%),
country F (a member country of ASEAN) (40%),
and “Africa” (30%).

The cocoa beans originating in country E and country F would satisfy the PSR. However, the cocoa beans from “Africa” would not satisfy the PSR. Therefore, the Customs clearance section informed the Post-Clearance Audit (PCA) section of the doubt surrounding the originating status of the good, and requested the PCA section to conduct an investigation.

The PCA section conducted an audit of the importer, but could not obtain enough information to remove the doubt. Therefore, Customs carried out the verification procedure stipulated in the EPA and requested information from the competent authority of country D.

The reply from the competent authority of country D was that the good was not originating.
Customs determined that the good was not an originating good, and preferential tariff
treatment was denied. The importer made an amendment to the declaration of duty and
paid the necessary amount.

What if we claim preferential tariff treatment the wrong way in order to reduce customs duties under the FTA?

Customs conduct a verification exercise on the good at random or when they have doubts about the authenticity of the certificate.

Here is an Actual case of OriginVerification of a company imported frozen Surimi (minced fish), claiming preferential tariff treatment as “goods wholly obtained” under one of Japan’s EPAs.

Customs received information from outside sources that in the process of producing the Surimi, phosphates that are not available in country A had been used as a preservative.
Customs asked the importer to provide more information about the Surimi. The importer
provided Customs with the list of ingredients. Customs examined the document and found
that the material concerned (i.e., phosphates) was included in the list. Therefore, Customs
had doubts about the originating status of this material and requested the exporting country
to conduct verification with regard to its originating status, in accordance with the relevant
provision of the EPA.

As a result of the verification, it was discovered that the phosphates used in the production
process were non-originating.

Customs determined that the Surimi was not an originating good, and therefore preferential tariff treatment was denied.

The importer made an amendment to the declaration of duty and paid the necessary amount.

Retrieved from:GUIDE TO COUNTER ORIGIN IRREGULARITIES (EXCLUDING FRAUD)