What is a Certificate of Origin
What is a Certificate of Origin?
A Certificate of Origin is a document used in international trade to identify the "Economic Nationality" of the goods (just as we use passport to identify our origin). It states the country of origin of the shipped goods. "Origin" as used in a certificate of origin does not mean the country the goods are shipped from, but the country where the goods are actually made or gain origin status. Certificates of Origin are broadly classified under two categories. Preferential and Non-Preferential Certificates of Origin
- PREFERENTIAL CERTIFICATE OF ORIGIN - is a document attesting the goods in a particular shipment are of a certain origin under the definitions of a particular bilateral or multilateral free trade agreement. It is issued to goods destined for export markets where preferential treatment is expected as agreed under the bi or multi-lateral trading system. This may include duty or quota free access among other benefits. This certificate is required by all foreign customs authorities in deciding whether the imports should benefit from preferential treatment in accordance with special trading areas, Customs Unions, Common Markets such as the Common Market for Eastern and Southern Africa (COMESA) and EAC African Common Market (EAC). Ugandan goods benefit from the preferential trade agreements if tye are accompanied by the corresponding certificate.
- NON-PREFERENTIAL CERTIFICATE OF ORIGIN - no special preferences are given other than those available to all WTO members.
Why is a Certificate of Origin necessary?
In order to avail the preferential treatment, the Ugandan exporter is required to furnish the proof that the goods are indeed of Ugandan origin, hence the need for the certificate of origin. But as mentioned above, the origin of products in international trade generally needs to be identified even when no preferential treatment is to accrue. However, where preferential treatment is obtaining, the products will enter the market at an advantage over products from countries that have no preferential treatment.
Of what significance is a Preferential Certificate of Origin to an importer of Ugandan goods?
Preferential certificates of Origin enable importers to claim preferential tariff treatment when products enter their country. Should the goods not be accompanied by the certificate, they will be subject to import duty.
How can a product be considered to be of Ugandan origin in order to benefit from preferential treatment?
For goods to qualify as of Ugandan origin, they must comply with rules stipulated in the preferential trade agreements.
For example, under the EAC Common Market, certain rules commonly referred to as EAC Rules of Origin apply. For goods to be considered as originating from Uganda, they ought to meet either of the following. (Note that the same rules apply for COMESA)
- Must be wholly originating from Uganda, or all the inputs used in product are from the member country. Examples of such products include agricultural produce, minerals, products of hunting and fishing, scrap and wastes resulting from manufacturing operations within the member states among others. (P)
- If the goods have inputs from outside the member states, the value of these foreign inputs should not exceed 60% of the total material costs used in production. (M)
- The goods produced in the member state should have at least 35% value added to the original inputs. In other words, at least 35% of the ex-factory cost of the finished product should be accounted for by local inputs. (V)
- The goods produced in the member states have undergone a change in tariff heading. The tariff headings are derived from the Harmonized Commodity Description and Coding System (HS). The product (input) has transformed from one tariff classification to another (final product). (X)