The difference in the origin self-certification mechanism of the new generation FTAs

VCN - The application of the self-certification of origin mechanism by enterprises has many advantages and brings many benefits, but there is a concern about the risk of origin fraud.
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Officers of the Customs Sub-Department of Thanh Hoa port border gate (Thanh Hoa Customs) helpenterprises to look up information. Photo: N.Linh

Notes on self-certification of origin in ATIGA, CPTPP and EVFTA

Currently, Vietnam is involved in negotiations for a numberof Free Trade Agreements (FTAs), which require the application of the self-certification of origin. Under this mechanism, the responsibility for certifying the origin of goods is transferred from specialized agencies to enterprises (or importers). That is, the enterprise (or the importer) will carry out the procedures and meet the conditions for the declaration that the goods meet the standards of origin and take responsibility for the accuracy of such declarations. Vietnam is participating in the application of the origin self-certification mechanism of the three free trade agreements, namely ATIGA, CPTPP and EVFTA, of which CPTPP and EVFTA are the new generation Free Trade Agreements.

The three agreements have differences about mechanisms of self-certification of origin.

ATIGA applies a self-certification of origin mechanism to enterprises authorized by State authorities, which means that only licensed enterprises can self-prove the origin of goodsproduced by them and are responsiblefor these self-certifications.The list of these enterprises is updated by ASEAN countries on the ASEAN website and the Customs authorities will use the information about enterprises on this website to check and determine the subjects who are able to self-certifyorigin.

The CPTPP applies a self-certification of origin mechanism for exporters, which means that exporters are allowed to self-certify the origin of goods on their commercial documents. The agreement specifies the minimum information to be shown on the self-certification of origin documents. The Customs office shall base on the information on the self-certification document and the customs dossier to check and determine the origin of the exported goods.

The CPTPP took effect from January 14, 2019. When implementing this agreement, Vietnam is not obliged to immediately apply the self-certification mechanism of origin at the time of entry into force of the agreement, but according to a certain roadmap. Accordingly, Vietnam reserves the right to not apply this for a maximum of 12 years from the date of entry into force of the agreement. Therefore, at present, Vietnam's exports to CPTPP countries are being issued C/O form by the Ministry of Industry and Trade.

Regarding the EVFTA, a self-certification of origin mechanism applies to exporters that are issued REX codes, which means that enterprises with REX codes will be able to self-certify the origin of their goods on commercial documents. Basedon the REX number of the enterprises,theCustoms authoritiescheck the EU website and customs documents to determine the origin of the goods.

For Vietnamese goods when exported to the EU, the following applies: For consignments from Vietnam exported to the EU with a value not exceeding 6,000 euros, any exporter is allowed to self-certify the origin. After that, traders are responsible for reporting and posting self-certification documents and documents related to exported consignments on the website: www.ecosys.gov.vn.

For export consignments valued at over 6,000 euros,exporters must have a C/O form EUR.1 issued by an agency or an organization authorized by the Ministry of Industry and Trade.The process of C/O declaration and certification for EUR.1 forms is similar to the current C/O forms.

Currently, for exported goods, Vietnam only applies self-certification of origin in ATIGA. For the two new generation trade agreements, CPTPP and EVFTA, Vietnam still applies the usual C/O issuance mechanism. When implementing the ATIGA self-certification of origin mechanism, currently only four Vietnamese enterprises are allowed to self-certify the origin, including: Vinamilk Dairy Joint Stock Company, Nestle Vietnam Co., Ltd. Sai Gon Precision, Indochina Procter & Gamble Company Limited.

The number of exporting enterprises licensed to self-certify the origin of goods is still limited, due to the strict regulations of conditions and criteria or the lack of recognition of the advantages and benefits of the enterprises for self-certification of origin.Therefore, the dissemination of these regulations should be promoted regularly and continuously in order to help them realize the advantages and benefits of being licensedfor self-certification of origin in ATIGA.

Potential risk of fraud

The application of the self-certification of origin mechanism for enterprises has many advantages and brings many benefits. However, there are concerns about fraud and counterfeiting. If the traditional C/O mechanism requires the enterprise to submit a dossier to the competent authority for consideration and issuance of C/O for exported goods, the self-certification of origin allows the enterprise to self-declare and to be responsible for the origin of goods.

Applying the mechanism of self-certification of origin, instead of the exported goods being inspected and determined by the competent authority of the exporting country, the enterprise proactively certifies the origin of goods on commercial documents. Accordingly, the risk of fraud and counterfeiting origin of goods will be more than the traditional C/O mechanism (issuing paper C/O according to the prescribed form). Customs will inspect and determine the origin of goods based on the information provided by the enterprise.

To prevent fraud and counterfeiting of origin of goods, Customs must change the management method compared to the traditional C/O inspection, mainly from "pre-check" to "post-check" in order not to increase the time to check the customs dossiers andnot to prolong customs clearance time while still ensuring management efficiency. In addition, the Customs office synchronously applies many professional measures such as inspection, investigation, verification and clarification for cases of fraud and counterfeiting of origin of goods.

By Hoang Thi Thuy/ Binh Minh

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