What British and European exporters should know about authentication of origin self-certification

Gone are the days when an exporter needed only to write a sentence or two on the commercial or transport document to be able to certify the preferential origin and use a trade agreement. Self-certification of origin is changing and may require sharing of more, potentially commercially sensitive data or factoring in additional processing time before the goods may be exported. Businesses need to be aware of the new requirements.

What are statements on origin?

When exporting under a trade deal (FTA), exporters need to provide proof that their product meets the rules of origin and can therefore benefit from the discounted tariff rate. This is done either by obtaining a certificate of origin from an accredited body or by self-certification by the exporter or importer. While in the past, third-party certification was the main method, modern trade deals have seen a shift towards self-certification, which is preferred by most businesses. It allows to avoid extra costs and time required to apply for an external certificate.

While self-certification is easier for traders, it may make it more difficult to monitor compliance. For that reason, various methods were used to ensure that companies using self-certification comply with rules of origin. For example, exporters were asked to apply for a prior authorisation (e.g. via the approved exporter status) or register with local authorities (e.g. Registered Exporters ‘REX’ number).

For the most part, self-certification involved an exporter placing a statement on origin on a commercial or transport document. For example, in the EU-UK Trade and Cooperation Agreement, the origin statement was a simple sentence signed by the exporter.

Of course, by placing the statement on a commercial or transport document, the exporter confirms that they are familiar with and comply with, the rules of origin under the given agreement. Self-certification does not remove the need for due diligence on the exporter’s part. But the process of certifying origin is relatively simple.  

That is now starting to change for many British and European companies as new agreements are signed and new forms or statements on origin are introduced.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) model

Over the years, new forms of self-certification or data elements were introduced under different FTAs. The EU-Japan agreement introduced ‘importer’s knowledge’, self-certification by the importer. This was also later used in the UK-EU agreement.

For UK traders, the UK’s recent FTA with Australia and New Zealand brought some changes to the format of the statement of origin. The agreement with Japan, signed earlier, already asked exporters to identify which origin criterion was used. In addition to that, the statement on origin for Australia required including the details of both the exporter and producer and HS code.

The inclusion of the origin criterion caused initial confusion for some of the UK’s exporters. The obligation to provide the details of both producer and exporter was more problematic. This information might be viewed as commercially sensitive, creating a risk that the importer might bypass the exporter and reach out directly to the producer. Companies reported examples of this with trade agreements, but also when sharing carbon emissions data for Carbon Border Adjustment Mechanism (CBAM) reporting purposes. Luckily, the UK-Australia agreement included an option to share the producer’s details with customs authorities only.

The self-certification model in the UK-Australia agreement is unsurprisingly similar to the one used in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a regional trade agreement of which Australia and New Zealand are members, and which the UK joined. This agreement also allows exporters to decide to share the producer’s details with customs authorities only.

While these new forms of self-certification or requirements added complexity, they did not change the overall process.

India and the authentication of origin self-certification

In recent years, a relatively new concept has slowly been introduced in Europe as India started signing trade agreements with new trading partners: the authentication of a statement on origin.

Authentication of origin differs from origin verification in the form of a post clearance audit or checks. Authentication refers to checking whether or not the documents themselves are authentic, whereas verification ensures the rules of origin have been met.

In 2020, India introduced the Customs (Administration of Rules of Origin under Trade Agreements) Rules, CAROTAR. The overall purpose was to increase compliance with origin requirements. To achieve this goal, the importer claiming preference in India was required to hold sufficient information about the preference claim before the goods were imported.

In practice, CAROTAR means that local customs authorities in India ask for an option to authenticate each inbound statement on origin. This additional step is something that all India’s recent FTA partners needed to accommodate. They have all addressed it in a slightly different way. For British and European exporters, this is the next big change in origin certification. The new UK-India and EU-India trade agreements both include procedures for the authentication of self-certification.

The agreement with the UK requires UK exporters to register in an IT system before they can issue statements on origin. To register, companies will need to submit the contact details of a person responsible for issuing an origin statement within the company. Each company can register up to 10 employees’ email addresses. The database of registered UK companies will be shared with Indian authorities. Once UK exporters are registered, they can start issuing statements on origin.

The statement itself requires contact details of the exporter and producer, as well as the exporter’s reference number, HS code, description of the goods, invoice information and the origin criterion. Two new origin provisions were added: non-alteration and absorption principle. Many traders will need to familiarise themselves with the meaning and conditions of these provisions. The ability to make the producers’ details available only to customs authorities is not mentioned.

Each time an origin statement is issued, the exporter will need to send it from one of the registered email addresses to both the importer and the Indian customs authorities, which will then start the authentication process by comparing the information provided on the statement with the database of registered exporters. UK exporters will be notified whether the process was successful and whether the importer in India can claim preference. The entire process needs to be completed before the goods are exported.

Further guidance will be provided regarding the required format of the email and other details ahead of the agreement becoming operational.

Under the UK-India agreement, this process is only required for UK exporters. It is not necessary for Indian exporters to the UK. Indian exporters can also use third-party certification, and UK importers can use the importer’s knowledge (self-certification by the importer). Again, further guidance on this is yet to be provided.
UK exporters to India do not have an alternative proof of origin to rely on. Unless they register and complete the process, their clients will not be able to claim lower tariff rates.

The provisional text of the EU-India agreement was released at the beginning of March. This agreement approaches the authentication mechanism in a slightly different manner.

EU exporters will need the REX number used for self-certification under other agreements, but this by itself will not suffice. Exporters will also need to be verified or authenticated. In the EU, this will take place via the Uniform User Management and Digital Signatures or another equivalent Member States’ system. In India, this will be done via a local system.

Under the agreement, the statement on origin is the main way to certify origin. EU importers can also use the importers’ knowledge. Once the exporters are authenticated, they will be able to upload or generate the statement on origin via a dedicated IT system. The exporter’s details, together with the REX number, will be matched against the unique reference number of the statement of origin. Such a statement on origin will not require a signature.

Interestingly, while the statement requires the exporters to provide a unique reference number, HS code and description of the goods, and whether or not the absorption principle was used, it does not require details of the producer. This is good news for European exporters.

If it’s not possible to authenticate the statement, the Indian customs authorities will inform the EU exporter within 20 days. Given that this needs to take place before export, companies will need to factor in that additional time. If authentication is not possible, the preferential claim will be rejected.

Finally, the agreement provides that if the authentication mechanism is not available at the time the agreement becomes operational, a third-party certificate of origin will need to be used by both sides. The agreement provides a template and process for exporters on both sides to request a third-party certificate.

What does this mean for business?

One of the main advantages of self-certification was the fact that it allowed for almost instant certification without having to wait for a third party to verify origin. The need to authenticate self-certification under the UK and EU’s agreement with India removes that benefit. Businesses will need to take the additional time into account when planning their exports. This is a significant departure from what they are used to.

Whether or not an FTA is utilised depends on how well businesses can understand and follow origin requirements. If the rules are too stringent or complex, businesses are likely to pay the full tariffs instead.

We are likely to see at least initial teething problems as companies get used to the new process. Businesses need to be prepared and introduce internal processes to take into account the registration and additional lead time needed for each certificate. As such, it will be particularly important for the local customs authorities in the EU and the UK to provide appropriate, business-friendly and timely guidance on the new requirements.

Authentication of origin: a growing trend?

Authentication of origin is an emerging area of interest for both companies and customs authorities. It is part of wider efforts around the digitalisation of origin documentation. Electronic certificates mean that the documents cannot be lost or damaged during shipping. It is also easier for customs authorities to check the information against data submitted by customs brokers.

In 2018, the Singapore International Chamber of Commerce and Singapore-based vCargo Cloud (VCC) introduced the first blockchain-based platform electronic certificate of origin. The aim was to help prevent origin fraud and ensure the documents cannot be tampered with. South Korea has an Electronic Origin Data Exchange System (EODES), which allows exporters to apply for an e-certificate and transmit it to customs authorities in the country of export. These are just two examples of initiatives aiming to digitise origin certificates.

Authentication of origin documents is the next step, allowing authorities and traders to not only send electronic certificates but also confirm their authenticity. Over the last decade, we’ve also seen various initiatives introducing authentication of third-party certificates For example, in 2016 New Zealand and the General Administration of China Customs launched the Joint Electronic Verification System. This has also been extended to self-certification, with India introducing it in a number of its trade agreements (including with New Zealand and EFTA, although the later was done simply via an approved exporter number).

Once a system for the authentication of self-certification is in place, it can be adjusted for use across a number of FTA partners. However, it is important that such requirements are done in a way that does not slow down trade or discourage traders from using trade agreements. The new agreements between the UK, the EU and India will be the newest but certainly not the last agreements to include such requirements.
There are also ongoing private sector initiatives that go further in digitisation of origin: into verification. The International Chamber of Commerce (ICC) has introduced the ICC Genesis system, which is utilised by chambers of commerce as a quality control tool for exporters’ self-certification of origin. The system facilitates the verification and certification of preferential origin claims and supports improved compliance procedures for free trade agreements.

One thing seems to be clear. New, digital ways of providing, authenticating and verifying origin are emerging. This has been the case for origin certificates but now increasingly also for self-certification. The next steps would be the harmonisation of various, co-existing statement on origin templates and requirements and increased interoperability of the national systems for providing digital certificates.

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*Disclaimer: The content of this article may not reflect the official views of the International Chamber of Commerce. The opinions expressed are solely those of the authors and other contributors.