Certificate of origin

1.????? Definition?

A?certificate of origin?(CO) is a document declaring in which country a commodity or good was manufactured. The certificate of origin contains information regarding the product, its destination, and the country of export.?

2.????? Types of C/O in Vietnam and issuing authority

a.????? Issuing authority

?

Based on the chart above, regardless of whether the certificate of origin (C/O) falls under FTA or non-FTA agreements, only the government has the exclusive authority to issue or reject C/O certificates application to factories. This is a universal rule across all countries, as the C/O certificate is issued by an authority rather than the factory itself.

a.????? Which type of C/O is used for exports to the US??

The US has remained the largest export market of Vietnam for many years. As Vietnam and the US have not entered any free trade agreement, Form B: C/O that is used for all kinds of goods exported to other countries and issued under non-preferential rules of origin is suitable for exports to the US.?

Pakistan: Pakistan and the United States do not currently have a free trade agreement (FTA). The idea of a Pakistan-US FTA has been discussed for some time.?Some say that signing a trade agreement could open up the US textile market for Pakistani manufacturers.?

Cambodia, Taiwan: Not yet.?

1.????? Criteria for Certificate of Origin (C/O)?

According to the guidelines, there are over 10 optional methods to help factories achieve a Certificate of Origin (C/O). Factories can choose the method that best fits their process, and each method has specific steps and rules to follow in order to qualify for the C/O. ?In this content, I won’t lay out all methods, I just pick the most common practice that factories usually do.?

a.????? RVC - Regional Value Content?

Regional Value Content (RVC) is a threshold goods must meet to qualify as originating goods. This threshold is often 40%. Depending on each Free Trade Agreement (FTA) and product, there will be a specific threshold. The most common threshold globally is 40%. Each trade agreement has a different way to calculate RVC, but to facilitate trade, FTAs allow businesses to calculate RVC either directly or indirectly.?

·?????? Direct method: Build – Up

???????????????????? RVC?= (VOM / FOB) x 100%

?????? VOM – Value of Originating Materials?refers to the value of materials with an originating status, including costs of materials, labor, and business expenses.?

·?????? Indirect method: Build – Down

???????????????????? RVC?= (FOB – VNM) / FOB x 100%?

?????? VNM – Value of non-originating materials refers to the value of materials that do not have originating status. This value includes the CIF (Cost, Insurance, and Freight) price at the time of import, parts of input goods, or the price at the earliest purchase time if parts or input goods haven't been identified.?

b.???? CTC - Change in Tariff Classification

This simply means converting HS code method.?

c.????? De Minimis

?This rule applies to materials that do not meet the HS code change criteria. However, the finished product can still be considered as originating if these materials do not exceed a certain percentage (X%) in value or weight. The percentage is usually calculated by dividing the value or weight of non-originating materials by the total value (FOB) or weight of the finished product. This percentage (X%) varies by FTA but is often 10%. Some FTAs may have stricter requirements, allowing only 7% to 8% for certain products.

?d.???? WO - Wholly Obtained

?Goods produced within the territories of FTA member countries or entirely in the exporting country are considered as having pure origin. Each FTA specifies criteria for pure origin. Goods produced within the FTA member countries' territories or entirely in the exporting country meet these criteria.

?WO (Wholly Obtained) is the strictest criteria among origin rules. Not many products meet this due to current trade practices. Products that meet this criteria include:

?·??????? Plants and products harvested in the exporting country

·??????? Live animals born and raised in the exporting country

·??????? Products obtained from these live animals

·??????? Products hunted, fished, or gathered in the country

·??????? Minerals and natural substances extracted from the country’s land, sea, or water

·??????? Products taken from the sea or seabed outside the country’s territory if the country is allowed to exploit according to international law

·??????? Products processed on a ship registered and flagged in the country

·??????? Products obtained or produced from the items mentioned above.

?e.???? PE - Produced Entirely

?Goods made from materials with pure origin, meaning 100% from the country's own materials. This includes:

?·??????? Goods produced from materials meeting WO criteria

·??????? Goods using materials meeting RVC, CTC, and/or SP criteria

·??????? Goods must ensure production from materials meeting PE criteria

·??????? Exported goods produced from materials meeting WO, PE, or RVC, CTC, or SP criteria

?f.?????? GR - General Rule

?General rules apply to all types of goods, except those specified in detailed product-specific rules. Each agreement will apply a common origin rule like:

?·??????? ATIGA, AKFTA, AJCEP, and AANZFTA: Goods must change to the 4-digit level or have a regional value content (RVC) of 40%.

·??????? ACFTA: Uses a general RVC rule of 40%.

·??????? AIFTA: Uses a general origin rule of RVC 35% plus a change in tariff classification (CTC) at the 6-digit level.

Some FTAs signed earlier apply both general rules (GR) and product-specific rules (PSR). Later agreements or revisions may only use PSR, calculated from the 6-digit HS code from Chapter 1 to the last chapter in the tariff schedule. FTAs with only PSR are often considered user-friendly and easy to reference

?g.????? SP - Specific Process

?Specific Processing (SP) applies to goods made from non-originating materials. These materials must be processed in a member country of the FTA. For example:

?·??????? Product A (WO criteria)

·??????? Product B (RVC criteria)

·??????? Product C (CTC criteria)

·??????? Product D (RVC or CTC criteria)

?When Product E is made through a specific process, it won't meet any single criteria listed above. Instead, it involves a whole production process described in 36 specific rules or a combination of several origin criteria.

The advantage of this criterion is its consistency. If the correct production process is followed, the goods will have origin status without depending on material, labor, or input costs. It also isn't affected by changes in material supply sources.

?h.???? Chemical Reaction Origin Rule

?Any goods undergoing a chemical reaction in a member country are considered to have originated there. A chemical reaction is a process that creates a new molecule structure by breaking and forming new internal molecular bonds or changing the atomic spatial network. Specific steps in a chemical reaction can include:

·??????? Dissolving in water or other solvents

·??????? Removing solvents, including water

·??????? Adding or removing water from crystalline substances

?i.??????? Cumulation

This rule allows goods originating in one FTA member country to be used as materials for producing goods in another member country. These items are considered as originating in the next country where they are produced.

?Accumulation

This form is used in all FTAs that Vietnam is a member of and is commonly used in global trade. If materials meet the origin criteria, they can be fully accumulated, meaning they count as 100% originating materials for production and determining the origin of the finished product.

?Full Cumulation

Applied in new-generation FTAs or for certain product groups like textiles (e.g., AJCEP, AANZFTA). With this rule, materials used in production don't need to meet the full origin requirement but only a part of it. The accumulated value is the actual added value, not the full value of the material as in the regular accumulation rule.

?Partial Cumulation

Used in ATIGA. If materials meet the cumulation criteria, they are counted as 100% of their value. If they meet 20% or 39%, the actual percentage is added when used for the next production step. This percentage determines the origin of the goods. With "partial cumulation" in ATIGA, these materials are still issued a C/O form D, marked in the "Partial Cumulation" box to help customs distinguish between goods that benefit from cumulation and those that don't enjoy tariff preferences under ATIGA.

Giang Nguyen.