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FTA Preferential Tariff Application: Differences in Procedures Before and After Customs Clearance, Required Documents for Each Case, and Considerations for Certificate of Origin Preparation. Released

2025-12-02 21:28
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  1. Importance and Basic Principles of Applying FTA Preferential Tariffs
    Free Trade Agreements (FTAs) are crucial tools that lower trade barriers between countries and provide tariff benefits, thereby increasing the price competitiveness of imported goods. To apply FTA preferential tariffs, it is essential that the goods meet the origin criteria stipulated in the agreement and that relevant documents, including a Certificate of Origin (C/O) proving this, are submitted in a timely manner. The application for preferential tariffs can be made either before or after the acceptance of the import declaration, and the required documents and points to note differ for each procedure.
    Before filing the import declaration, importers must receive a Certificate of Origin (C/O) from the exporter in the FTA partner country and verify whether the origin criteria are met. This is the most fundamental prerequisite for applying preferential tariffs.
  2. Procedure and Required Documents for Applying FTA Preferential Tariffs Before Acceptance of Import Declaration
    Applying for preferential tariffs before the acceptance of the import declaration is the most common and recommended method. In this case, tariff benefits can be applied simultaneously with the import declaration, immediately reducing the amount of customs duties payable, and it is administratively simpler as it avoids post-refund procedures.
    [Required Documents]
    • Import Declaration Form: States information about imported goods and applicable tariff rates. The application of preferential tariffs must be clearly indicated.
    • Application for Preferential Tariff Treatment: Submit an application form prepared according to Annex Form No. 1 of the Enforcement Rule of the FTA Customs Act to the head of the customs office.
    • Certificate of Origin (C/O): Submit the original or a copy issued by the exporter in the FTA partner country. It must be a valid Certificate of Origin.
    • Commercial Invoice, Bill of Lading, Packing List, etc.: These are basic documents required for general import customs clearance.
    This procedure has the significant advantage of allowing immediate enjoyment of tariff reduction benefits during the import customs clearance process. Therefore, it is crucial to prepare all necessary documents perfectly in advance of import.
  3. Procedure and Required Documents for Applying FTA Preferential Tariffs After Acceptance of Import Declaration
    Even if origin-proving documents were not prepared before the acceptance of the import declaration, or if the application for preferential tariff treatment was not made due to an oversight, benefits can still be received through customs duty refund. In this case, the application for preferential tariff treatment must be submitted within 1 year from the date of acceptance of the import declaration for the relevant goods. This period is very important and must be strictly adhered to.
    [Required Documents]
    • Application for Preferential Tariff Treatment: Use Annex Form No. 1 of the Enforcement Rule of the FTA Customs Act, same as for applications before acceptance.
    • Application for Correction of Import/Tax Declaration: This application corrects the import declaration details and tax amount to receive a refund for previously paid customs duties.
    • Certificate of Origin (C/O): A copy of a valid Certificate of Origin can be submitted, same as for applications before acceptance.
    • Origin Verification Documents: Submit only if requested by the customs authority for origin verification. For example, manufacturing process diagrams, BOM (Bill of Materials), raw material purchase records, production logs, shipping documents, etc., may be included.
    • Original Import Declaration Certificate and Customs Duty Payment Proof Documents: These are for verifying the details of customs duties already paid.
    Since applications after acceptance involve a procedure to refund already paid customs duties, an application for correction is additionally required, and in some cases, requests for additional documents for origin verification may be made.
  4. Key Points to Note When Preparing a Certificate of Origin (C/O)
    The Certificate of Origin is a critical supporting document for applying FTA preferential tariffs, so its accuracy and validity must be thoroughly verified.
    [Key Points to Note]
    • Consistency of Information: All information stated on the Certificate of Origin, such as the exporter, importer, HS code of the goods, description, quantity, weight, Invoice number, and issuance date, must perfectly match the information of the actual imported goods. Even minor typos or discrepancies can lead to the denial of preferential tariff application.
    • Fulfillment of Origin Determination Criteria: It must be verified that the origin determination criteria stated on the C/O (e.g., RVC, CTC, WO) are accurately applied to the relevant agreement and goods. This is the most critical criterion for assessing the validity of the Certificate of Origin.
    • Validity Period and Issuance Method:
      • Verification of Validity Period per Agreement: The validity period of a Certificate of Origin differs for each FTA (e.g., 12 months for Korea-EU FTA, 4 years for Korea-US FTA). An expired C/O cannot be used.
      • Verification of Issuance Method: There are 'institutional issuance' and 'self-issuance' methods. Institutional issuance (e.g., chambers of commerce, customs offices) is issued according to a prescribed form, while self-issuance is prepared directly by the exporter (e.g., Korea-US FTA Invoice Declaration). The method of each agreement must be followed.
      • Signature and Seal: In the case of institutional issuance, the institution's seal and signature must be clearly indicated, and in the case of self-issuance, the exporter's signature.
    • Preparation for Post-Verification and Document Retention: Even after the acceptance of the import declaration, customs authorities may conduct post-verification of origin. Importers are obligated to retain the Certificate of Origin and related documents for origin substantiation (e.g., production process records, BOM, raw material purchase proofs, inventory records, shipping documents, etc.) for 5 years from the date of acceptance of the import declaration. If these cannot be submitted upon request for verification, or if the origin is not recognized, additional duties and surcharges may be imposed.
    • Direct Consignment Rule: Most FTA agreements stipulate that, in principle, goods must be directly transported from the exporting country to the importing country to qualify for preferential tariffs. If the goods pass through a third country, documents proving that no processing other than unloading, re-shipment, etc., occurred in that country (e.g., non-manipulation certificate, transshipment certificate) must be provided.
    • De Minimis Exemption and Simplified Proof: Certain FTA agreements exempt the submission of a Certificate of Origin for low-value goods below a certain amount (e.g., under USD 1,000 for Korea-US FTA), or allow an Invoice Declaration issued by the exporter to substitute for the Certificate of Origin (e.g., under EUR 6,000 for Korea-EU FTA). You can utilize this by checking the regulations of the relevant agreement.
  5. Utilizing FTAs with Experts
    FTA preferential tariffs are a crucial factor directly impacting corporate cost reduction, but due to complex origin regulations and procedures, expert assistance is essential. Customs brokers assist in interpreting these complex regulations, preparing accurate documents, and identifying and preparing for potential risks that may arise.
    Continuously checking FTA agreement details and seeking expert advice when necessary will greatly help in avoiding unnecessary customs duty surcharges or administrative sanctions and in conducting stable trade activities.

[This content regarding export and import clearance regulations and their interpretations is based on the customs and trade laws of the Republic of Korea.]

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Thank you!

JJ Goh
Representative Customs Broker
NPU Customs Consulting
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