Korea-China FTA Certificate of Origin: Legal name and country information of the third-country invoice issuer are omitted. Can preferential tariff rates still be applied, or should the certificate be amended? Released

You inquired about the applicability of preferential tariff rates if the legal name and country information of the third-party invoicing operator are missing from the Korea-China FTA Certificate of Origin. To state the conclusion first, the omission of such information is considered a material error in the Certificate of Origin, and the application of preferential tariff rates is not possible, and you must submit a corrected Certificate of Origin.

This is based on the regulations stipulated in the Korea-China FTA Agreement, Article 3.25 (Exclusion from Preferential Tariff Treatment). This article stipulates that the application of preferential tariff rates may be excluded if the Certificate of Origin fails to meet the requirements of Chapter 3 (Rules of Origin and Origin Procedures). The inclusion of information related to third-party invoicing is one of the key requirements to ensure transparency and accuracy in origin procedures.

What is Third-Party Invoicing, and why is this information important?

Third-Party Invoicing refers to a transaction model where the exporter of originating goods (producer or supplier) and the importer do not directly trade, but rather a business entity in a third country issues the invoice and intermediates the payment. For example, when goods produced in China are imported into Korea, a specific company in Japan issues the invoice and manages the payment. Such transactions can frequently occur due to the complexity of global supply chains.

In the case of such third-party invoicing, the Certificate of Origin must clearly state the legal name and country of the third-party operator issuing the invoice, in addition to the actual originating exporter and actual originating importer. The reasons why this information is crucial are as follows:

• Ensuring Transaction Transparency: In transactions involving a third party, information related to origin can become opaque. By clearly identifying the invoice issuer, it becomes essential data for accurately identifying the goods' movement path and transacting parties, and for verifying compliance with origin rules.
• Preventing Origin Washing: It prevents attempts to misrepresent origin by passing through a third country or through invoicing, and ensures that preferential tariff benefits are applied only to legitimate originating goods.
• Maintaining Trust Between Contracting Parties: FTAs operate based on mutual trust between the contracting parties. The omission of such detailed information can affect trust relationships and may lead to unnecessary friction during future origin verification processes.

Measures to Take When Information is Missing

As in your case, if the legal name and country of the third-party invoicing operator are not stated on the Certificate of Origin, it is difficult for that Certificate of Origin to be recognized as valid. The Korea Customs Service regards such an error as a 'Certificate of Origin error' and will not allow preferential tariff rates to be applied without its resolution. Therefore, the most certain and swift solution is to contact the exporter to obtain and submit a corrected Certificate of Origin (Amended COO or Corrected COO).

• Correction Procedure: The exporter must request an error correction from the Certificate of Origin issuing authority (e.g., Chinese customs or chamber of commerce) to obtain a new certificate. In this process, it is common to state the number of the original certificate and specify what content has been corrected.
• Timeline and Precautions: The corrected Certificate of Origin should be secured as quickly as possible in preparation for import declaration amendments or post-clearance audits. If the corrected certificate cannot be submitted within a certain period after import clearance, the application of preferential tariff rates may be rejected, the Most Favored Nation (MFN) rate may be applied, and additional duties may be imposed.

Advice for Preventing Similar Issues in the Future

To prevent the recurrence of such issues, it is advisable to take the following measures:

• Prior Consultation and Provision of Guidelines: When contracting with an exporter, you should clearly discuss the requirements for issuing a Certificate of Origin and provide guidelines requesting that necessary information (legal name, country, etc.) be clearly stated if third-party invoicing is involved.
• Thorough Document Review: You should develop the habit of carefully checking all entries immediately upon receipt of the Certificate of Origin, especially information related to third-party invoicing.
• Role of a Customs Broker: It is difficult for individual companies to grasp all complex FTA regulations and Certificate of Origin examination standards. It is important to seek the help of a professional customs broker to review Certificate of Origin requirements in advance and to respond promptly when issues arise.

While FTA preferential tariffs offer significant cost-saving benefits to businesses, thorough compliance with origin rules and procedures is essential to receive these benefits. Even the omission of a small piece of information can lead to significant financial losses, so we urge you to always ensure accurate and complete document preparation.