For third-country invoicing trade, if a Chinese exporter must obtain a Certificate of Origin, where is the invoice issuer indicated, and how is direct shipment proven? Released

Third-country invoicing trade is a common form in international trade, becoming even more prevalent as global supply chains grow more complex. This transaction method requires special attention from the perspective of origin management, and most FTA agreements, including the Korea-China Free Trade Agreement (FTA), permit the application of preferential tariffs for originating goods only when specific requirements are met. We will provide a detailed explanation regarding the issuance of Certificates of Origin for third-country invoicing trade, as you inquired.

1. Entity Responsible for Applying for a Certificate of Origin

The Korea-China FTA Agreement does not restrict the issuance of third-country invoices. However, as stipulated in Article 3.21 (Certificate of Origin) and Annex 3-C (Guidelines for Completing the Certificate of Origin) of the Agreement, the Certificate of Origin must be applied for by the Chinese exporter of the originating goods. This is a core principle of rules of origin, as the ultimate responsibility for proving the origin of goods eligible for preferential tariffs lies with the exporter in the Party to the agreement (in this case, China) exporting those goods. Therefore, it must be clearly understood that even if the commercial seller is an entity in a third country, the exporter (applicant for issuance) on the Certificate of Origin must always be the exporter located in China.

2. Method of Stating the Third-Country Invoice Issuer (Non-Party Operator)

When a third-country invoice is issued, the relevant information must be indicated on the Certificate of Origin form so that customs authorities can clearly understand the correlation between the commercial invoice and the Certificate of Origin. The Korea-China FTA Certificate of Origin stipulates that the legal name and country of the Non-Party Operator must be stated in Box 5 (Remarks). By including this information, even if the exporter on the Certificate of Origin and the actual issuer of the commercial invoice are different, it clarifies that the origin of the goods is China and transparently shows the flow of the commercial transaction. This entry plays a crucial role in enhancing the reliability of the Certificate of Origin and facilitating customs clearance by the importing country's customs authorities.

3. Method of Proving Direct Consignment Requirements

One of the important requirements for applying FTA preferential tariffs is the 'Direct Consignment Rule'. This refers to the principle that originating goods must be transported directly from the exporting country to the importing country. The Korea-China FTA Agreement also adheres to this principle, and it applies without exception even in third-country invoicing trade. To prove compliance with the direct consignment requirement, the following transport documents must be provided:

• Bill of Lading (B/L) or Air Waybill (AWB): These are the most crucial supporting documents. The transport document must clearly state that the goods were shipped from a port or airport in China and directly transported to a port or airport in Korea. It must clearly show that both the origin and destination are FTA Parties.

• Multimodal Transport Document: In cases of multimodal transport, such as sea-land or air-land, direct consignment can also be proven with a multimodal transport document.

• Transit/Transshipment Documentation (if necessary): Even if the goods are unavoidably transported through a third country, additional documents (e.g., Non-Manipulation Certificate) might need to be submitted to prove that no further processing occurred in that third country beyond simple unloading, re-loading, or operations to keep the goods in good condition, and that they remained under the control of that third country's customs authorities. However, direct transport from China to Korea is generally the simplest and clearest method of proof.

4. Additional Considerations and Recommendations

To consistently apply FTA preferential treatment in third-country invoicing trade, it is important to consider the following:

• Maintain Consistency Across Documents: All trade documents, including the Certificate of Origin, commercial invoice, packing list, and transport documents, must consistently state the goods' description, quantity, weight, consignor, and consignee information (including the third-country invoice issuer stated in specific fields). Inconsistencies between documents can lead to customs clearance delays or denial of preferential tariff treatment.

• Prior Confirmation and Consultation: Sufficient consultation regarding the issuance of the Certificate of Origin must take place in advance between the Chinese exporter and the third-country invoice issuer. In particular, cooperation is needed to ensure the Chinese exporter can obtain the necessary documents for proving origin (e.g., manufacturing cost statements, declarations of regional materials).

• Prepare for Origin Verification: Even after import clearance, customs authorities may review the appropriateness of FTA preferential tariff application through post-clearance verification. During this process, they may request all supporting documents related to the Certificate of Origin, as well as third-country invoice-related data, and transport documents. Therefore, it is crucial to thoroughly retain relevant data and prepare in advance. Insufficient documentation or inadequate proof of origin can lead to additional duties and penalties.

As such, third-country invoicing trade is more complex than standard trade transactions, making it crucial to accurately understand the relevant regulations and prepare thoroughly. If you have any questions, we recommend consulting with a customs expert at any time to minimize risks.