Application of Korea-Vietnam FTA Preferential Tariffs with Discrepant HS Codes on Certificate of Origin and Import Declaration Released

You have inquired about the applicability of preferential tariffs under the Korea-Vietnam Free Trade Agreement (FTA) when there is a discrepancy between the HS Code on the Certificate of Origin and the Import Declaration. Specifically, you noted that the imported lemongrass is classified as HS 2008.99-9000 on the Certificate of Origin, while the Import Declaration lists it as HS 1211.90-9010. Although the tariff headings differ, applying the Korea-Vietnam FTA preferential tariff is possible if specific conditions are met. Below is a detailed explanation and guidance.

1. Principles of Applying Preferential Tariffs with Discrepant HS Codes

To state the conclusion first: applying the preferential tariff is possible even if the HS Code on the Certificate of Origin differs from that on the Import Declaration. This is permissible under the Act on Special Cases of the Customs Act for the Implementation of Free Trade Agreements (hereinafter referred to as the 'FTA Special Act'), provided the requirements for preferential treatment are satisfied. While HS Codes are classification systems for tariff imposition and statistical purposes, the core principle of origin determination lies in whether the goods in question meet the specific origin criteria stipulated in the agreement.

2. Importance of the 'WO' (Wholly Obtained) Origin Criterion

In your case, if the 'Origin Criterion' field on the Certificate of Origin is marked as 'WO', the likelihood of successfully applying for the preferential tariff is very high.

• Meaning of 'WO': 'WO' stands for Wholly Obtained or Entirely Obtained. It refers to goods that are wholly produced or obtained in a specific country. Examples include agricultural products harvested, minerals collected, or marine products caught within that country.
• Significance of 'WO': Since wholly obtained goods are entirely produced in the respective country, there is no need to apply complex criteria such as Change in Tariff Classification (CTC) or Value Added (VA) rules. The fact that the goods originated entirely within the region is clear. Therefore, if 'WO' is specified, the origin is likely to be recognized as the FTA partner country, even if the importing country classifies the HS Code differently.

Regarding the lemongrass in question, if it was harvested in Vietnam and produced entirely without being processed into a different product, it satisfies the 'WO' criterion. Even if the Import Declaration classifies it as plants for perfumery or pharmacy (HS 1211.90-9010) while the Certificate of Origin lists it as prepared vegetables (HS 2008.99-9000), the essential nature of the goods and their status as wholly produced in Vietnam are the deciding factors. The key is the actual nature of the goods and compliance with the origin criteria, rather than the absolute matching of the HS Codes.

3. Additional Requirements for Preferential Tariff Application

In addition to meeting the 'WO' criterion, all general requirements under the FTA Special Act must be satisfied.

• Valid Certificate of Origin: You must submit or possess a valid Certificate of Origin (or origin declaration) that meets the format and content requirements of the agreement. (For the Korea-Vietnam FTA, an origin declaration issued by a certified exporter is also acceptable).
• Direct Consignment Principle: The goods must be transported directly from the originating country to Korea without passing through a non-party country, although exceptions exist for transshipment under customs control.
• Application for Preferential Tariff: You must formally apply for the preferential tariff at the time of import declaration. While post-import application is possible, initial application is recommended for certainty.
• retention of Origin Documents: You must faithfully retain documents proving origin, such as contracts, invoices, bills of lading, and manufacturing process data, and be able to submit them upon Customs' request.

4. Causes of HS Code Discrepancy and Countermeasures

HS Code discrepancies can arise from various factors, and resolving them is advisable for long-term compliance.

• Causes of Discrepancy:
  • Differences in HS classification interpretation between the exporting and importing countries.
  • Changes in HS Code depending on the degree of processing for the same item.
  • Errors where the exporter's Certificate of Origin describes the goods differently from their actual state.
  • Classification errors by the importer during the import declaration.
• Countermeasures:
  • Re-verification and Harmonization: Consult with the exporter to confirm the accurate HS Code acceptable to both countries. Aligning the codes on the Certificate of Origin and the Import Declaration is the best way to prevent future disputes.
  • Utilization of Advance Ruling: If classification is uncertain, utilize the Advance Ruling on Tariff Classification by the Korea Customs Service before importation. Additionally, an Advance Ruling on Origin can verify if the goods meet the FTA origin standards beforehand.
  • Thorough Preparation of Evidence: Since discrepant codes may trigger stricter customs scrutiny, ensure you have comprehensive documentation proving the lemongrass was wholly produced ('WO') in Vietnam (e.g., production process charts, raw material purchase records, harvest certificates).

Conclusion

In summary, even if the HS Codes differ, you may apply for the Korea-Vietnam FTA preferential tariff if the Certificate of Origin specifies 'WO' and all other legal requirements are met. The decisive factors are the actual nature of the goods and their status as wholly produced in Vietnam.

However, as a trade professional, I recommend ensuring HS Code consistency and strictly managing supporting documents to minimize compliance risks, even if the 'WO' criterion currently mitigates the impact of the discrepancy. If you have further questions regarding specific documentation or procedures, please consult with a customs expert.