Validity and Requirements for Korea-China FTA Certificates of Origin with Third-Party Invoicing (e.g., Hong Kong) Released

In the global trade environment, it is common for the country of shipment and the country of invoicing to differ due to intermediary trade or transactions between head offices and branches. We provide professional guidance on the validity of the Korea-China FTA Certificate of Origin (C/O) and the practical compliance requirements for cases involving third-party invoicing.

1. Concept and FTA Validity of Non-Party Invoicing

To conclude, even if an invoice is issued in a third (non-party) country, the Certificate of Origin remains valid provided it meets the requirements set forth in the agreement. Therefore, the Korea-China FTA preferential duty rates can be applied normally.

The Korea-China FTA specifically recognizes and defines these transactions as 'Non-Party Invoicing.' This provision ensures that preferential tariff benefits are granted to the actual originating goods as long as they are transported directly from the country of origin (e.g., China) to the importing country (e.g., Korea), even if the commercial documents for payment flow through a third country. However, customs authorities demand strict formal requirements to ensure consistency between documents and to verify that the transaction involves third-party invoicing.

2. Key Requirements for C/O Issuance: Box 5 (Remarks)

The most critical practical point regarding third-party invoicing is the information recorded on the Certificate of Origin. Unlike standard direct transactions, specific information must be entered in Box 5 (Remarks) of the C/O form. When obtaining a C/O through China Customs or the China Council for the Promotion of International Trade (CCPIT), you must ensure the following information is included:

• Subject of Entry: The legal entity or operator actually issuing the commercial invoice in the third (non-party) country.
• Mandatory Information: The Legal Name and Country of the said operator.

For example, if goods are shipped from a factory in China but the invoice is issued by a Hong Kong head office (e.g., ABC Trading HK Ltd), the phrase 'ABC Trading HK Ltd, Hong Kong' must be clearly stated in Box 5. If this information is missing at the time of import declaration, customs may deny the application of preferential duties or request a supplementary audit due to the discrepancy between the invoice issuer and the information on the C/O.

3. Practical Considerations and Risk Management

Before receiving the original Certificate of Origin, it is essential to cross-verify that the aforementioned details are accurately recorded in Box 5 during the drafting stage. If the original is issued with this information missing, you may face the inconvenience of requesting an amendment from the exporter and potential delays in customs clearance.

Furthermore, even if the invoice is issued in a third country, the 'Direct Transport Principle' must be observed. This means that while the documents may pass through a third country, the goods must be shipped directly from a Chinese port to Korea, or it must be proven that no processing other than simple transshipment occurred if they passed through a third country. In summary, while FTA application is possible for third-party invoice cases, the key is to comply with the procedural requirement of 'recording the non-party operator's information.'