Applicability of FTA Preferential Tariffs in Cases of Domestic Bill of Lading (B/L) Transfer Released

In principle, FTA preferential tariff rates can be applied even when the importer listed on the Certificate of Origin (COO) differs from the Importer of Record (taxpayer) on the import declaration due to a domestic Bill of Lading (B/L) transfer. This is recognized because domestic B/L assignments are common distribution practices in international trade. However, it is essential that the transaction meets all FTA requirements, the identity of the goods is clearly verified, and the entire transaction trail leading to the final buyer is transparently documented.

The fundamental requirements for applying FTA preferential tariffs are as follows:

• Eligibility of Goods: The items must be eligible for tariff benefits under the specific FTA agreement.
• Origin Compliance: The goods must originate from the contracting party as defined by the agreement, proven by a valid Certificate of Origin.
• Direct Transport Rule: Generally, goods must be transported directly from the exporting party to South Korea. If they transit through a third party, they must remain under customs control without any processing, other than unloading, reloading, or temporary storage.
• Formal Application: The importer must explicitly apply for the preferential tariff at the time of import declaration.

1. Proving the Identity of the Goods

Proving the identity of the goods involves demonstrating that the items described in the Certificate of Origin are identical to those being declared for import. This is a primary focus during FTA post-clearance audits.

• Cross-Verification of Documents: You must cross-check information across the COO, Commercial Invoice, Packing List, Bill of Lading (B/L), and the Import Declaration. The product name, specifications, model, quantity, weight, and packaging type must remain consistent.
• Technical Specifications and Catalogs: If necessary, attaching detailed technical spec sheets or product catalogs can help clarify the characteristics of the goods, especially for items where the Harmonized System (HS) code classification might be complex.

2. Proving the Transaction Trail (B/L Transfer Documentation)

When a domestic B/L transfer causes a mismatch between the initial importer (on the COO) and the final importer (taxpayer), you must prove that the legal rights to the goods were properly transferred to the final buyer to claim FTA benefits.

• B/L and Assignment Documents:
  • Original Master B/L: Issued by the overseas exporter. The consignee on this document usually matches the importer on the COO.
  • Domestic B/L or Assignment Agreement: Documents proving that the rights under the Master B/L were transferred domestically. This must clearly show the transfer from the initial consignee to the final Importer of Record.
• Transaction Documents:
  • Initial Contract/Invoice: The sales agreement and commercial invoice between the overseas seller and the initial importer.
  • Domestic Contract/Invoice: The agreement and invoice between the initial importer and the final importer. The recipient of this invoice must match the Importer of Record on the customs declaration.
  • Proof of Payment: Bank wire transfer slips or foreign exchange transaction records showing the final importer paid the initial importer for the goods.
• Additional Evidence: A Confirmation of Transfer or Power of Attorney stating the intent to transfer B/L rights is recommended. These should include specific details of the goods, transfer date, and information for both the assignor and assignee.

Conclusion

Customs authorities use these documents to track and verify the entire transaction flow from the overseas supplier to the final domestic taxpayer. Therefore, logical consistency across all documents is vital. We recommend retaining all related documentation for five years to prepare for potential post-clearance audits and to ensure the seamless application of FTA preferential benefits.