Applying Korea-Vietnam FTA Rates Despite HS Code Discrepancy for Lemongrass Imports Released

Regarding your inquiry about the Korea-Vietnam Free Trade Agreement (FTA), you asked whether preferential tariff rates can be applied when the HS Code on the Certificate of Origin (HS 2008.99-9000) differs from the one on the Import Declaration (HS 1211.90-9010) for lemongrass. In principle, the Korea-Vietnam FTA rate can still be applied if specific requirements are met, despite the discrepancy in HS codes. Below is a detailed professional analysis and guidance on this matter.

1. General Principles of FTA Application for HS Code Discrepancies

In short, it is possible to apply the FTA preferential tariff even if the HS codes do not match, provided the requirements set forth in the Act on Special Cases of the Customs Act for the Implementation of Free Trade Agreements (the 'FTA Special Act') are satisfied. While HS codes are a classification system for taxation and statistics, the core of origin determination lies in whether the actual goods satisfy the Rules of Origin (RoO) specified in the agreement.

2. The Significance of the 'WO' (Wholly Obtained) Criterion

In your case, if the Origin Criterion on the Certificate of Origin (C/O) is listed as 'WO', the likelihood of successfully applying the FTA rate is very high.

• Meaning of 'WO': 'WO' stands for Wholly Obtained (or Entirely Obtained). This refers to the 'Wholly Obtained Criterion,' which means the product was entirely produced or obtained within a single country. This typically applies to agricultural products harvested, minerals extracted, or seafood caught within that territory.
• Importance of 'WO': Because Wholly Obtained goods are fully produced within the territory, there is no need to apply complex rules such as Change in Tariff Classification (CTC) or Value-Added (VA) criteria. It is clear that the item itself originated within the region. Therefore, if 'WO' is indicated on the C/O, the origin is clearly recognized as being within the FTA territory, even if the HS Code is classified differently in the importing country.

For the lemongrass in question, if it was harvested in Vietnam and has not undergone significant processing that changes its nature as a 'wholly obtained' product, it satisfies the 'WO' criterion. Even if the importing country classifies it under HS 1211.90-9010 (plants for perfumery/pharmacy) while the C/O lists it under HS 2008.99-9000 (processed vegetables), the physical properties of the goods and their status as wholly obtained in Vietnam are the determining factors, rather than a perfect match of HS codes.

3. Additional Requirements for FTA Preferential Treatment

Beyond satisfying the 'WO' criterion, all other general FTA requirements must be met:

• Valid Certificate of Origin: You must possess a valid C/O (or Origin Declaration) that adheres to the format and content requirements stipulated in the agreement.
• Direct Consignment Principle: The originating goods must be transported directly from the country of origin to South Korea without passing through a third country, unless specific exceptions (e.g., transshipment under customs control) apply.
• Application for Preferential Tariff: The application for the FTA rate must be submitted at the time of import declaration (though a post-importation claim is possible within a certain period).
• Documentation Maintenance: You must maintain all supporting documents, such as contracts, invoices, bills of lading, and production process records, and be prepared to submit them if requested by Customs.

4. Causes of HS Code Discrepancies and Countermeasures

HS Code discrepancies can occur for various reasons, and it is advisable to resolve them for long-term compliance.

• Causes of Discrepancy:
  • Differences in interpretation of the HS Nomenclature between the exporting and importing countries.
  • Changes in HS codes based on the degree of processing of the goods.
  • Clerical errors by the exporter or importer during documentation.
• Countermeasures:
  • HS Code Harmonization: Consult with the exporter to confirm the most accurate HS Code and try to align the C/O with the import declaration to prevent future disputes.
  • Advance Ruling System: If there is significant uncertainty regarding classification, utilize the Customs Advance Ruling for Classification to get a binding decision from the Korea Customs Service before importation.
  • Preparation of Evidence: Since discrepancies may trigger closer scrutiny, ensure you have thorough documentation (production records, raw material purchase history, harvest certificates) to prove the 'WO' status in Vietnam.

Conclusion

In summary, for your lemongrass import, as long as 'WO' is specified on the C/O and all other statutory FTA requirements are met, the Korea-Vietnam FTA rate is applicable despite the HS code difference. The actual nature of the goods and the fact they were wholly obtained in Vietnam are the key factors.

As a customs professional, I recommend that you work toward long-term HS Code consistency and maintain rigorous documentation to ensure smooth customs clearance for future shipments. If you require further assistance or specific legal review, please feel free to consult with us.