If you are a part of a large organization that sources your goods globally, you may run into a common problem: How can our Certificate of Origin (COO) be managed efficiently? Who is responsible for ensuring they are up to date? Where should the information be stored? How often should it be reviewed?
A clear country of origin statement or certificate is a requirement of many Free Trade Agreements, which then allows the import of those goods at a reduced or eliminated rate of duty. A certificate of origin also plays a part in labeling and marking requirements such as “Made in the USA.” It can also determine whether there are additional requirements or special duties applicable. Without the careful and accurate use of a certificate of origin, companies will find themselves in the crosshairs of Customs and the legal system.
Determining the country of origin can be quite complex if the commodity is comprised of multiple parts from different countries of manufacture. Rules of Origin help to decipher what will qualify and what will not. Because the seller of these goods is the most familiar with them, they are typically the party that provides this information. However, during the buying and shipping process, this very important document/certification can be easily overlooked, leading the buyer’s team to scramble at the time of import. Here are 5 tips on how to avoid this situation.
1: Make Certificates of Origin Part Of Your Contract Negotiations
As the seller is most attentive when a deal is about to be closed, ensure you negotiate how your company will receive the certificate of origin data for all new and existing orders moving forward. Ensure a clause on these requirements is within your terms and conditions, which includes an annual review of all parts/SKUs and confirmation of their country of origin.
2: Ensure Your Customs And Purchasing Teams Are Working Together
Now that you have negotiated with the seller on terms, it’s important to ensure that your purchasing team is communicating with your Customs/Logistics teams. Often, a Licensed Customs Broker (LCB) or Certified Customs Specialist (CCS) on your team, or at your Customs Broker can assist you with determining the most cost-effective sourcing options by looking at preferential duty treatments allowed under certain Free Trade Agreements. Therefore, get these two teams talking at the onset of any purchasing decisions.
3: Create An SOP On Certificates of Origin
Create a standard operating procedure (SOP) that details the steps to be taken by each team member at the onset of entering a new part, as well as the ongoing maintenance of such information. The SOP should include:
- Key accountabilities of members of your purchasing and compliance/customs/logistics teams
- Key accountabilities of vendors
- Vendor contact information and location of SKUs/parts database
- Certificate of origin is a required field in the setup of a new vendor, part, or SKU, in an ERP system or database
- Certificate of origin to include an expiry/review date which will prompt a team member to ensure the data is still correct
- The Purchase Order system cannot generate a PO# without a certificate of origin
- Ensure proper authority for any team that is able to edit this data
4: Run Regular Reports To Look For Gaps
A member of your team should be reviewing certificate of origin data regularly to ensure the correct data is on file and to look for any missing or inaccurate information. Some suggested reports are as follows:
- Vendors you purchased from annually and cross-reference with certificates of origin on file
- Reminders are sent out to all vendors listing SKUs/parts in the last quarter of the year (or earlier)
5: Educate Your Team
The manufacturing country is not the same as the country of origin.
Let’s repeat that very important detail.
The country of manufacture is NOT the same as the country of origin.
Contrary to popular (but misinformed) belief, these two are not one and the same. Therefore it’s very important that you educate all members of your purchasing and logistics teams to not use the country shipping or seller’s country of business to populate Country of Origin fields.
As mentioned earlier, it is a good idea to make the certificate of origin fields mandatory in your ERP system or parts database to ensure that this data is attached to each part or SKU of your purchase. However, mandatory fields can quickly become those pesky fields we must override before we can do what we are trying to do! As a result, the annoyance of having to input a data element into that field will soon drive “quick fixes.” Too often, the quick fix is to use the country where the goods were sold from or manufactured. Unfortunately, this is not always accurate, and extra time and attention must be given to determine an accurate country of origin instead.
Failure to comply with country of origin marking and labeling comes with hefty monetary and possibly criminal penalties. Speak with a Trade Advisor today to learn more.