Certificate of Origin

Certificate of Origin

Ozgur Eker (CDCS) Certificate of Origin, Letter of Credit Documents ,
Certificate of Origin

A Certificate of Origin (often abbreviated to CO, C/O, COO) is a trade document, which identifies the origin of goods that is being exported and required by almost all of the export and import shipments in international trade.

Certificate of origin is a document used in international trade transactions, certifies that goods in a particular export shipment are originated in a particular country either by wholly obtained principle or substantial transformation principle.

What are the Functions of a Certificate of Origin in Export / Import Transactions?

Certificates of origins are requested by the importing country administrations for the following reasons:

  1. Determining whether or not the goods being imported are eligible for any preferential custom tariffs,
  2. Determining the exact import customs duties to the goods,
  3. Determining whether or not the goods come from a country against which the importing country has trade restrictions.

What are the Types of Certificates of Origin?

Certificates of origin can be classified under two main groups:

types of certificates of origin

Ordinary Certificates of Origin: An Ordinary certificate of origin is a document that can be used to satisfy importing country’s custom authorities that the products exported are originated in a specific country.

Ordinary certificates of origin do not grant any preferential tariff treatment during the importation of goods.

Issuing Bodies of Ordinary Certificates of Origin: Ordinary certificates of origin can be issued and certified by chambers of commerce, chambers of industry and chambers of commerce and industry.

In some occasions exporting companies can also prepare ordinary certificates of origin by themselves in a separate document form or adding a statement on this effect on to the commercial invoices.

Ordinary certificates of origin do not need any endorsement or legalization from the custom authorities.

Preferential Certificates of Origin: Preferential Certificates of Origin likely to grant reduced or zero rates of custom duty when export goods are entering into importer’s country as a Preferential Certificate of Origin (PCO) proves that the product originates from a Free Trade Agreement Partner Country under stipulated Rules of Origin (ROO) and hence, qualifies the product for tariff concessions provided under the specific FTA.

Issuing Bodies of Preferential Certificates of Origin: Preferential certificates of origin must be issued and authorized by the customs or any other organization that is entrusted by the government in the exporting country.

Some Examples of Preferential Certificates of Origin:

  • Certificate of Origin GSP Form A
  • North American Free Trade Agreement (NAFTA) Certificate of Origin
  • EUR1 Form Movement Certificate
  • ATR Movement Certificate

How to Use Certificates of Origin in Letters of Credit Transactions:

Letter of credit rules do not cover certificates of origin under specific articles, unlike transport and insurance documents; as a result certificates of origin will be treated like any other ordinary document under the letter of credit rules.

This having been said, we need to emphasize that the specific requirements regarding the certificates of origin must be indicated in the letters of credit by the issuing banks.

  1. If no specific requirement exists in the letter of credit for the certificates of origin, then the presentation of a certificate of origin will be satisfied by the presentation of a signed document that appears to relate to the invoiced goods and certifies their origin.
  2. When a credit requires the presentation of a preferential certificates of origin such as a Certificate of Origin GSP Form A or EUR1 Form Movement Certificate, only a document in that specific form should be presented by the beneficiary.
  3. A certificate of origin should be issued by the entity stated in the credit such as Chamber of Commerce, Chamber of Industry, Customs Authorities etc.

Certificates of Origin Samples:

Ordinary Certificate of Origin:

certificate of origin

EUR1 Certificate of Origin:

eur1 certificate of originNafta Certificate of Origin:

nafta certificate of origin

Letter of Credit Documents

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letter of credit documents

After reading this post, you should understand why documentation is very important under letters of credit.

Additionally, most frequently used document links have been supplied on later parts of this article.

There are many important points in a typical letter of credit transaction that need to be taken care of professionally.

However, documentation is much more important than any other aspects of the letters of credit transactions, because the documentation forms the backbone of the letters of credit structure.

In order to understand the importance of the documentation, please assume that you are an exporter, whom has just shipped an order.

How can you prove to the issuing bank that you have make the shipment according to the letter of credit terms?

Which means that;

  • you have shipped the goods on time, not late
  • you have shipped the right goods, not wrong ones
  • you have shipped the goods in good condition, no apparent defect on the packing
  • you have delivered the goods to the carrier for transportation from port of loading to the port of discharge indicated in the credit etc.

In order to prove above points to the issuing bank, you have to supply a relevant transport document.

Furthermore, let us also consider that the delivery term was CIF Incoterms 2010, which obligates the exporter, which is you, to arrange and pay the insurance for the shipment.

Once again, you have to supply an insurance policy to fulfill your insurance responsibility.

The examples can be extended, but perhaps the main idea is very clear. Letters of credit transactions are related to the documents only, not actions.

importance of letter of credit documentation

The importance of the documentation is stated in UCP 600 article 5 as follows:

Banks deal with documents and not with goods, services or performance to which the documents may relate.

In addition, every condition stated in the letter of credit must be connected to a document. This point is also clearly indicated in UCP 600 article 14 as below.

If a credit contains a condition without stipulating the document to indicate compliance with the condition, banks will deem such condition as not stated and will disregard it.

Documents Most Frequently Used Under Letters of Credit Transactions:

Transport Documents:

Insurance Documents:

Financial Documents:

Commercial Documents:

Official Documents:

Certificate of Origin Discrepancies

Ozgur Eker (CDCS) Certificate of Origin Discrepancies, Letter of Credit Discrepancies , ,
certificate of origin discrepancies

Certificate of Origin can be regarded as an official document. The certificate of origin could be issued on paper or electronic form.

The certificate of origin verifies the country in which the goods to be exported were originally manufactured.

Although the certificate of origin could be issued by an exporter without requiring any additional certification, in most cases, the customs office in the importing country requires a certificate of origin to be issued either by

  • the chamber of commerce (Ordinary Certificates of Origin) or
  • custom authorities (Preferential Certificates of Origin).

Letter of credit rules allow presentation of all types of certificates of origin.

On this page, you can find most common certificate of origin discrepancies under letter of credit transactions.

Certificate of Origin Discrepancies

Important Definitions Regarding the Certificate of Origin

  • According to UCP 600, latest letter of credit rules, and international standard banking practices a certificate of origin should be issued by the entity specified in the letter of credit.
  • When a letter of credit does not state the name of an issuer of the certificate of origin, any institution could issue a certificate of origin.
  • When a credit requires the presentation of a certificate of origin, this will be satisfied by the presentation of a signed document that appears to relate to the invoiced goods and certifies their origin.
  • When a letter of credit demands the presentation of a specific form of certificate of origin such as a EUR1, ATR or GSP Form A, only a document in that specific form is to be presented. For example if credit calls for a EUR1, beneficiary can not present an ordinary certificate of origin issued by the chamber of commerce.
  • Consignee information, when shown, is not to conflict with the consignee information in the transport document. However, when a credit requires a transport document to be issued “to order”, “to the order of shipper”, “to order of issuing bank”, “to order of nominated bank (or negotiating bank)” or “consigned to issuing bank”, a certificate of origin may show the consignee as any entity named in the credit except the beneficiary.
  • When a credit has been transferred, the first beneficiary may be stated to be the consignee.

Origin of Goods Inconsistent with the Letter of Credit Discrepancy

Ozgur Eker (CDCS) Certificate of Origin Discrepancies, Letter of Credit Discrepancies , , ,
certificate of origin inconsistent certificate of origin discrepancy

A certificate of origin should certify the origin of the goods.

When a letter of credit indicates the origin of the goods and requesting presentation of a certificate of origin, any reference to the origin of goods on the certificate of origin or another document, is not to conflict with the stated origin.

For example, when a letter of credit indicates “origin of the goods: Japan”, a certificate of origin or a statement on any stipulated document indicating a different origin of the goods is to be considered a conflict of data, discrepancy.

As per letter of credit rules and international standard banking practices a certificate of origin must certify the origin of the goods as indicated in the letter of credit.

If the issuing bank determines that the certificate of origin is not reflecting correct origin of goods, then the issuing bank raises a discrepancy, which is known as origin of goods inconsistent with the letter of credit.

Discrepancy Example: Origin of Goods Inconsistent with the Letter of Credit

A letter of credit has been issued in SWIFT format, subject to UCPURR latest version, with the following details:

Letter of Credit Conditions

Field 45A: Description of Goods and or Services:

Aluminum Round Bars 15000 kgs. Delivery Terms: FOB Port of Jebel Ali, Dubai, UAE Incoterms 2010.

Field 46A: Documents Required:

  • Duplicates of signed and stamped commercial invoices issued by the beneficiary stating this letter of credit number.
  • Certificate of Origin in 1 original and 2 copies issued by any chamber of commerce stating that goods are of United Arab Emirates origin.
  • Full set of original bill of lading clean shipped on board established to the order of issuing bank notify applicant marked freight collect.

The beneficiary presented a Certificate of Origin as shown on the below picture.

Certificate of Origin

certificate of origin example of wrong country of origin discrepancy

Discrepancy: Certificate of origin should have shown that the goods are of United Arab Emirates origin, but the certificate of origin shows that the goods are Turkish origin, which is a clear discrepancy.

Reason for Discrepancy: A certificate of origin should certify the origin of the goods as indicated in the letter of credit.

Description of Goods Differs from the Letter of Credit Discrepancy

Ozgur Eker (CDCS) Certificate of Origin Discrepancies, Letter of Credit Discrepancies , , , ,
certificate of origin shows different description of goods

As per letter of credit rules and international standard banking practices a certificate of origin should not specify description of goods different than what is stated in the letter of credit.

A certificate of origin is to appear to relate to the invoiced goods, for example, by:

  • a goods description that corresponds to that in the credit or a description shown in general terms not in conflict with the goods description in the credit; or
  • referring to a goods description appearing in another stipulated document or in a document that is attached to, and forming an integral part of, the certificate of origin.

If the issuing bank finds out that the certificate of origin is showing different description of goods, the the issuing bank raises a discrepancy, which is known as description of goods on the certificate of origin differs from the letter of credit.

Discrepancy Example: Description of Goods Differs from the Letter of Credit

A letter of credit has been issued in SWIFT format, subject to UCPURR latest version, with the following details:

Letter of Credit Conditions

Field 45A: Description of Goods and or Services:

  • Leather Office Chairs 250 pcs. Delivery Terms: FOB Istanbul Port, Turkey Incoterms 2010.

Field 46A: Documents Required:

  • Original commercial invoice and five copies all duly signed in the name of applicant showing all the details of the goods and the prices as per proforma invoice no LY12141516 stating this letter of credit number.
  • Certificate of Origin in one original and two copies issued in the name of the applicant stating that the goods being exported are of Turkish Origin. This certificate of origin must be issued and authenticated by the chamber of commerce or union of industry in Turkey.
  • Full set of shipping company clean shipped on board marine bill of lading made out to the order of issuing bank notify applicant marked freight payable at destination.

The beneficiary presented a Certificate of Origin as shown on the below picture.

Certificate of Origin

certificate of origin sample

Discrepancy: The letter of credit requires shipment of “Leather Office Chairs”, but the certificate of origin describes the goods as “Imitation Leather Office Chairs”, which means that the description is representing a change in nature, classification or category of the goods.

Reason for Discrepancy: Description of goods on the certificate of origin should be shown in general terms but not in conflict with that stated in the letter of credit.

Certificate of Origin not Issued by the Chamber of Commerce Discrepancy

Ozgur Eker (CDCS) Certificate of Origin Discrepancies, Letter of Credit Discrepancies , , ,
certificate of origin not issued by chamber of commerce discrepancy

The certificate of origin verifies the country in which the goods to be exported
were originally manufactured.(1)

The issuing body of the certificate of origin could be the government authority or a body empowered by the government.

Furthermore, the producer, manufacturer or exporter could also issue a certificate of origin by himself, either in self-issued certificate of origin or declaration of origin format.(2)

In regards to letter of credit rules, a certificate of origin is to be issued by the entity stated in the credit.

If the issuing bank determines that the certificate of origin is not issued as per letter of credit terms, then the issuing bank raises a discrepancy, which is known as certificate of origin is not issued by the entity as indicated in the letter of credit.

Discrepancy Example: Certificate of Origin not Issued by the Chamber of Commerce

A letter of credit has been issued in SWIFT format, subject to UCPURR latest version, with the following details:

Letter of Credit Conditions

Field 45A: Description of Goods and or Services: Motor Vehicle Parts 3500 pieces. As stated on order sheet 101, dated 20th April 2014. Delivery Terms: DAT Port of Bangkok Incoterms 2010.

Field 46A: Documents Required:

  • Signed and stamped commercial invoices in three originals issued by the beneficiary stating this letter of credit number.
  • 1 Original Certificate of Origin issued by the chamber of commerce
  • Full set of original bill of lading shipped on board established to the order of Bangkok Bank Public Company Limited notify applicant company marked freight prepaid.

The beneficiary presented a Combined Certificate of Origin and Value as shown on the below picture.

certificate of origin not issued by chamber of commerce discrepancy

Discrepancy: Certificate of Origin should have been issued by the chamber of commerce as per letter of credit terms, but the Combined Certificate of Origin and Value presented by the beneficiary has been issued by beneficiary’s himself.

Reason for Discrepancy: A certificate of origin must be issued by the organization specified in the letter of credit.

When a credit requires the presentation of a certificate of origin issued by a Chamber of Commerce, a certificate of origin would be acceptable which is issued by

  • Chamber of Commerce,
  • Chamber of Industry,
  • Association of Industry,
  • Economic Chamber,
  • Customs Authorities,
  • Department of Trade or the like…

But certificate of origin issued by the beneficiary instead of a chamber of commerce is not acceptable.

Certificate of Origin Presented Instead of a GSP Form A Discrepancy

Ozgur Eker (CDCS) Certificate of Origin Discrepancies, Letter of Credit Discrepancies , ,
certificate of origin discrepancy

The certificate of origin verifies the country in which the goods to be exported
were originally manufactured.

The certificate of origin could be issued on paper or electronic form.

The issuing body of the certificate of origin could be the government authority or a body empowered by the government.

Furthermore, the producer, manufacturer or exporter could also issue a certificate of origin by himself, either in self-issued certificate of origin or declaration of origin format.

Certificates of origin can be classified under two main groups:

  • Ordinary Certificates of Origin
  • Preferential Certificates of Origin

When a credit requires the presentation of a specific form of certificate of origin such as a GSP Form A, only a document in that specific form is to be presented.

Examples of Preferential Certificates of Origin: (Specific Form of Certificates of Origin)

  • Certificate of Origin GSP Form A
  • CAFTA-DR Certificate of Origin
  • North American Free Trade Agreement (NAFTA) Certificate of Origin
  • EUR1 Form Movement Certificate
  • ATR Movement Certificate

As per letter of credit rules and international standard banking practices a certificate of origin must be presented as outlined in the letter of credit.

If a beneficiary of a letter of credit presents a certificate of origin, which is not prepared in that specific form, banks raise a discrepancy, which is known as certificate of origin not presented in a specific form; such as that an ordinary certificate of origin presented instead of a GSP Form A.

Discrepancy Example: Certificate of Origin Presented Instead of a GSP Form A:

A letter of credit has been issued in SWIFT format, subject to UCPURR latest version, with the following details:

Letter of Credit Conditions

Field 45A: Description of Goods and or Services: Soccer uniforms 12500 pieces. As stated on order sheet 41, dated 10th March 2014. Delivery Terms: FOB Port of Chittagong Incoterms 2010.

Field 46A: Documents Required:

  • Signed commercial invoices in two originals showing letter of credit number and certifying that the merchandise is as per purchase order.
  • Original GPS FORM A Certificate of Origin signed by the exporter, authorized by the appropriate customs authorities under their stamp and signature dated not later than the transport document date and free of any remark such as “Simplified procedure” or words similar effect.
  • Full set of original bill of lading clean on board established to the order of The Australia and New Zealand Banking Group Limited notify applicant marked freight collect.

The beneficiary presented a certificate of origin as shown on the below picture.

Certificate of Origin

certificate of origin discrepancy gsp form a

Discrepancy: The letter of credit clearly requests a special form of a certificate of origin, which is GSP Form A. The beneficiary should have presented a specific GSP Form A certificate origin, whereas ordinary certificate of origin has been presented, instead.

Reason for Discrepancy: When a credit requires the presentation of a specific form of certificate of origin such as a GSP Form A, only a document in that specific form is to be presented.