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4. Outbound - Preferential origin

4. Outbound – Preferential origin

Introduction

Preferential origin becomes relevant where the customer requests proof of preferential origin for an outbound shipment, so that the importer in the country of destination can claim preferential tariff treatment. Before performing an assessment, CS identifies:

  • the product and quantity concerned;
  • the country of destination; and
  • the preferential arrangement under which originating status is to be assessed.

Proofs of preferential origin are only issued, made out or facilitated for arrangements and terminals for which a destination-specific work instruction has been approved by the terminal's customs specialist and CGT. At the time of writing, this applies to shipments to the United Kingdom under the EU-UK Trade and Cooperation Agreement (TCA). Requests for other destinations are assessed case by case before the first shipment.

A proof of preferential origin issued or made out in the EU generally certifies that the product originates in the European Union. Preferential origin of an imported product does not confer EU originating status. A product imported with a proof of origin of a partner country that leaves the terminal unchanged remains originating in that partner country. Such a product can only be covered by a proof issued in the EU where the applicable arrangement expressly provides for this, for example through re-export rules within the Pan-Euro-Mediterranean (PEM) zone or replacement proofs. These cases are always referred to the terminal's customs specialist.

Evidence of originating status of inbound product

Where product delivered to the terminal may be shipped under a preferential arrangement, the customer provides evidence of its originating status with the inbound nomination. For product from production in the EU, this is a supplier's declaration or long-term supplier's declaration within the meaning of Articles 61 to 66 of Implementing Regulation (EU) 2015/2447 (Annexes 22-15 and 22-16).

Before relying on a supplier's declaration, CS checks that:

  • all combinations of CN code and product description that may be shipped under the arrangement are covered;
  • the declaration refers to the arrangement relevant to the destination and, where applicable, contains the required statement on cumulation;
  • a long-term supplier's declaration is valid for the date of the inbound delivery (maximum validity 24 months);
  • the declaration bears a handwritten signature, or, where both the declaration and the invoice are drawn up electronically, is electronically authenticated or covered by a written undertaking of the supplier accepting full responsibility; and
  • renewed declarations are requested before expiry.

Materials originating in a partner country may count as originating in the EU through cumulation where the applicable arrangement provides for this. An example is UK-originating materials used in production in the EU under the TCA. The evidence of their originating status is the proof of origin recorded under section 2.

CS stores and registers the evidence in the same manner as proofs of origin under section 2.

Goods leaving the terminal unchanged

Where the goods leave the terminal unchanged, VTTI relies on the evidence of originating status recorded for the relevant inbound parcel(s). CS verifies that the outbound goods can be traced to those parcels and are covered by the available documentation.

Where originating and non-originating product has been stored in the same tank, the outbound product cannot be identified physically. It may only be treated as originating where all of the following apply:

  • the applicable arrangement permits accounting segregation for the product concerned (the TCA does so for fungible products of Chapter 27);
  • where required, prior authorisation of the customs authorities has been obtained;
  • the method applied ensures that at no time more product receives originating status than would be the case with physical segregation; and
  • the method is applied in accordance with generally accepted accounting principles and supported by the ERP inventory records.

Where these conditions are not met, product drawn from a tank that contains any non-originating product cannot be treated as originating. These cases are always referred to the terminal's customs specialist.

Goods blended or processed at the terminal

Where the goods have undergone blending or processing at the terminal, the preferential origin of the resulting product must be assessed under the applicable arrangement.

As with non-preferential origin, blending is performed on the customer's instruction and assessed in close consultation with the customer. The customer indicates the arrangement concerned, the components and proportions used, the specification to which the blend is performed, and the basis on which the customer considers the resulting product to be originating. The terminal's customs specialist performs a reasonableness check on this information, taking into account:

  • the product-specific rule;
  • the rules on insufficient working or processing;
  • the originating status of the input materials;
  • the operations performed; and
  • the information available in VTTI's systems.

Most arrangements treat simple mixing of products as insufficient working or processing. Whether controlled blending to a specification goes beyond "simple mixing" and satisfies the product-specific rule depends on the arrangement concerned. Some arrangements also specify for Chapter 27 that obtaining a sulphur content by mixing products with different sulphur contents does not confer origin.

A blend may therefore have EU non-preferential origin under section 3 without having EU preferential origin. In principle, a blend only qualifies as originating where all input materials are originating, including through cumulation, unless the applicable arrangement provides otherwise.

A work instruction for determining the preferential origin of outbound products is available here.

Proof of preferential origin

Where the originating status of an outbound product has been established, the terminal's customs specialist determines which form of proof may be used under the applicable arrangement and in what capacity VTTI may act.

  • Standard route. The proof, such as a statement on origin, is made out by the exporter (in principle the owner of the goods), under its own REX registration or approved exporter authorisation where required. VTTI facilitates this by providing the exporter with an overview of the parcels and quantities included in the shipment, the operations performed and the evidence of originating status on file.
  • VTTI as exporter. VTTI only makes out a proof itself where all of the following apply:This route is the exception.
    • VTTI qualifies as the exporter under the applicable arrangement;
    • VTTI holds the required REX registration or authorisation;
    • the customer has contractually undertaken to provide all supporting documentation upon a verification request; and
    • the customs specialist and CGT have approved this route for the arrangement and terminal concerned.
  • Proofs issued by an authority. Where a proof must be issued or endorsed by a customs authority or another competent body, such as a movement certificate EUR.1 or EUR-MED, VTTI may apply for it on behalf of the exporter based on the completed origin assessment.

VTTI will only issue, make out or facilitate a proof of preferential origin where:

  • the originating status of the product has been established and substantiated;
  • the required form of proof is permitted under the applicable arrangement;
  • the relevant formal requirements are met; and
  • the proof can be linked to the relevant outbound product, quantity and shipment.

Where originating status cannot be established, the customer may request a Terminal Origin Declaration under section 3. That document does not constitute a proof of preferential origin.

Recording and retention

The origin assessment, its outcome and the supporting documentation, including the customer's blend instruction and information where applicable, are retained as part of the origin audit trail. Any proof of origin issued, made out or facilitated is stored in the Document Management System and linked to the relevant parcel or shipment. CS records the relevant document data in the Cargo Documents module in ERP.

Records are retained for at least the period required under the applicable arrangement (for example four years after making out a statement on origin under the TCA), and in any case for at least seven years.

Verification and correction

Requests for verification of a proof of origin by the customs authorities of the EU or of the country of destination are handled by the terminal's customs specialist, with the support of CGT.

Where VTTI becomes aware that a proof it issued, made out or facilitated may be incorrect, CS informs the terminal's customs specialist immediately. The customer is informed without delay so that the importer can be notified where required.

Follow-up and escalation

Any doubt regarding any of the following must be resolved before preferential origin is documented:

  • the applicable arrangement;
  • the originating status of the input materials;
  • the applicable origin rule;
  • the application of accounting segregation; or
  • the required proof.

Where necessary, CS involves the terminal's customs specialist. The customs specialist may request support from CGT where the matter:

  • is complex;
  • has a potentially material financial or compliance impact; or
  • requires engagement with a competent authority.

VTTI will not issue, make out or facilitate a proof of preferential origin while material concerns regarding the originating status of the product or the supporting documentation remain unresolved.

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