Although the terms "provenance" and "origin" are usually used synonymously in everyday language, they do not have the same meaning in customs law. It is therefore easy to confuse them and this can have unwanted consequences. To avoid this, reading this blog is a must. The following sections will be covered:
- An explanation of the terms 'provenance' and 'origin
- The difference between provenance and origin
- Increased rate or reduced rate/exemption
- Preferential and non-preferential origin
Difference between 'provenance' and 'origin'
As mentioned earlier, the terms 'provenance' and 'origin' in customs law - unlike in everyday language - are not synonyms of each other. Both concepts have a meaning of their own.
The concept of provenance refers to the status of goods. This involves looking at which country the customs duties were paid in. An example:
You, as a Dutch entrepreneur, import electrical equipment from China with your Dutch company. You clear the goods into free circulation in the Netherlands. After releasing the goods into free circulation - and thus making them freely tradable - you resell the goods to a company in Canada. For the Canadian company, the provenance of the goods here will be the Netherlands, not China. This is because the customs duties on the goods have been paid in the Netherlands.
In determining the concept of origin - unlike the concept of provenance - one should not look at the status of the goods, but at the country where the goods were made/produced. Quite simple, right? The country where the goods were made in the previous example is China. Unfortunately, it is not that simple. Especially with goods such as electrical equipment, determining the origin is often difficult. This is because these goods are often made in different countries. For example, the screws of the electrical equipment may have been made in India, the wiring in Japan and later an assembly is made in China. As in the case of a phone, for example. This therefore involves several countries in making the final product.
If several countries are involved in the production/manufacturing of a product, it is essential to distinguish the following aspects to determine the country of origin.
- For instance, it should be considered where the last substantial processing or working took place;
- whether the processing is economically justified and has taken place in a company equipped for that purpose; and
- the processing must have resulted in an entirely new product or represent a significant stage of manufacture.
Provided these conditions are met, then in our example China would be the country of origin. Here, it would then be the case that the last substantial processing was completed in China, which processing was economically justified and led to an entirely new product, namely the electronic equipment.
Increased rate or reduced rate/exemption
When goods are imported and thereby released into free circulation, import duties are usually payable. In EU member states, these tariffs are the same; outside the EU, it's a different story, however. Thus, certain goods may be subject to increased rates, reduced rates or even exemptions. When determining whether an increased rate or a reduced rate/exemption applies, one of the important things to consider is the concept of origin discussed earlier. For instance, there may be preferential and non-preferential origin.
Preferential and non-preferential origin
Goods of preferential origin lead to a lower levy of import duties, these are also called preferential arrangements. However, this requires proper application of the rules of origin to avoid any unwanted problems. In addition to goods of preferential origin, there are also goods of non-preferential origin. In the case of goods of non-preferential origin, no preferential arrangement applies. It may even be the case, for example, that anti-dumping duties apply to the goods with the origin in question.
To prove that goods are of preferential origin and therefore a lower customs tariff applies, proof of origin must be presented. These proofs are only issued if the goods actually meet the - in that case - set origin criteria.
Want to know more? Do you have questions about customs law or international trade? Or do you want to know whether the goods you are importing or exporting are of preferential origin, and with this a lower rate may apply? Please feel free to contact one of our attorneys.