Trade preference management

Overview

Preferential origin is related to Free Trade Agreements (FTAs) signed between the European Union and its commercial partners.

The FTAs list all the conditions to be met so that a product can be considered from EU preferential origin. Also they explain how traders can benefit from the preferential origin. (See Annex 1 for the complete list of FTAs).

When Solvay is the importer, if the conditions stated in the FTAs are met and if the supplier is able to prove the preferential origin of its goods, then Solvay is allowed to benefit from reduced or nil duty rates when importing it.

When Solvay is the exporter of goods, it must ensure that it provides its customer with the evidence of preferential origin.

Preferential origin is not to be mistaken with the country of origin or the dispatch country. 

Trade preference management has become mostly automated with the implementation of GTS tool, whereas it used be mostly manual. 

EXPORT process

Authorizations

CTC is responsible for any amendment and renewal of Approved Exporter authorizations. These authorizations allow simplifications in the management of preferential origin. Indeed, it allows to issue preferential invoice statement (see annex 2), for countries accepting it, instead of EUR 1 certificates for invoices having a value superior to 6000€. Moreover these authorizations allow to pre authenticate A.TR certificates. 

Determination of the preferential origin for Finished Products

CTC uses SAP GTS to collect all information needed for GTS to compute the preferential origin, such as:

• Tariff codes for raw materials and final products
• Composition of finished products, through the « BOM », Bill Of Material
• Sourcing of finished products via procurement indicators
• Rule to be applied, uploaded directly into GTS from a file sent by an external data provider
• Information related to the preferential origin of raw material : CTC requests Long Term Supplier's Declarations (LTSD) to all suppliers and maintain LTSD received in GTS.

 Once all information has been gathered, CTC launches the preference calculation.

Evidence of preferential origin - Preferential Declaration/ EUR1

When the goods are shipped, GTS checks if the country of destination is part of the countries listed in the Approved Exporter Authorization and if the product is from preferential origin for the particular FTA.

If the 2 conditions are met, the preferential declaration is printed out on the invoice and the relevant CPC code is used. 

EUR1 and A.TR management

The delivery coordinator (Supply Chain department) requests for EUR1 when explicitly stated in the documentary instructions completed by the commercial assistant. Note: in some cases customs broker handles the request.

The delivery coordinator completes and sends the pre authenticated A.TR in case of shipment to Turkey.

Evidence of preferential origin - Long Term Supplier's Declaration

A customer can ask Solvay to provide a Long Term Supplier's Declaration, a legal document in which Solvay certifies that the goods qualify for preferential origin (or not), for all the shipments in a given period. (see also “Procedure Management of Long Term Declaration in GTS”).

The Customer Service Representatives are responsible for issuing the LTSDs directly from GTS. The output is based on the result of the preference calculation done by CTC.

Non drawback clause

The non drawback clause is a part of some FTAs. This clause prevents cumulating the benefits from preferential origin (for the importer) and from customs regimes with economic impact such as IPR (for the manufacturer and exporter). It means that an export flow post IPR cannot benefit from an invoice statement or EUR1.

At the time of export, GTS checks if the flow qualifies for IPR and if the flow qualifies for trade preference.

If the third country has not signed any FTAs with the EU, then the export flow discharges the IPR stock.

If the flow qualifies for trade preference (relevant country and product qualifying), then a preferential declaration is printed out on the invoice (export).

Remark: « worst case » rule

This rule applies in the determination of the preferential origin.

If there is a multi sourcing on a raw material (EU and non EU), then GTS considers that the raw material does not originate from the EU.

If there are several alternative BOM’s to manufacture a finished product (certain leading to a positive result, certain to a negative result), the GTS considers that the finished product does not qualify for preferential origin.

To issue a LTSD, GTS considers all the shipments (all the invoices) during the period. If only one shipment doesn’t qualify, then the LTSD is negative.

IMPORT process

The customs broker is responsible for checking if there is any preferential origin certificate in the original documentation sent by the supplier:

• preferential declaration
• EUR1
• Form A
•  A.TR used within the customs union TR-EU (it doesn’t confirm the preferential agreement, but confirms that the product is in free circulation) 

He is then responsible for using the relevant codes and CPC accordingly and filing the document. He is also responsible to archive documents. 

Annexes

Annex 1: 

List of preferential agreements and accepted evidence of preferential origin

Follow the link below to the EU website 

http://ec.europa.eu/taxation_customs/customs/customs_duties/rules_origin/preferential/index_en.htm 

Annex 2: 

Invoice statement 

“THE EXPORTER OF THE PRODUCTS COVERED BY THIS DOCUMENT (CUSTOMS AUTHORIZATION …) DECLARES THAT, EXCEPT WHERE OTHERWISE CLEARLY INDICATED THESE PRODUCTS ARE OF EU PREFERENTIAL ORIGIN.”