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The origin of certificates of origin

Ben Goldstein on Monday, August 21, 2017 at 12:00:00 am

For almost a century, governments around the world have relied on chambers of commerce to verify the origins of overseas exports. And, while the issuance of certificates of origin—first assigned to chambers through the Geneva Convention in 1923—is an essential function of the chamber world, it is also one of the least understood.

What is a certificate of origin?

A certificate of origin is a stamped document that verifies where goods are manufactured, so governments can assess tariff rates and enforce embargoes on imports. They are required for all international trade, unless exempted by parties to a trade deal like the North American Free Trade Agreement.

The origin of the goods refers to the location the final product was assembled, not its parts. For goods that were manufactured in multiple countries, the country that bore more than 50 percent of the costs of assembly is considered the country of origin. All valid certificates must be signed by the exporter and then verified and stamped by a local chamber of commerce.

Advice from the pros

At the Greater Omaha Chamber of Commerce, Executive Assistant to the President Kristin Gochenour uses eCertify, an electronic certification software, to issue certificates digitally. The chamber charges exporters $20 per certificate, $5 of which is paid to eCertify, meaning it profits $15 per certificate, not counting the $1000 annual fee for the software. For exporters that hit 100 certificates within a calendar year, the cost is reduced to $10 per certificate, while nonmembers pay up to $75 each.

Asked if it would make sense for a smaller-sized chamber to issue certificates of origin, Gochenour said it “all depends on their volume,” adding, “They’d have to do at least 200 certificates a year just to recoup the eCertify cost for the fee, not even counting the $5 charge per certificate. It’s a substantial number.”

At the Chapel Hill-Carrboro Chamber of Commerce, Vice President and Chief of Staff Justin Simmons swears by eCertify as the most efficient way to issue certificates of origin.

“The old, paperbound process required a courier or staff time for the company, and you’d have to actually sit down and manually stamp and sign,” said Simmons. “The efficiency gained for the exporter enables them to do it from their desk, with a much shorter turnaround than what it would take to drive them across town.”

Rife with fraud

Because of the decentralized nature of the certificate of origin process in the U.S., American exports have attracted scrutiny from foreign officials who have been tipped off about fraudulent behavior in the issuance process. Examples include documents signed by fictitious employees and chambers lending out their seals for companies to stamp themselves.

“The basic problem is lack of oversight,” said Chris Mead, senior vice president at the Association of Chamber of Commerce Executives. “It’s been compared to a Wild West-type situation. Foreign countries are more on their toes now, so chambers should be careful that they’re issuing these certificates the right way.”

Scrutiny of fraudulent certificates of origin increased in 2011, after the Egyptian Consulate in Houston launched an investigation into improperly labeled food shipments. After determining that the goods were actually of Latin American origin, the consulate restricted certificates of origin for all but two chambers in a host of states.

“They did a test and quite a few of these certificates were not legit,” said Mead. “Egypt doesn’t have a strong food inspection system, so this potentially endangered the people living there.”

Bottom line

When deciding whether to issue certificates of origin, chambers should ask whether it will be a profitable enough activity for them to commit the resources needed to do the job right. And those who opt to issue should always act with integrity.

“Don’t lend out your stamp,” said Mead. “It’s like lending out your checkbook or the plaque you got for graduation. You just don’t do it.”

Want to learn more? Check out our Chamberpedia page on certificates of origin.

 

Tags: Certificates of Origin, Exports, International Trade

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