Origin Verification

Origin verification serves the following purposes.

• Preventing unfair trade practices

• Blocking the circumventing import of third-country goods

• Preventing tariff evasion and securing tax revenue

• Maintaining trade order among parties to an agreement

• Managing FTA implementation and securing international trust

Origin verification is carried out with respect to the following parties.

• Domestic importers

• Domestic exporters and producers

• Certificate of origin issuing bodies

• Exporters and producers in the counterpart contracting country

In particular, not only importing companies but also exporting companies can become subjects of verification by the counterpart country, so advance preparation is needed.

In practice, the core issues that arise in origin verification are as follows.

Adequacy of the certificate of origin

Adequacy of the issuing party

Adequacy of the transaction structure

Adequacy of the applied preferential rate

Whether transshipment for circumvention occurred

If even one of these elements is not satisfied, preferential tariff treatment may be denied.

Once verification begins, customs may temporarily suspend preferential tariff treatment for identical or similar goods until the verification result is confirmed.

This measure is based on Article 17 of the Enforcement Decree of the FTA Customs Act, and it may apply not only to the goods under verification but also to identical goods imported afterward.

If verification confirms that the origin criteria are met, the suspended duties are refunded. If the criteria are not met, the suspended duties are confirmed as assessed and become a burden on the company.

In other words, a measure that affects cash liquidity begins as early as the verification stage.

If verification confirms any of the following grounds, preferential tariff treatment is denied, and the duties previously reduced or exempted are collected.

This is based on Articles 44 and 46 of the Enforcement Decree of the FTA Customs Act.

• The origin determination criteria were not satisfied

• Supporting origin documents were not submitted or were submitted falsely

• The partner country's verification result was not returned within the deadline

• The submission of materials was refused or access was restricted during an on-site investigation

• The obligation to retain supporting origin documents was violated

In these cases, preferential tariff treatment itself is denied, and the duties are recalculated at the general rate or the basic rate.

Collection may also take place within the five-year exclusion period running from the date preferential tariff treatment was applied, so a substantial additional payment may arise retroactively for past transactions.

When origin-related violations are repeated, sanctions go beyond the collection of back tariffs and are strengthened against the company or exporter involved.

Under Article 37 of the FTA Customs Act, a party that has fraudulently submitted origin documentation or failed to substantiate origin in good faith two or more times within the past five years may be designated as a "party restricted from preferential tariff treatment".

In that case, preferential tariff treatment is restricted for a set period (five years) across all identical or like goods that the exporter produces or exports.

This sanction directly affects a company's price competitiveness and the continuity of its transactions, and the practical operational disadvantage is considerable.