Once businesses have a thorough understanding of Free Trade Agreements (FTA), the next step would be to apply for a Certificate of Origin (CO).
CO is an important tool that allows export businesses to reduce the costs of export, especially when the importing country is under the same FTA as the exporting country.
Preferential Certificate of Origin (PCO) vs Non-preferential Certificate of Origin (NPCO)
Example of CO
Picture source: www.fmm.org.my
Both types of COs have the same objective – to attest that the exported product listed therein has met certain criteria to be considered as originating in a particular country.
What makes PCO and NPCO different is their benefit in gaining tariff concessions in relation to a particular FTA.
The main idea of proving a product’s country of origin allows exporters to be eligible for tariff concessions and only PCO can allow this benefit.
This is how it works:
Example A (Bilateral FTA: Malaysia-India) -If an exporter is interested to expand their business to India, the manufactured goods must contain a predetermined percentage of raw materials that originate from either Malaysia, or India, in order to benefit from the tariff concessions.
Example B (Multilateral FTA: ASEAN-Japan) -If an exporter is interested to expand their business to Japan, the manufactured goods must contain a predetermined percentage of raw materials that originate from either participating countries in ASEAN, or India, in order to benefit from the tariff concessions.
A NPCO is used when an exporter is exporting to a country that has not formed an FTA with Malaysia, therefore disqualifying the benefits of having tariff concessions.
However, NPCO is still widely used and can be a tool used to gauge the quality and prestige of the exported product.
It may be beneficial to obtain one, although it does not help exporters in gaining tariff concessions.
From where can a CO be obtained?
A NPCO can be obtained from various sources such as the Chambers of Commerce and Associations that are authorized by the Ministry of International Trade and Industry (MITI), Malaysia.
The full list can be obtained by clicking here.
Exporters can apply for a PCO through MITI. MITI hosts monthly Pocket Talk sessions for potential and existing exporters who wish to get a more in-depth knowledge regarding PCO.
Click here for more information.
For the full guideline of the process of applying for a PCO, click here.
It is recommended for exporters to leverage upon the benefits of the PCO as it can help reduce export costs and most importantly, it can facilitate in maintaining a strong business relationship with countries that are a part of the same FTA as Malaysia.
In the next article, we will talk about the various modes of transportation exporters can utilise from for their export business.
Till then, stay tuned!
For the first article of this series, click here.
For the second article of this series, click here.
For the third article of this series, click here.