Introduction
The objective of these lines is to present some key concepts that are often familiar to trading professionals, and often not so familiar. Beyond their seemingly complex nature, the goal is always to address these technical issues from a simple perspective that is easy for any reader to understand, so that they understand what we are discussing.
The subject matter of these lines relates to one of the provisions established in the origin regimes of trade agreements, regarding transportation requirements and the effects of complying with origin.
As I have stated on other occasions, rules of origin are the "key" that unlocks the door to accessing the tariff preferences negotiated in the negotiated agreements. Hence the importance of delving deeper into some of the issues that both Argentina and its partners within MERCOSUR have been developing and implementing various updates aimed at facilitating the mechanisms and procedures for verification and control of origin.
This approach is also motivated by current issues, the constant developments and advances in global trade facilitation, a banner upheld in so many forums and on so many fronts in recent years. This banner is also upheld by the Argentine government, which has been developing and implementing new mechanisms aimed at eliminating and simplifying those procedures that allow for this, in order to reduce costs, improve competitiveness, and create a predictable horizon for commercial activity.
In the complex world of international trade, the movement of goods across borders is regulated by customs regulations that aim to ensure security, control, and revenue collection. Understanding the concepts of direct shipment, transit, and transshipment is essential for any logistics operator, importer, or exporter. These customs regimes allow for optimizing routes, reducing costs, and ensuring compliance with trade agreements.
Fundamental concepts to develop
The first key concept is the "principle of territoriality," which appears in the origin regimes and establishes that products must be produced or processed within the territory of the States Parties to the agreement in question in order to obtain originating status.
This principle is complemented by the concept of "non-alteration," which establishes that originating products must not be modified, transformed, or altered outside the territory of the country or economic bloc of origin. In practice, this involves the application of specific customs regulations and the issuance of supporting documents demonstrating compliance with these rules.
We must then ask ourselves what the relationship is between these seemingly new concepts and our well-known and well-known "direct shipment" in so many trade agreements—especially those framed under the umbrella of ALADI (Latin American Integration Association).
Taking MERCOSUR as an example, it is established that for a product to be considered originating in a MERCOSUR member state and enjoy tariff benefits, production and processing operations must be carried out within the bloc's territory, and for transportation purposes, the product must meet the requirements for direct shipment. That is, products transiting through a country that is not a member of MERCOSUR must not undergo any operation or alteration during transit that would change their nature. Only loading, unloading, or handling operations are permitted to maintain the product in good condition or ensure its preservation. Any other operation could cause the product in transit to lose its originating status.
It should be noted that, as a result of the modernization of the ROM based on Article 05 of CMC Decision No. 23/18, the grounds justifying transit through third countries were eliminated—that is, justification based solely on geographical reasons or transportation requirements. This results in greater flexibility and facilitation for meeting direct shipment requirements.
Therefore, as a first conclusion, it can be said that although the direct shipment criterion still exists, in its essence it is part of the territoriality principle, which is applied generally. For its part, the concept of "non-alteration" is the one that best fits the current reality of trade and is one of the main rules that support it, ensuring that the condition of origin of the products is maintained during their transport.
Therefore, both concepts are fundamental and must be taken into account in the same way as the following key aspects, which make the supporting documentation of each operation that falls into a situation of direct shipment, transit or transshipment:
- Origin and Provenance: For a product to enjoy preferences, it must not only originate in a country (accredited with a proof of origin), but it must also come directly from that country to the final destination, as historically referred to in agreements as the concept of “direct shipment”.
- Purpose of control: Prevent products from being manipulated, substituted, or modified in intermediate countries, thus preserving the integrity and scope of preferential agreements.
- Permitted exceptions (with customs control): The mention of transit through countries that are parties to the agreement is not included. Transit through countries not party to the agreement: Passage through third countries is permitted provided it is justified for geographical or transport reasons, and when the product is under customs control and is not intended for trade, use, or employment in the transit country. Transshipment or temporary storage: Transshipment or temporary storage in a third country may occur, provided that the product is not subject to operations other than loading, unloading, or those necessary to maintain it in good condition, and that it remains under customs surveillance.
Supporting documentation in these cases: The origin is verified with the transport documentation (B/L, air waybill, etc.), which must be consistent with the origin of the merchandise.
Example: Goods produced in Brazil (origin Brazil) that are exported to Argentina must be shipped directly from Brazil to Argentina to benefit from a MERCOSUR tariff preference. If they stop at a European port and are handled there for another purpose, they could lose the tariff preference.As its definition indicates, “transit” is a customs regime that allows the transfer of goods under customs control from a customs office of origin to a customs office of destination within the same customs territory or between different customs territories, without payment of duties and tariffs that would be applicable to imports or exports. It differs from internal (national) transit, where the merchandise is moved from one customs office to another within the same country. For example, from a port of entry to a bonded warehouse in the interior. Or, the tInternational Transit, where lGoods cross the territory of one or more countries without being nationalized there. This type of transit is governed by bilateral or multilateral agreements (e.g., TIR Convention, ATIT).
Today, thinking about a transaction in which a product is imported or exported directly from one country to another without considering the logistical issues that tend to streamline the flow of goods, reduce storage costs, optimize logistics routes, etc. is a concept far from reality.
The same thing happens if we analyze the transshipment concept, in the sense that it occurs when the initial means of transport cannot carry the goods to their final destination, whether for logistical, route, or capacity reasons. Sometimes, transshipment can be more efficient than direct transport, especially in maritime transport (transshipment hubs). It offers companies greater flexibility in choosing the best transport combination.
Example: A container arrives at a major transshipment port in Panama on a large vessel, and is then transferred to a smaller vessel that will take it to a shallower port in the Caribbean.
Therefore, the principle of territoriality together with the concept of direct dispatch, transit and transshipment They are fundamental tools in international trade. Their correct application, in compliance with customs regulations, allows for:
- Take advantage of benefits of trade agreements.
- Optimize the logistics and supply chain.
- Reduce times and costs Of transport.
Understanding these customs regulations is key to efficient and successful foreign trade management. Without prejudice to the authority of the importing country's Customs Office to request supporting documentation when it has specific doubts regarding origin control, in some countries, these requirements are systematically established for all operations involving transit, based on the provisions of the Agreements.
Regarding Argentine regulations, the requirements for supporting documentation are established in General Instruction ARCA IG 02/16. However, the National Public Administration as a whole is working in line with the central objective of facilitation and following a policy of debureaucratization and simplification of procedures and processes, seeking to eliminate any barriers and/or restrictions that hinder the normal functioning of trade.
