New rules for origin of goods

The Export Guarantee and Insurance Corporation (EGAP) has decided to further increase quality and attractiveness of services to exporters. Since the beginning of December 2005, requirements for evidencing the share of Czech goods and services in the value of the export as a prerequisite for state support in the credit insurance have been significantly liberalized and simplified. The Czech Export Bank (CEB) will apply these rules for the officially supported financing of the export I na similar way.

The first principal improvement of terms is that the share of the domestically originating goods and services in the total value of the export - being one of basic conditions for the insurance and financing with state support - is lowered from the existing minimal 60 % to minimal 50 %.

Beside the decrease in the minimum share, the way of determining the Czech origin of goods and services has been substantially liberalized and simplified. Decisive for the determination of the Czech origin shall be the fact the exporter invoicing deliveries to a foreign buyer is a company registered in the Czech Republic. Similarly, sub-deliveries purchased by the exporter from other Czech manufacturing companies will be considered as having the Czech origin. The requirement of the Czech origin of the goods and services will also be complied with in case of the sub-deliveries purchased by the exporter (or by the exporter's Czech supplier) abroad but only if there was some value added in the manufacturing. For determining of the required share, goods and services of foreign origin will only be those purchased from abroad and directly re-sold to the foreign buyer. In international projects with suppliers from several countries where EGAP or CEB transfer the support of the part of the deliveries onto foreign partner state financial institution, such part of the deliveries shall be excluded from the calculation of the share.

Even such liberally laid down principles shall have possibility of relatively flexible exceptions. E.g. the exception from the minimum 50 % share of Czech goods and services will be possible in cases where the exporter proves that the delivery could not be completed with the equivalent goods from the Czech manufacturer.

The purpose of these measures is to provide the credit insurance and financing with state support to as wide group of Czech manufacturers and providers of services as possible and, simultaneously, to respect the principle of the priority support of the export of goods and services primarily of the domestic origin.

With new principles of determining the share of Czech goods and services in the total value of the export, EGAP has reacted to the fact that resulting from continuing globalization of economy it is more and more difficult to define the national origin of the goods and services. Czech companies become often a part of international delivery consortia and practice has shown that they need corresponding forms of financing and insurance. Practically all state credit insurance companies in countries with developed market economies have been proceeding in similar spirit.

Requirement for a minimum share of the goods and services of the Czech origin is only applicable on those cases where the credit insurance and financing is being provided with state support and thus it is tied to funds or guarantees of the Czech state budget. It is not applied in the commercial insurance of short-term receivables which EGAP outsourced to its subsidiary - Commercial Credit Insurance Company EGAP - as of 1 October 2005.

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