CUSTOMER INFORMATION ON THE PROCEDURE OF CERTIFICATION OF HUNGARIAN ORIGIN I. INTRODUCTION An export transaction may involve the export of goods or services, or a construction/installation contract (including both goods and services). The availability of the required Hungarian origin, to be certified by the exporter is a prerequisite of EXIM financing, guarantee or insurance. (The legislative background of the requirements pertaining to the Hungarian share of origin s described in Annex 1.) For exported goods, the Exporter certifies the Hungarian origin with the help of a Certificate of Origin issued by the regional office of the Hungarian Chamber of Commerce and Industry (MKIK), and the Hungarian origin, required in loss assessment is verified by EXIM; the MKIK headquarters issues the required certificate for construction and installation contracts, while in the case of the export of services the assessment is conducted by EXIM on the basis of the EP (Health Fund) certificate issued on the number of the insured by the regionally competent health insurance administration office. In the case of the export of any processed agricultural product, an application must be submitted to the customer service office of the regional National Chamber of Agricultural (NAK) for the certificate of the Hungarian origin. While issuing the certificate of origin, NAK checks where the last essential processing that changed the features of the products took place (generally any change involving triggering a change of the customs tariff number). For the export of goods, the certificate of origin may be issued subsequently, no more than 60 days after the start of the delivery. After that deadline, MKIK and its regional offices do not issue a certificate of origin. EXIM entered into a co-operation agreement with MKIK and with the National Chamber of Agriculture in order to provide more effective services to Exporters. II. Review of the Hungarian content of the goods (where the goods export is part of an installation contract and not of a construction contract) 1 1. Insurance The certificate of the Hungarian origin is a condition of eligibility for insurance and loss reimbursement. On the basis of the certificate of origin issued by the regional office of the Hungarian Chamber of Commerce and Industry (MKIK) 1 the Exporter must certify that at least half of the delivered goods are 2 of Hungarian origin. No product or service delivered or provided by a foreign supplier or subcontractor and classified as foreign content may be included in the Hungarian content. The Hungarian share of origin may be assessed by MEHIB in two ways, depending on the choice of the Insured: 1.) The Insured obtains a certificate of origin, certifying the Hungarian origin of the goods, from the competent office of MKIK, within 60 days from the start of each individual delivery. In that case, the Insured declares the share of Hungarian origin in the delivered goods in the monthly income reports. 1 In the case of processed agricultural products, the certificate of the Hungarian origin is issued by the regional office of the National Chamber of Agriculture 2 At least 25% Hungarian share is sufficient if coverage is provided in national interests, i.e., where the performance of the export deal is associated with any national interest. 1
If a claim event occurs, the Insured submits the previously obtained certificate of origin to MEHIB with regard to the invoices included in the claim. In that case, in the course of the claim assessment, MEHIB checks whether or not the requirement that at least 50% (or in case of coverage in national interest at least 25%) of the delivered goods, in terms of value, are of Hungarian origin, certified with a certificate of origin, issued by the regional office of MKIK, is satisfied with regard to the invoices submitted with the claim. 2.) The Insured obtains the certificate of origin for each individual customer for a particular insurance period, within 60 days from the first delivery after the anniversary date of the policy. If more than one product is delivered to a particular customer, the same certificate of origin certifies the Hungarian origin of all products delivered to the particular customer. MEHIB deems the obtained certificate of origin effective from the policy anniversary date. If during a particular insurance period the Insured starts making deliveries to a new debtor or starts exporting new products, the certificate of origin issued by the chamber must be obtained when the first delivery is made. 2. Financing In the case of financing and/or a guarantee, at least half of the delivered goods (goods export) or the value of the export deal (guarantee), covered by the export credit guarantee, must be of Hungarian origin. The Hungarian origin of the goods is certified by the certificate of origin issued by the regional office of the Hungarian Chamber of Commerce and Industry (MKIK) (or, in the case of processed agricultural goods, the National Chamber of Agriculture); the Exporter must submit the certificate to EXIM or, in the case of refinancing through a credit institution, to the financing credit institution. In addition to the certificate issued by the chamber, the following documents, submitted to EXIM by the Exporter, are required: a. Trade agreement for the export of the goods and its annexes: budget, list of goods or specifications, delivery schedule with the presentation of the actual Hungarian content in each individual delivery and in total. b. Breakdown of the exported goods according to Hungarian/third country origin, in total and as a percentage. c. List of any other suppliers and their share in the project. d. Copies of supplier price offers, supply contracts/invoices, manufacturing documents. Export of machines and equipment in financing and insurance deals used by the entity The export of machines and equipment, regularly used for at least five years, by a company with a registered seat in Hungary can also form the basis of an export deal (irrespective of origin). In the case of such export deals, the Exporter must certify at least five years of regular use. 2
III. REVIEW OF THE HUNGARIAN CONTENT OF SERVICES In relation to service exports, the Hungarian origin is assessed by EXIM both in financing and insurance. According to the effective legal regulations, EXIM checks the employment status of the employees of the Exporter: it is a statutory requirement that more than fifty per cent of the employees of the exporter (or its subcontractor in Hungary involved in the service) must be in a legal relationship with obligatory 3 insurance. The Exporter must submit the following documents to EXIM: a. A document issued by the health fund administration office of the Budapest or county government agency, certifying the number of insured employees (EP certificate). b. Exporter s declaration on the total number of employees and on the fact that more than 50% of the employees are insured. c. Exporter s declaration on any resident and non-resident subcontractors involved in the service and their ratio. If any resident subcontractor(s) take(s) part in the provision of the service, then the same declaration must also be obtained from that/those subcontractor(s) (subcontractor s declarations), together with the EP certificate pertaining to the subcontractor(s). For any individual insurance deal 4, the Exporter must obtain the EP certificate for itself and for any potential subcontractor and submit it to EXIM, prior to the first delivery and then at least every twelve months 5 ; in the case to turnover-type insurance deals for each policy anniversary date. In the case of financing, the Exporter must submit the EP certificates and the Exporter s/subcontractor s declarations together with the credit application. Then the Exporter must report any change in writing, within no later than 5 (five) working days to EXIM, as a result of which the number of the Exporter s employees insured by the health insurance fund falls below 50% of the total number of the Exporter s employees. IV. REVIEW OF THE HUNGARIAN CONTENT OF CONSTRUCTION AND INSTALLATION CONTRACTS Pursuant to the effective decree, at least one quarter (25%) of the value of the Exporter s contracts for construction, installation, technological installation, design and related services provided by the Exporter must qualify as export of Hungarian origin. If the Hungarian share is lower, the EXIM exposure may generally relate only to the actual Hungarian share. MKIK reviews the Hungarian share of the export deal according to its own procedure, and issues the certificate of origin accordingly. The exporter application to be submitted to MKIK must contain at least the following: Exporter s declaration on the share of goods/services of Hungarian origin in the main contractor s invoices, stated as an amount and as a percentage (see the related documents), the invoices related to the project, 3 Pursuant to the provisions of the Act on Social Security Services, eligibility for private pension and the funding of those services and the Act on the Detailed Tax of Small Taxpayer Enterprises and on Small Corporate Tax 4 insurance or EXIM financing related insurance 5 insurance or EXIM financing related insurance 3
a detailed description of the project (cost calculation, including the origin and value of the materials, auxiliary materials, fixtures, machines and equipment to be integrated and the date of the first record in the construction logbook), copies of the invoices certifying performance, copies of contracts with the engineer and with the client, certificate of incorporation, or certified copy of the business licence, not older than 30 days. MKIK establishes the Hungarian share of origin by taking into account the performance of the subcontractors registered in Hungary, to the first subcontractor level, certified with invoices 6 ; all direct costs incurred in Hungary, including, e.g., design and expert costs, main contractor s fees, working fees paid in Hungary, indirect costs, costs of export financing and MEHIB insurance premium. MKIK issues a preliminary certificate of origin for the terms and conditions of the EXIM exposure, which is later followed by the final certificate of origin relating to each delivery. MKIK checks each construction and installation contract to the first subcontracting level. At any further subcontracting level, the Hungarian subcontractor performing the service must issue a written statement as to whether a local or third-country subcontractor is involved in the performance of the service provided by it. Apart from the MKIK certificate of origin, the following documents, submitted to EXIM by the Exporter, are required: - Main contracting agreement and annexes; - Technical description of the project; - Budget; - Implementation schedule; - Financial schedule, implementation of the Hungarian export by settlement phase and on an aggregated basis; - Presentation of the Hungarian share/local share/third country share of origin, as an amount and as a percentage; - List of envisaged Hungarian subcontractors, their role in the project and their estimated contract values; - List of goods and suppliers, broken down into Hungarian, local and third country categories, and specifying in detail the estimated value of the goods. The EXIM technical expert reviews the technical documentation submitted by the Exporter and the preliminary fulfilment of the requirements applicable to the Hungarian share of origin and local expenses prior to adopting a binding decision. In the implementation phase of the project during the settlement of each milestone and following the technical delivery-acceptance of a construction project, EXIM requests a certificate of origin, issued by MKIK, certifying the Hungarian origin from the exporter in relation to the submission of the final invoice. In terms of establishing the share of Hungarian origin, the performance of foreign subcontractors may not be taken into account, i.e., must be deducted from the total performance (except the Hungarian goods exported by them, and the performance of Hungarian subcontractors contracted by them). Similarly, the costs of financing (e.g., interest, insurance premium) are not included 6 EXIM may verify the performance of Hungarian subcontractors within its own scope of competence. If during an EXIM inspection the required Hungarian share of origin is lower than the minimum ratio regulated in the decree, MKIK may withdraw its certificate previously issued for the Hungarian share of origin. 4
in the share of Hungarian origin either. The local costs are assessed on the basis of the written declaration of the main contractor. Performance schedule of the Hungarian origin The schedule of the Hungarian origin, provided by the Insured, is stated in the insurance policy. The performance schedule of the Hungarian origin must contain at least the following data: - performance date, - performed amount, - amount of the Hungarian origin, - aggregated performance, - aggregated Hungarian origin (as an amount and as a percentage). If the actual Hungarian origin is lower than the Hungarian origin scheduled in the insurance policy in a particular delivery, the insurance policy must be modified. If during financing the Hungarian content established by the technical expert during an inspection is lower than the ratio or schedule specified in the contract documentation, then EXIM may suspend the disbursement of the loan until the Hungarian content is achieved in compliance with the terms and conditions of the contract and the provisions of the law. V. PRODUCT SPECIFIC DECLARATIONS In addition to the certificate of Hungarian origin, the following declarations are also required for certain products: Supplier loan and/or bank guarantee: the written declaration of the Supplier or Exporter is required, in addition to the certificate of origin issued by MKIK, stating that the Exporter exports the supplied goods or the Hungarian goods produced with the use of the exported goods, or uses the service provided by the supplier to perform its obligations specified in a foreign trade contact. If there is no such declaration, the supplier s certificate may also be accepted if it states that the goods supplied or the service provided by it is required for enabling the Exporter to fulfil its obligations stated in a contract for the export of Hungarian goods or services, produced by using such goods or services. In the case of the export of goods, financed with export related investment loans, and/or bank guarantees issued to cover export related investment loans financing the export of goods: the Exporter s written declaration is required which states that the export related investment loan to be disbursed/guaranteed by EXIM will be used for an investment that facilitates the production and export of goods of Hungarian origin, as a result of which the Exporter will generate or increase export revenues, at least in the amount of the export related investment loan. 5
Related documents, useful links: ANNEX 1: Legislative framework applicable to the Hungarian share of origin and alien share of origin Export of goods: o MKIK certificate of origin template (pdf) o NAK certificate of origin template (pdf) o regional MKIK offices (link) o contact information for the Chamber of Agriculture (link) Export of services: o Application for EP certificate template to be submitted to government offices (word) o EP certificate template (pdf) Construction-installation: o MKIK guide on the procedures of the issue of certificates on the Hungarian share of origin (pdf) o Declaration on the Hungarian content of main contractor s invoices to be submitted to MKIK (word) o MKIK certificate of Hungarian share of origin template o MKIK headquarters - contact information 6