Problem
Companies are often faced with the question of how to provide their customers with a correct proof of origin. The key to this is preference calculation, for which not only the relevant list rules are required, but also the information as to which preferential origin the input materials used have. This can be achieved by keeping separate stocks or clearly labeling each good at each goods receipt. However, the reality in many production plants is different:
Separate warehousing of input materials is not possible in many companies, so that different deliveries of the same material are stored and posted in one storage bin. The differentiation of the origin statements of these different deliveries is thus no longer possible.
Example:
Figure 1: Screws not stored separately in a mechanical engineering company
A producer of machines purchases M10 screws from two suppliers. Supplier A sends a supplier declaration with the origin “European Union” (EU).Supplier B obtains his goods from China, can therefore only confirm third country (CN) and therefore no preference. The machine manufacturer stores both deliveries in one crate and removes 10 screws from this crate for each production. However, during the removal it cannot be determined whether it is a screw from Europe or China. The consequence is that the worst case principle has to be applied and the screws without preference are included in the calculation.
For precisely these cases, there is a simplification that can help to make a differentiated statement about the input materials: the average storage period. The basis for the application of the average storage period is the service regulation Z 42 17 (accounting segregation).
Average storage period
The average storage period provides information on how long materials and goods remain in the warehouse on average. If a company knows the average storage period, it knows how long the inventory will last in order to be available for production or sale to the end customer. Within the company, the average storage period can be optimized by regulating the inventory turnover. The average storage period is calculated using the following formula:
Average storage period = 360 days / inventory turnover rate.
The inventory turnover rate indicates the average period over which goods are replaced in the warehouse. It represents an important success indicator for many companies, which can also be applied to individual product groups.
Example of the preference statement with advancing time
At the time of costing (production), the period of average storage duration is considered. The duration of the average storage period is calculated from this point in time into the past.
If there are several goods receipts within this period, the preference is determined using the worst case principle. If a goods receipt does not qualify for preference, no preference can be granted for this good.
A chronological example is used to illustrate the connection between the preference statement for purchased goods and the average storage period and goods receipts. It shows how the preference statement changes in relation to different goods receipts:
Figure 2: Two different goods receipts within the storage period
In Figure 2, there are two goods receipts with different countries of origin (zones) within the storage period. After the worst case consideration, the goods receipt with origin = Europe and the goods receipt with origin = China are compared and thus the evaluation = QU/No preference is adopted.
Figure 3: Storage period with goods receipt originating in China
Figure 3 shows that only goods receipts originating from China are included in the storage period. The goods receipt originating in Europe is excluded from the storage period. This means that only the goods receipt originating in China is included in the valuation and therefore results in a negative valuation (= QU).
Figure 4: Storage period with goods receipt originating in Europe
In Figure 4, the storage period is so long that the goods receipt originating in China is also excluded from the analysis. Thus, only the new goods receipt with origin Europe counts and it results in a positive evaluation.
Figure 5: Storage period without goods receipt
If there is no goods receipt within the average storage period, then the last goods receipt is always considered and the corresponding valuation of this is used for the calculation (in this example the positive valuation with European origin). This means that the storage period does not have to be artificially increased.
Looking at the initial example of screws, the following statement can be made: As soon as the mechanical engineering company has agreed the average storage period with customs, it can use this for the worst-case consideration based on the goods receipts. In this way, as in the cases listed, it can be determined whether the preference statement is to be declared as eligible for preference or not eligible for preference.
