Post on 03-Apr-2018
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Presented by: Ron UbelsA & A Contract Customs Brokers Ltd.in partnership with U.S. Commercial Service.
The Importance of
NAFTA in an Era of
Increased Compliance
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NAFTA does not allow for the uncheckedmovement of goods into Canada The Customs Clearance Process:Order in Council (OIC) Shipments with a value of CDN $20.00 or lessLow Value Shipments (LVS) Courier shipments where the value is greater than CDN $20.00
but less than CDN $1600.00
High Value Shipments Any shipment valued at more than CDN$1600.00;courier and other modes of transport, require formalclearance before release. There are a number ofCustoms initiatives that can expedite the clearance of
these shipments.* A Canada Customs Invoice or Commercial Invoice is required to clear goods through
Customs.
The NAFTA Certificate of Origin will not expedite your goods through Customs or delay theprocess The NAFTA Certificate is a post release document..
The Customs Clearance
Process and NAFTA
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Only importers who possess a valid Certificate of Origin canclaim preferential tariff treatment
Low Value Shipment requirements: For goods which are valued at less thanCDN$1,600.00, customs will accept an informal statement of origin which may behandwritten, typed or otherwise indicated on the paperwork.
The NAFTA
Certificate of Origin
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Example of statement:
STATEMENT OF ORIGIN FOR COMMERCIAL IMPORTATIONS OF LESS THANCDN $1,600.00
I certify that the goods referenced in this invoice/sales contract originate under the rulesof origin specified for these goods in the North American Free Trade Agreement(NAFTA), and that further production or any other operation outside the territories of theParties has not occurred subsequent to production in the territories.
NAME:__________________________________________________________________
TITLE:__________________________________________________________________
COMPANY______________________________________________________________
STATUS: EXPORTER________PRODUCER__________OF THE CERTIFIED GOODS
TELEPHONE_________________________FAX________________________________
COUNTRY OF ORIGIN_________________________________
(For purposes of determining the applicable preferential rate of duty as set out in Annex302.2, in accordance with the marking rules or in each Party's schedule of tariffelimination.)
The NAFTA Certificate of Origin(Continued)
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High Value Shipment requirements: For goods that are valuedover CDN$1600.00, a formal NAFTA Certificate is required
a) NAFTA Certificate per shipment
b) Blanket NAFTA Certificatecovering one calendaryear
The NAFTA Certificate of Origin - (Continued)
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Why does it matter? Its all duty free anyway, right? Importers using an invalid NAFTA Certificates of Origin, will be denied NAFTA
origin duty free status, and duties will be applied retroactively. Duty rates will apply,based on the classification number declared at time of import.
Exporters are responsible for determining qualification under NAFTA, and forcompleting an accurate certificate. The importer of record is ultimately responsible
for un-remitted duty and GST on imported goods, as well as applicable penalties.
Periodic Verification Audits: With the introduction of Periodic Verification Audits byCanada Customs, NAFTA Certificates are coming under greater scrutiny.
AMPS (Administrative Monetary Penalty System): AMPS was introduced in the fallof 2001 as a penalty regime to be used in case of intentional, or negligentmisclassification, where there is no difference in rates between the MFN rate andthe NAFTA rate (UST).
AMPS imposes a graduated corrective approach, starting withwarnings and escalating to higher penalties if non-compliance
continues.
The Importance of the NAFTA Certificate
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For a good to originate it must meet the requirements set out in the Rules ofOrigin - Article 401 of the NAFTA Agreement
The NAFTA grants benefits to a variety of goods from the region
(Canada, United States, and Mexico). For a good to originate, it mustmeet the requirements set out in the Rules of OriginArticle 401 of the
Agreement.
Within the context of NAFTA the words origin, originate, ororiginating areused differently than in the context of determining country of origin.
NAFTA: Article 401
The Rules of Origin
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1. Wholly obtained or produced in the NAFTA region
2. Goods produced in the NAFTA region wholly fromoriginating materials
Goods taken from the seabed, the soil or the air in the NAFTA territories3. Goods meeting the Annex 401 origin rule
4. Unassembled goods, and goods classified with their parts,which do not meet the Annex 401 rule of origin, but contain60% regional value content using the transaction method, or
50% using the net cost method
Goods can originate in Canada, Mexico, or the United States, even if they contain non-originatingmaterials, as long as the m aterials satisfy the rules of origin specified in Annex 401 o f the
Agreement
NAFTA: Article 401The Rules of Origin(Continued)
Article 401 of NAFTA defines originating in four ways:
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The Keys to a True and Accurate Certificate
NAFTA
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If your goods are initially misclassified, all work done to establisheligibility will be m eaningless.
The rules of origin ensure that parts and materials that do not originate in the NAFTAterritory undergo a sufficient amount of processing which then transforms into
qualifying products. The rules of origin are based on tariff classification, therefore it is important that you
have the correct HS tariff classification for the finished product, and any non-originating parts and materials.
In most cases the HS tariff classification is required to the six digit level only. For thepurposes of the Rules of Origin, it is important to understand the structure of the tariff.
Example: Tariff classification: 2007.9920 - First two digits are the chapter2007 - Third and fourth digits are the header2007.99 -Fifth and sixth digits are the subheader
TariffClassification
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The tariff of the finished product, Strawberry Jam is: 2007.99
The tariff for the sugar (Jamaica): 1701.99
Example 1 Tariff ChangeStrawberry jam is manufactured in the United States from sugar that is theproduct of Jamaica, and strawberries that are the product of Mexico.
Tariff Classification(Continued)
The tariff item for the strawberries does not need to be determined, since theyoriginate in one of the NAFTA territories.
The rule of origin for tariff 2007.99 reads as follows:
20.01 20.07 A change to heading Nos. 20.01 through 20.07 from any otherchapter.Since the sugar (Jamaica), is from outside of headings 20.01 through 20.07; the
jam is originating and qualifies under the NAFTA duty free tariff.
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Regional Value ContentAs well as a required tariff change, the specific rules of origin may ask that aRegional Value Content (RVC) be met. The RVC, which is always expressedas a percentage, may be determined by using one of the following two formulas:
RVC = Transaction ValueValue of Non-Originating Materials X 100
Transaction Value
ORRVC = Net CostValue of Non-Originating Materials X 100
Net Cost
It is the exporters choice to use either the Transaction Value or NetCost
The transaction value must be at least 60% of the value
The net cost must be at least 50% of the value
Tariff Classification(Continued)
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Example 2 Regional Value ContentGoods of tariff (subheading) 8703.10, are shipped to Canadafrom Mexico. The transaction value of the goods is $3,600.00;the net cost of the good is $3,500.00; and the value of thenon-originating material is $1,495.00.
The Specific rule of origin for 8703.10 states:
8703.10 A change to subheading No. 8703.10 from any other headingnumber, provided there is a regional value content of not less than:
a) 60 percent where the transaction value method is used,or
b) 50 percent where the net cost method is used
Tariff Classification(Continued)
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Assuming the first specific rule of tariff change has been met, the RVC calculation is
as follows:
Transaction Value:
RVC = $3600.00 - $1495.00 X 100 = 2105.00 X 100 = 58%
3600.00 3600.00
Must be at least 60%, so it doesnt qualify under this methodNetCost
RVC = $3500.00$1495.00 X 100 = 2005.00 X 100 = 57%
3500.00 3500.00
Must be at least 50%, so the goods qualify under thismethod
Tariff Classification(Continued)
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All goods which qua lify under the NAFTA rates of du ty, must fall into one ofsix criteria (must be indicated on field 7 of the Certificate of Origin).
Criterion AGoods must be wholly obtained or produced entirely in the territory of one ormore of the NAFTA countries. No foreign materials.
For goods of Criterion A, there is no tariff change or Regional Valuerequirements that must be met.
Criterion BGoods which are produced entirely in Canada, the United States, or Mexico,and satisfy one of the rules set out in the annex 401 of the Agreement (change in tariff orregional value content requirements; or combination of thetwo).
NOTE: Criterion D, E and F are rarely used or used in very specific cases only
Criterion C Goods must be produced entirely in the territory of one or more of the NAFTAcountries using only originating materials. In this case some of the materials areoriginating due to the fact that they have undergone a tariff and/or RVC.
Determining Origin Criteria
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2
From
D D M M Y Y D D M M Y Y
To
3 4
1 Exporters Name and Address: Blanket Period
Producers Name and Address: Importers Name and Address:
Tax Identification Number:
Tax Identification Number: Tax Identification Number:
ABC Exports1550 Executive DriveSan Diego, CA
92101
To
Available Upon Request ABC Exports1550 Executive Drive,San Diego, CA
92101
To be completed for Blanket Certificates onlyFROM is the date upon which the Certificate
becomes applicable to the good covered by the
Certificate. TO is the date upon which the
blanket period expires. The importation of a
good for which a good for preferential tariff
treatment is claimed based on this Certificate
must occur between these dates.
If the exporter is established as a
Non-Resident Importer show exporter
name and address. If Canadiancompany is the importer and there are
multiple importers state VARIOUS.
North American Free Trade Agreement
CERTIFICATE OF ORIGIN
Full legal name andaddress and the legal
tax ID (employers Id
or Social Security)
number of the exporter.
0 1 1 2 0 5 3 0 1 1 0 6
For confidential reasons always stateAvailable to Customs upon request if the
producer is different from the exporter. If
same as exporter state SAME if the
producer is unknown state UNKNOWN.
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Description of Goods
North American Free Trade Agreement
CERTIFICATE OF ORIGIN
5 HS Tariff
Classification
Number
6Preference
Criterion
7Producer
8 9 10Net Cost Country
of Origin
Strawberry Jam 2007.99 B Yes No US
Provide a full description of each good.
The description should be the same as that
shown on the subsequent invoices and be
in a generic language.For each good described in
Field 5, identify the HS tariffclassification to the six digit level.
For each good described in Field 5,
state what criterion (A through F)
is applicable. The key ones used
are A, B, or C.
For each good described in Field 5, state
YES if you are the producer of the good.If you are not the producer of the good,
state NO followed by (1), (2), or (3),
depending on whether this certificate
was based on:
(1) your knowledge of whether the
good qualifies as an originating
good;
(2) your reliance on the producerswritten representation that the
goods qualify, or
(3) a completed and signedCertificate for the good
voluntary provided by the
producer.
For each good described in Field 5, where the good
is subject to a regional value content (RVC) requirement,
indicate NC if the RVC is calculated according to the
net cost method; otherwise indicate NO.
Show the name of the Country of Origin
(ie: US for originating goods from the US).
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11
I certify that:__ the information on this document is true and accurate and I assume the responsibility for proving such representations.
I understand that I am liable for any false statements or material omissions made on or in connection with this
document;
__ I agree to maintain, and present upon request, documentation necessary to support this Certificate, and to inform, in
writing, all persons to whom the Certificate was given of any changes that would affect the accuracy or validity of this
Certificate;
__ the goods originated in the territory of one or more of the parties, and comply with the origin requirements specified for
those goods in the North American Free Trade Agreement, and unless specifically exempted in Article 411 or
Annex 401, there has been no further production or any other operation outside the territories of the Parties; and
__ this Certificate consists of _____ pages, including all attachments.
Authorized Signature: Company:
Name: Title:
Date: Telephone: FAX:
To be completed, signed and dated by
the exporter on the date the Certificate
was completed.
1
ABC Exports
Mr. Smith President
05/10/00 (800) 555 - 8300 (800) 555 - 0398
North American Free Trade Agreement
CERTIFICATE OF ORIGIN
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NAFTA records must be kept for a period of sixyears
Exporters or producers that prepare Certificates of Origin mustmaintain records pertaining to the exportation for 6 years.
Exporters or producers must notify all parties to whom thecertificate was given of any changes that could affect its accuracyor validity
Exporters or producers must provide copies of the NAFTACertificate to their own customs administration on request.
Exporters Responsibilities
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NAFTA authorizes the importing countrys customs administration
to conduct verification of the exporter or producer to determine
whether the goods qualify as originating as certified on the
Certificate of Origin Verifications are usually done by questionnaire or
verification visit
Questionnaires are usually sent to the exporter or
producer, who completed the Certificate of Origin andare used to determine if the goods in fact qualify.
The information should be readily available to theexporter or producer as it would be the information theyused to determine qualification under NAFTA before theCertificate was signed.If insufficient information is available a verification auditwill be considered.
Customs Verification Audits
Customs Verification Audits (Continued)
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Verification visits are conducted by the importing countriescustoms administration.
Before conducting a verification visit, customs must providewritten notification of their intention to conduct a visit to the
exporter or producer.
The exporter or producer can have their customs broker presentduring the audit
Customs Verification Audits(Continued)
Customs Verification Audits (Continued)
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Customs Verification Audits (Continued)
Simplifying the
Canada Customs Invoice
Customs Verification Audits (Continued)
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Customs Verification Audits (Continued)
The perception that shipping international packages can be morecumbersome because of documentation requirements is simply that...aperception. Done properly shipping internationally can be as easy asshipping domestically.
Use existing documents - The key document to clear goods into Canadais the Canada Customs Invoice. Using this form can create additionalwork for your shipping department and may in fact slow down theshipping process and create opportunity for error in the transposing ofinvoice information.
Eliminate Additional Documentation
Customs Verification Audits (Continued)
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Customs Verification Audits (Continued)
This can be replaced by your commercial invoice which is usuallygenerated through your computer system and is a document that isrequired on domestic as well as international sales. Use of thecommercial invoice for customs clearance is perfectly acceptable as
long as the information customs require is shown on the invoice. Thisresults in very minor changes to your invoice.
NAFTA Certificate of - For product that qualifies under NAFTA aCertificate of Origin is required. A Blanket Certificate of Origin, valid forone year, can be completed by U.S. shippers and kept on file for goodsfrequently imported into Canada. A Blanket Certificate will eliminate theneed to provide a certificate with each shipment.
Eliminate Additional Documentation cont.
Customs Verification Audits (Continued)
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Custo s e cat o ud ts (Co t ued)
The following information is required on your commercialinvoice to make it acceptable for clearance through CanadaCustoms. This can be in any format.
VendorPurchaserImporter of RecordDescriptionNumber of PackagesNumber of Units in ShipmentUnit PriceValueCountry of OriginCountry of SettlementConditions of Sale
Eliminate Additional Documentationcont.
Customs Verification Audits(Continued)
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( )
Opening Up the Canadian MarketUsing the Border as an
Advantage to Grow your Business.
Customs Verification Audits(Continued)
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( )
When you pay all the charges into Canada, including any dutiesand/or taxes you can clear the goods into Canada in your name asa Non-Resident Importer.
You become the importer of record even though you are not physicallylocated in Canada.
What is a Non Resident Importer?
Customs Verification Audits(Continued)
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)
Product sales are the same as domestic. Goods are sold on
a delivered price basis
Makes the border transparent
Controls the timely delivery of product
Creates a level playing field with Canadian firmsUses the trade process to gain advantage over US
competitors
Eliminates the need for warehouse, distribution points
Provides complete control over sales, pricing and profits
Empowers company sales teamUnprecedented success at trade shows
Opens door to larger retailers
Expand the Canadian market
Duplicate AnalysisTo US Vendors
Customs Verification Audits(Continued)
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Creates a domestic purchase environment
The border becomes transparent
Goods are ordered and delivered
Easier to compare price with Canadian competition
They know the bottom line price to shelf
Consistent delivery
Duplicate Analysis
To Canadian Purchaser
Customs Verification Audits(Continued)
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What does it cost?Nothing. All that is required is to set up an account with a
broker of your choice.
Who can become and NRI?Any firm is eligible. No special requirements.
Can a firm become an NRI for select shipments ?Yes some firms are NRI just for warranty goods or commercial.
samples.
NRIFAQs
Customs Verification Audits(Continued)
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Tools forCanadian Market Success
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Exporters Compliance Program
As you expand your business to Canada, being customs-compliant is acritical component of any successful trade strategy. Ensuring yourCanadian customers realize a efficient and compliant release throughcustoms while taking full advantage of trade concessions can come own
to how you complete your export paperwork.
Non Resident Importer ProgramHave you examined all of your options for increasing your companys
Canadian market share? The Non-Resident Importer Program can help
you increase sales of your products into Canada. Sell your product in adomestic purchase environment while virtually eliminating the border forboth current and prospective customers.
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Consolidated Program
As your cross-border package volume grows it is important tolook at way to streamline your processing, improve your time tomarket and create cost savings that can reduce the deliveredprice of your product.
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Direct to Market Program
For U.S. companies who import product from overseas into theU.S. market and then export some of these goods to Canada is
it time to look at the benefits of shipping direct to the Canadianmarket.
Consider the benefits:
1) Elimination of the need to pay duty twice (U.S. andCanada)
2) Possible reduction in the duty payable when enteringCanada
3) Product strategically located in Canada to create quickeraccess to market
4) No international freight costs, creation of documents orcustoms issues for each order.
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Returns Management Program
When dealing with returns in the domestic market mostcompanies have designed a simple and customized return
program. Unfortunately it isnt always that easy when dealingwith cross-border returns. Having to deal with customsdocumentation, arranging shipping and other uncertainties cancreate an unmanageable returns program at best
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Presented by: Ron UbelsA & A Contract Customs Brokers Ltd.
in partnership with U.S. Commercial Service.
The Importance of
NAFTA in an Era of
Increased Compliance