Nafta Robert Corona

NAFTANAFTA

Certificate of Origin and Supporting Records

NAFTA BenefitsNAFTA Benefits

• What are the rules and how can I benefit?

• Certificate of Origin• Harmonized Tariff # (HS)• Preference Criteria

– Rules of Origin

• Penalties

Certificate of OriginCertificate of Origin

• A Customs Form 434, completed by the exporter or producer to certify that a good being exported from the United States into Canada or Mexico, or from Canada or Mexico into the United States, qualifies as an originating good for purposes of preferential treatment under the NAFTA

Purpose of Certificate of OriginPurpose of Certificate of Origin

• Trilateral form used to claim NAFTA preference

• Certifies that a good exported qualifies as an originating good under NAFTA

When C/Os Not Required - U.S.When C/Os Not Required - U.S.

• Waiver obtained from Port Director• Non-commercial importation of the good• Commercial importation less than $2,500

http://forms.cbp.gov/pdf/CBP_Form_434.pdf

Certificate of Origin InstructionsCertificate of Origin Instructions

• Fields 1,3, 4: Name and address of the exporter, producer, and importer

• Field 2 is used for “blanket periods”– Multiple shipments– Identical goods– One year period


• Field 5: Description of the good sufficient to relate it to an invoice and to the HTSUS

• Field 6: HTSUS classification 6 to 8 digits• Field 7: Preference Criterion (A, B, C, D, E, and F)• Field 8: Producer statement:

– Yes = Producer– No (1,2, or 3) = Not Producer; – 1 - first knowledge, – 2 – written statement from producer, – 3 – signed Certificate from producer


Yes

or

No (#)

Certificate of Origin Instructions Certificate of Origin Instructions

• Field 9: – If good identified in Field 5 is subject to RVC

requirement the field would contain:

• NC = net cost method

• No = not net cost method

– If RVC calculated over a period of time, the field would show beginning and ending dates


NC

or

No


• Field 10: Identifies the country to which the preferential rate of Customs duty applies, for goods exported into the United States:– MX = Mexico– CA = Canada

• These same “codes” are used as a prefix to the HTSUS recorded on the Customs entry to identify it as a NAFTA claim

• Field 11: Signature of preparer and date:– The exporter, or the producer


US

or

MX

CA

Exporter’s ObligationsExporter’s Obligations

• Exporter’s who sign a C/O must:– Provide a copy of the C/O and all related

documentation to customs upon request– Correct a C/O once there is reason to believe that it

contains erroneous information and notify, in writing, all parties who the C/O was given

– Maintain the C/O and all related documentation for at least 5 years after the date C/O signed

• NAFTA Articles 504 and 505

NAFTA Required RecordsNAFTA Required Records

• Importer - C/O and related import documents• Exporter/Producer - Records relating to the

purchase, cost, value, and payment for:– the good that is exported to the U.S.– all material and indirect materials used in production

of the good– production of the good in the form in which the good

is exported

• 181.21 and NAFTA Article 505

Online ResourcesOnline Resources

1. Harmonized Tariff # Search http://www.census.gov/foreign-trade/schedules/b/index.html

2. Entire HTS

usitc.gov/tata/hts/bychapter/index.htm

3. http://rulings.customs.gov/

4. General notes 12 (t) replaced Annex 401• http://www.usitc.gov/publications/docs/tata/hts/

bychapter/0910gn.pdf Rules of Origin

Preferential TreatmentPreferential Treatment

• A - wholly obtained or produced –

CUT FLOWERS Wholly grown in Mexico

• B - non-originating materials undergo tariff shift

• C - produced entirely in the territory from originating materials


• D - produced entirely in the territory but one or more of the non-originating materials provided for as parts does not undergo a change in tariff classification - good was imported in an unassembled or a disassembled form - heading for the good provides for the good and its parts and is not further subdivided, provided a certain RVC is met.


• E - applies to certain automatic data processing goods and their parts.

Ref: Annex 308.1 of NAFTA

Digital Processing Units

8471.91 3.9%

• F - applies to agricultural goods

Criteria BCriteria B

• non-originating materials undergo tariff shift

• B - SIMPLE TARIFF SHIFT

Silk Fabric 5007

Made from imported silk yarn (5006)

Rule States: A change to heading 5007 from any other heading

RULES OF ORIGINRULES OF ORIGIN

• Determine whether a good originates in the territory of a party

• Determine whether the good is entitled to preferential treatment


• TARIFF SHIFT Travel kit under HTS 9605.00 consisting of :

Plastic case 3923.10 China Sewing thread 5204.20 Italy

Needles 7319.90 Indonesia Toothpaste 3306.10 France

Toothbrush 9603.21 Taiwan

Rule States: Change to heading 9601 through 9605 from any other chapter.


HTS# 9605000000 Travel sets for personal toilet, sewing or shoe or clothes cleaning (other than manicure and pedicure sets of heading 8214) . . . . .

http://www.census.gov/foreign-trade/schedules/b/2004/sb96.html

Criteria BCriteria B• TARIFF SHIFT AND REGIONAL VALUE

CONTENT (RVC) Plastic Boxes under HTS 3923.10

Resins 3901.20

Rule states: A change to subheadings 3923.10 through 3923.21 from any other heading, provided there is an RVC of not less than (A) 60% under TV or (B) 50% under net cost

Regional Value Content - RVCRegional Value Content - RVC

• Two Methods

Transaction Value Method – 60%

Net Cost Method – 50%

RVC - Transaction Value Method RVC - Transaction Value Method

• Transaction Value Method

RVC = TV - VNM x 100 TV

TV transaction value of the good adjusted to an F.O.B. basis

VNM value of non-originating materials used by producer

RVC – Net Cost MethodRVC – Net Cost Method

• Net Cost Method

RVC = NC - VNM x 100 NC

NC net cost of the good

VNM value of non-originating materials used by producer

Criteria CCriteria C

• The good is produced entirely in the NAFTA territory of one or more of the Parties exclusively from originating materials

• Materials from Rule B


• Wooden Desks under HTS 9403.30

Wood 4407.10 Grown in US Metal Legs 9403.90 Made in US from

KR steel (7212.50) Metal Hardware 9403.90 Made in US from

KR steel (7212.50)

9403.90 rule states: A change to subheading 9403.90 from any other heading


Silk Fabric Silk Tie

Criteria DCriteria D

• The good is produced entirely in the territory of one or more of the Parties but one or more of the non-originating materials does not undergo a change in tariff classification. The good does nonetheless meet the regional value content requirement specified in Article 401(d).


• Imported in an unassembled or disassembled form but was classified as an assembled good (kit, exclusive parts, etc..)

• HTS classification describes both the good itself and its parts (not further subdivided)


• Tricycle Kit (unassembled tricycle packaged in MX) under HTS 9501.0020 All parts 9501.0040 CN, MX, US

HTS 9501.0020 reads: Wheeled toys designed to be ridden by children;…parts and accessories thereof.

Rule states: A change to heading 9501 from any other chapter.


• Tricycle Kit HTS 9501.0020

(1) parts and good in same subheading HTS 9501.00

(2) Does Not satisfy tariff

shift BUT may fall under this provision if enough RVC

Any Penalties?Any Penalties?

Penalty AmountsPenalty Amounts

• Willful - $100,000 or 75% of the appraised value, whichever is less, for each release of merchandise

• Negligent - $10,000 or 40% of the appraised value, whichever is less, for each release of merchandise.

http://www.cbp.gov/nafta/hwm000a.htm

Penalty AmountsPenalty Amounts

• Willful – Knowing, false statement, i.e. voluntary and intentional, failure to maintain, store or retrieve a demanded record

• Negligent – Failure to exercise reasonable care and competence in maintaining a storing, or retrieving a demanded record.

Exceptions to PenaltiesExceptions to Penalties

• A U.S. Importer who makes a corrected declaration:– Will not be subject to civil or criminal

penalties, provided it was voluntarily made

• It is “voluntarily” if accomplished:– Within 30 days following discovery that the

NAFTA declaration was incorrect– Before start of criminal investigation

Exporter/Producer to Report Errors in C/O to Avoid PenaltyExporter/Producer to Report

Errors in C/O to Avoid Penalty• Exporter/Producer

– U.S. -within 30 days after discovery, notify all persons whom the C/O was given.

– Canada - immediately– Mexico - prior to commencement of a criminal

investigation

• Reference: Annex IV.1, Regulatory Standards for Implementation of NAFTA, 8/24/95

The EndThe End

Documents

Nafta Robert Corona