Canada First Us Commerce 1105

7/28/2019 Canada First Us Commerce 1105

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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



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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



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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



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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



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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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




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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)



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Simplifying the

Canada Customs Invoice



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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



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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.



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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.



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( )

Opening Up the Canadian MarketUsing the Border as an

Advantage to Grow your Business.



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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?



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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



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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



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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



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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

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Canada First Us Commerce 1105

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