FOREIGN TARGETS, INC.

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NAFTA Certification:

The North American Free Trade Agreement (NAFTA) is a comprehensive trade agreement that improves virtually all aspects of doing business within North America  (economies of the USA, Canada and Mexico).

Within 10 years of the January 1, 1994 implementation of NAFTA, all tariffs will be eliminated on North American industrial goods between these economies, while some US agricultural exports to Mexico will take up to 15 years for complete tariff phase-out.  The agreement also removes many of the non- tariff barriers, such as import licenses.

US exports to these markets receive preferential tariff and non-tariff treatment once awarded a NAFTA Certificate of Origin.  NAFTA certification is more complicated than simply declaring the product has over 50% North American content.  The product must  meet a ‘Rule of Origin’ specified under the NAFTA accord.

Each product has a Rule of Origin that applies to it. The rules are organized according to the Harmonized System (HS) classification of the product.   There are two types of rules - both require substantial North American processing, but are measured differently.

 

Rule Type Description
Tariff-Shift Rule All non-NAFTA inputs must be in a different tariff classification than the final product. The rules state the level of tariff classification shift required. The rules may require that the non- NAFTA input be in a different HS chapter, heading or tariff item number. Most goods are subject to a tariff classification shift requirement.
Value-Content Rule A set percentage of the value of the good must be North American (usually coupled with a tariff classification shift requirement). Some goods are subject to the value-content rule only when they fail to pass tariff classification shift test because of non-NAFTA inputs.

           

Qualifying goods for NAFTA preferential duty treatment and completing the NAFTA Certificate of Origin for the first time may be complex and time consuming depending on the products to be exported.

This step is crucial, as failure to comply with proper documentation may make the exporter or importer liable for up to 5 years on duty amounts having gone unpaid due to faulty HS classification or improper NAFTA documentation. 

FTI assists clients determine which rule of origin applies, define the appropriate HS classification and put in place the necessary technical files required to ensure proper, systematic adherence to the NAFTA accord.

 

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