|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.|
The Core 8-Steps to effective export development is a systematic and structured approach to foreign market entry that includes all aspects of effectively initializing an export program - assessing a client's readiness to export, extensive market research to identify and narrow the top export markets, competitive positioning of product and agent/distributor search and selection. Below are those requisite procedures which, if selected, would require a minimum 6-8 month contract.
The Core 8 Service may be continued past the initial 6-8 month contract to allow the client greater freedom to continue focusing on domestic business activities.
For American companies uncertain of their product's competitive positioning or strength of global reach, a one month analysis of foreign market and competitive positioning may be the most appropriate next step.
FTI will assess what export markets receive your type of products from the US, market trends and the landed price of your product in those markets after payment of applicable tariffs, foreign taxes, freight costs and other applicable charges. These landed prices will then be compared to existing products supplied in-country for a price-competitive analysis.
Should the findings be favorable, the client retains the right to have FTI explore export opportunities in those markets, including agent / distributor search and other components of the Core 8-Steps to effective export development administered by FTI.
Company management may have a good idea of where the top export markets are for their products and may have already determined the tariff and non-tariff barriers to entry. Provided that the firm also has favorably assessed their product offering’s competitive positioning in those top markets, the next step is to identify sales agents and distributors best suited to facilitate product-to-market introduction.
FTI offers an Agent & Distributor Search service to facilitate this process. FTI will benchmark with other similar product-focused firms, conduct research with in-country industry sources and product-specific professionals to identify foreign agents and distributors offering the best fit to the client’s marketing needs. The duration of this process depends on the product, (consumer or industrial), number of markets targeted and number of distribution points required to adequately cover the targeted market(s).
The North American Free Trade Agreement (NAFTA) is being replaced by the new USMCA agreement, now pending Canadian approval of revised agreement. Until then, NAFTA remains in effect. NAFTA is a comprehensive free trade agreement (FTA) implemented on January 1, 1994 that improves virtually all aspects of doing business within North America (economies of the USA, Canada and Mexico). By 2010, all tariffs on industrial, commercial and agricultural goods were eliminated between our three economies. The agreement also removes many of the non- tariff barriers, such as import licenses.
The new USMCA will extend these benefits, increasing North American content for autos, base-line for up to 45% of auto parts being built with $16/hour labor, and expanding US Agriculture opportunities in Dairy and Wheat to Canada, and includes a chapter on digital commerce.
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.
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.
The US has Free Trade Agreements with: Australia, Bahrain, CAFTA-DR (Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua), Chile, Colombia, Israel, Jordan, South Korea, Morocco, NAFTA (Canada & Mexico), Oman, Panama, Peru, Singapore. The US Administration through the efforts of the US Trade Representative's Office, is currently negotiating our country's most ambition trade deals to date, Free Trade Agreements with the European Union, and the Trans-Pacific Partnership (TPP) countries of Australia, Brunei, Chile, Canada, Malaysia, Mexico, New Zealand, Peru, Singapore, USA and Vietnam, with Japan having expressed strong interest in joining.
Trade with America's Free Trade Partners account for 60% of our exports and accordingly, FTI is devoted to helping its clients make the most of these critical trade agreements presently and as they develop.
Never before has the issue of export compliance and documentation been more critical than it is today.
FTI will review the client's existing export procedures and compliance program including attention to GDPR (rules on how firms and entities based both inside and outside the EU comply with the continent's data privacy law), the FCPA (US Foreign Corrupt Practices Act), and use of the Consolidated Screen List.
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