Cargo Enforcement Reporting and Tracking System Date in 25 point Arial, Cool Gray 6 C JFK Trade Operations NAFTA Long Island Import Export Association Thursday, February 5, 2015

Disclaimer  The material in this presentation is provided for informational purposes only and is not considered binding.  For questions related to Trade Agreements, the Free Trade Agreement (FTA) in box at 2

North American Free Trade Agreement (NAFTA)  NAFTA took effect on January 1, It is a comprehensive agreement that established a free-trade zone in North America between the United States, Canada, and Mexico. NAFTA created the world’s largest free trade area, which now links 450 million people.  NAFTA immediately lifted tariffs on the majority of goods produced by the signatory nations.  Among its main objectives was the liberalization of trade between Canada, Mexico and the United States, to stimulate economic growth and give the NAFTA countries equal access to each other’s markets. 3

NAFTA AGREEMENT  The Agreement is available at by selecting “trade agreements” or on by selecting “FTA Countries” and then “NAFTA”  The complete text of NAFTA is maintained on-line by the Department of Commerce, International Trade Administration, Trade Compliance Center. 4

U.S. Census Bureau - NAFTA Statistics – Calendar Year 2014  COUNTRY IMPORTS EXPORTS  Canada $317,408,100,100 $287,818,800,000  Mexico $270,295,900,000 $221,437,000,000  Total $587,704,000,000 $509,255,800,000 5

NAFTA Research  When researching NAFTA matters, first consult General Note 12 in the Harmonized Tariff Schedule of the United States (HTS)  Consult the NAFTA regulations including the Appendix  The Customs Rulings Online Search System (CROSS). CROSS is a searchable database of CBP rulings that can be retrieved based on simple or complex search characteristics.  CROSS can be found at rulings.cbp.govrulings.cbp.gov 6

Advance Rulings  Importers, exporters and producers of goods may obtain advance rulings from the customs administrations of Canada, Mexico and the U.S. regarding application of NAFTA to future importations of goods into each country.  Each country is bound by the rulings they issue. Rulings will be applied to importations covered by the ruling beginning on the date of issuance or on such later date specified in the ruling. An advance ruling may not be applied if it is determined that imported goods differ materially from the goods which were the subject of the ruling or if the person requesting the ruling has failed to act in accordance with the terms and conditions of the ruling. 7

Advance Rulings - Procedures in Canada  Importers in Canada, and exporters and producers of goods in Mexico and the U.S. may obtain an advance ruling regarding future importations.  Requests should be made in writing to Trade Administration Services, Client Services Division in the customs region in which most of the importations will occur.  Customs will review all written applications and will advise the applicant of any additional information that is required. A standard has been set for issuing these rulings within 120 days from the receipt of complete information. 8

Advance Rulings – Procedures in U.S.  Importers in the U.S., and exporters and producers in Canada and Mexico, may obtain advance rulings regarding NAFTA to CBP. Requests must be in English and contain a complete statement of all relevant facts relating to the NAFTA transaction.  Advance rulings may be requested from the Office of Regulations and Rulings, 1300 Pennsylvania Avenue, NW, Washington D.C. or the National Commodity Specialist Division, 1 Penn Plaza – 10 th Floor, New York, N.Y.  Questions relating to regional value content requirements can be expedited by sending them directly to the Office of Regulations and Rulings. 9

Advance Rulings – Procedures in Mexico  Importers in Mexico, and exporters and producers in Canada and the United States may request an advance ruling from the Legal General Administration of Revenue of the Tax Administration Service of Mexico (Administration General Juridica de Ingresos del Servicio de Administration Tributaria de Mexico).  The competent authority must treat the information received as confidential. Therefore, details of the ruling will only be released to the person to whom the ruling was issued. The authority must issue the ruling within four months. 10

General Note 12  General Note (GN) 12 is statutory law and provides guidance regarding NAFTA. GN 12 can be found in the Harmonized Tariff Schedule of the United States (HTSUS). General notes are not part of the international harmonized system and is legally binding in the U.S. only.  GN 12 also defines terms, describes abbreviations, states special rules and qualification criteria for special tariff treatment (i.e. trade programs) and provides authority for methods of ascertainment (to analyze) for classification purposes. 11

CERTIFICATE OF ORIGIN (CO)  Is a trilaterally agreed upon form (CBP Form 434) used by NAFTA members to certify that goods qualify for preferential tariff treatment accorded by NAFTA.  The CO must be completed by the exporter. A producer or manufacturer may also complete a CO in a NAFTA territory to be used as a basis for an Exporter's CO.  To make a claim the importer must possess a certificate of origin at the time the claim is made. 12

CERTIFICATE OF ORIGIN (CO)  The Certificate of Origin may cover a single importation of goods or multiple importations of identical goods.  Multiple importations are called blanket certificates and may apply to goods imported within any twelve (12) month period specified on the Certificate. 13

NAFTA Origination  Do not assume goods are entitled to NAFTA benefits simply because they were made in a NAFTA country.  It is possible for goods not to originate in a NAFTA country as the term is defined in the Agreement but still be an article of Mexico, Canada or the U.S. for country of origin marking, statistical or other purposes. 14

Rules of Origin  Wholly Obtained  Tariff Shift  Tariff Shift plus Regional Value Content (RVC)  Exclusively of Originating Materials  Automatic data processing (ADP) goods  Product Specific Rules of Origin 15

Filing a NAFTA claim  A claim for preferential tariff treatment under NAFTA may only be made at (1) the time of filing the entry summary or (2) after the filing of the entry summary, but no later than 1 year from the date of importation, under the provisions of 19 U.S.C. 1520(d) (see also 19 CFR )  Record Keeping – All records related to a preferential duty claim under NAFTA must be kept for a minimum of five years 16

Claims Made at the Time of Filing the Entry Summary  A claim for preferential tariff treatment for a good under NAFTA is made by using the Special Program Indicator (SPI) “CA” for products of Canada or “MX” for products of Mexico as a prefix to the HTSUS number under which the good is classified.  The importer makes a claim for preferential tariff treatment by using a SPI on CBP Form 7501, Entry Summary  The Certificate of Origin (CO) must be in the possession of the importer at the time preferential tariff treatment for an originating good is claimed. 17

NAFTA Eligibility  NAFTA eligibility involves a two-step process:  (1) Article must be “originating” under the terms of GN 12, HTSUS and 19 CFR 181, Appendix.  (2) Article must qualify to be marked as a good of a NAFTA country under the NAFTA marking rules (19 CFR Part 102)  The NAFTA Certificate of Origin, CBP Form 434, is key to claiming NAFTA benefits. The following FAQs provide general guidance as you determine NAFTA qualification. 18

DO MY GOODS QUALIFY FOR NAFTA?  Do you know the background of the product?  Who produced it or where was it grown or taken from the ground?  Where were the components or ingredients manufactured or grown?  If the answer to these questions is ‘no’ do not claim NAFTA. 19

DO MY GOODS QUALIFY FOR NAFTA?  Was your product last processed in Canada, Mexico or the U.S. Was it produced overseas?  If the product was produced overseas and simply passed through North America, do not claim NAFTA.  If your product qualified for NAFTA, but was sent temporarily overseas, did it leave Customs control, was anything done to it other than unloading, reloading or preservation?  If ‘yes’ to either of these questions, do not claim NAFTA. 20

DO MY GOODS QUALIFY FOR NAFTA?  Is every atom and molecule of your good the product or growth of Canada, Mexico or the U.S., or a combination thereof?  If “yes” claim criterion “A” in Field 7 and proceed to step 10.  Do you know the U.S. tariff classification of the product you are exporting to the U.S. and of all components or ingredients produced outside of North America?  If “no,” then you can not look up the rule of origin to find out the specific requirements for your product and therefore can not claim NAFTA. Further research is required. 21

DO MY GOODS QUALIFY FOR NAFTA?  Do you know the specific NAFTA rule of origin for your product and how to apply that rule?  If not, further research is required.  Did the offshore components for your product undergo the transformation required by the rule of origin? Did they undergo the specified classification change from imported material to exported good, or was sufficient value added in North America? (The requirements vary product by product).  If “yes” claim criterion “B” in Field 7 and proceed to step

DO MY GOODS QUALIFY FOR NAFTA?  Was your product manufactured from components or sub- assemblies that contain non-NAFTA materials, but which themselves became NAFTA-eligible according to the rules of origin?  If “yes” claim criterion “C” in Field 7 and proceed to step 10.  Was your product merely assembled in North America? Did it fail to undergo a classification change because it was imported into Canada, Mexico or the U.S. in an unassembled or disassembled form and classified as an assembled good”  If “yes” criterion “D” may apply if sufficient value is added. Further research is required. 23

DO MY GOODS QUALIFY FOR NAFTA?  Was your product made in North America? Did it fail to undergo a classification change because the imported parts for your good, and the finished good itself, are classified in the same tariff heading (4 digits) or subheading (6 digits) of the HTS?  If “yes” criterion “D” may apply if sufficient value is added. Further research is required. 24

DO MY GOODS QUALIFY FOR NAFTA?  If you know the background of your product, if it complies with the applicable rule of origin, and if all other requirements (including documentation to support your claim) are met---Congratulations! You may now prepare a Certificate of Origin.  Remember, a good certificate is complete, correct, and clear. 25

NAFTA Textiles Claims  Importers claiming preferential tariff treatment for textile goods under a tariff preference level (described in Annex 300-B of the NAFTA) and for articles altered or repaired (HTS and will not have a CO since the goods are not originating (as that term is defined in Article 401 of the Agreement).  A claim for preferential tariff treatment for textile goods under a tariff preference level cannot be accepted until the line item has been processed through quota in accordance with existing instructions. 26

Revision of Post-Importation Preference Program Claims  19 USC 1520(d), post-importation preference claim, allows for a preference claim to be made within one year of the date of importation if a claim was not made at entry summary.  The clock for the 1 year period starts on the day following the date of importation  It is the only mechanism to make a post-importation preference claim on NAFTA.  This statutory provision only allows changes to the entry summary that bear directly on the preference claim. 27

Post-Importation Claims  This includes a tariff classification or valuation change on a line in which a preference claim is being made, if that valuation change enables the good to meet NAFTA terms.  Such claims should be processed without requiring a Post Entry Amendment (PEA), a Post Summary Correction (PSC) or a 19 U.S.C. 1514, Protest. 28

29 Customs Modernization Act  On December 8, 1993, Title VI of the North American Free Trade Agreement Implementation Act (Pub. L , 107 Stat. 2057), also known as the Customs Modernization Act or “Mod” Act, became effective.  Two new concepts that emerged from the Mod Act are:  Informed Compliance  Shared Responsibility

30 Importer of Record’s Obligation to Provide Information to CBP  Pursuant to the Modernization Act, it is now the responsibility of the importer of record to use reasonable care to enter, classify and value the goods and provide any other information necessary to enable CBP to properly assess duties, collect accurate statistics, and determine whether all other applicable legal requirements are met.  CBP Form 7501, the entry summary, requires that the importer of record or authorized agent declare that to the best of the declarant’s knowledge, the entry fully discloses the true prices, values, quantities, rebates, drawbacks, fees, commissions and royalties, and is true and correct, and that all goods and services provided to the seller of the merchandise either free or at a reduced cost are fully disclosed.

31 Informed Compliance Publications on CBP.gov  CBP has prepared a number of Informed Compliance publications (ICPs) in the "What Every Member of the Trade Community Should Know About:..."  NAFTA Country of Origin Rules for Monumental & Building Stone  NAFTA Eligibility and Building Stone  NAFTA for Textiles & Textile Articles contains information on new or revised requirements, regulations or procedures, and a variety of classification and valuation issues.