1. NAFTA Certificate of Origin and Supporting Records

2. Center for International Trade Development

3. NAFTA Benefits What are the rules and how can I benefit? Certificate of Origin Harmonized Tariff # (HS) Preference Criteria –Rules of Origin Penalties

4. Certificate 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

5. Purpose of Certificate of Origin Trilateral form used to claim NAFTA preference Certifies that a good exported qualifies as an originating good under NAFTA

6. 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

7. Certificate 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

8. Certificate of Origin Instructions 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

9. Certificate of Origin Instructions Yes or No (#)

10. 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

11. Certificate of Origin Instructions NC or No

12. Certificate of Origin Instructions 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

13. Certificate of Origin Instructions US or MX CA

14. Online 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.cbp.gov/ 4. Rules of Origin Annex 401 http://www.cbp.gov/trade/nafta/annex-401

21. Preferential 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

22. Preferential Treatment 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.

23. Preferential Treatment 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

24. Criteria 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

25. RULES OF ORIGIN Determine whether a good originates in the territory of a party Determine whether the good is entitled to preferential treatment

26. Criteria B TARIFF SHIFT Travel kit under HTS 9605.00 consisting of : Plastic case 3923.10China Sewing thread 5204.20 Italy Needles 7319.90 Indonesia Toothpaste 3306.10France Toothbrush 9603.21Taiwan Rule States: Change to heading 9601 through 9605 from any other chapter.

27. Criteria B 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/2015/c96.html

28. Criteria B TARIFF SHIFT AND REGIONAL VALUE CONTENT (RVC) Plastic Boxes under HTS 3923.10 Resins3901.20 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

29. Regional Value Content - RVC Two Methods Transaction Value Method – 60% Net Cost Method – 50%

30. RVC - Transaction Value Method Transaction Value Method RVC = TV - VNM x 100 TV TVtransaction value of the good adjusted to an F.O.B. basis VNMvalue of non-originating materials used by producer

31. RVC – Net Cost Method Net Cost Method RVC = NC - VNM x 100 NC NCnet cost of the good VNMvalue of non-originating materials used by producer

32. Criteria 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

33. Criteria C Wooden Desks under HTS 9403.30 Wood4407.10Grown in US Metal Legs9403.90Made in US from KR steel (7212.50) Metal Hardware 9403.90Made in US from KR steel (7212.50) 9403.90 rule states: A change to subheading 9403.90 from any other heading

34. Criteria C Silk FabricSilk Tie

35. Criteria 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).

36. Criteria 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)

37. Criteria D Tricycle Kit (unassembled tricycle packaged in MX) under HTS 9501.0020 All parts 9501.0040CN, 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.

38. Criteria D 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

39. Any Penalties?

40. Penalty 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/trade/nafta/guide- customs-procedures/penalties

41. Penalty 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.

42. Exceptions 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

43. Exporter/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

44. The End

45. Robert Corona M.B.A., Director Center for International Trade Development Riverside Community College District 152 East Sixth Street Corona, CA 92879 (951) 571-6443 Robert.Corona@rccd.edu www.citd.org