1. NAFTA 101: Understanding the Basics
JoAnn Queen
Trade Promotion Programs
Trade Information Center
June, 2009

2. Objectives FREE TRADE AGREEMENTS Greater market access
Promote trade
Greater market access
Promote fair competition
Establish framework for further cooperation

3. BENEFIT FOR U.S. PRODUCTS
Immediate Benefit: No Duties
Elimination is not automatic
Certain steps must be followed
Products must contain sufficient North American content to meet the requirements of the NAFTA Rules of Origin

4. Taking Advantage of Free Trade Agreements
Understand the specific free trade agreement
Ensure products meet the FTA requirements
Complete the documentation

5. Free Trade Agreements A Few Common Misconceptions:
U.S., Canadian & Mexican Tariffs are the same
Originating means purchased in a NAFTA Country
NAFTA Certification is Mandatory
NAFTA Certificates are required to clear Canada customs
A producer is required to supply a buyer with a NAFTA Certificate of Origin

6. Free Trade Agreements in Force
Israel January 1, 1985
NAFTA January 1, 1994
Jordan December 17, 2001
Chile January 1, 2004
Singapore January 1, 2004
Australia January 1, 2005
Morocco January 1, 2006
CAFTA-DR March/April 1, 2006
Bahrain August 1, 2006
Costa Rica January 1, 2009
Oman January 1, 2009
Peru January 1, 2009

7. Free Trade Agreements
Qualify Your Products

8. HOW TO DETERMINE POTENTIAL BENEFITS
Benefits for U.S. Products Require Certain Steps:
Find the appropriate HS number
Determine the duty rates in your export market
Determine if your product meets the requirements of its specific NAFTA Rule of Origin

9. HOW TO DETERMINE POTENTIAL BENEFITS
Classification Systems:
Harmonized System Numbers (HS)
Schedule B
Harmonized Tariff Schedule of the United States (HTS)

10. HOW TO DETERMINE POTENTIAL BENEFITS
Product Classification:
Paints ( ) based on polyesters
Chapter – 32
Heading – 3208
Subheading –
Tariff Item –

11. HOW TO DETERMINE POTENTIAL BENEFITS
Product Classification
Plastic Bags ( )
Chapter – 39
Heading – 3923
Subheading –
Tariff Item –

12. HOW TO DETERMINE POTENTIAL BENEFITS
Product Classification
Get started by visiting the Census website at to use the Schedule B Search Engine to obtain classification numbers for both the end product and its foreign components

13. HOW TO DETERMINE POTENTIAL BENEFITS
NAFTA Rules of Origin
Define how much foreign input is allowed
Specific by product and are based on the harmonized system (HS)
May require a Tariff Shift, Regional Value Content, or Both

14. HOW TO DETERMINE POTENTIAL BENEFITS
Example:
Paints (HS )
Made from imported acrylic acetate(HS Chapter 39)
NAFTA Rule of Origin: Tariff Shift (Change in classification number)
“A change to headings 3208 through 3210 from any heading outside that group.”

15. HOW TO DETERMINE POTENTIAL BENEFITS
Example:
Plastic bags ( )
Made from plastic pellets from Taiwan ( ) &Regional Value Content is 75% using either the Transaction Value or Net Cost formulas.
NAFTA Rule of Origin: Tariff Shift & Regional Value Content
“A change to subheading from any other heading except from subheadings or In addition RVC must not be less than: a)60% using Transaction Value formula of b)50% using the Net Cost formula.”

16. Regional Value Content
Formulas for Calculating NAFTA Regional Value Content (RVC)
Transaction Value:
RVC = TV – VNM x 100 TV
Net Cost:
RVC = NC – VNM x 100 NC

17. Regional Value Content
Transaction Value:
RVC= TV-VNM x 100 TV
Example:
RVC= – 90 x 100
200
RVC= x 100
RVC= %
RVC= 55%

18. Regional Value Content
Net Cost:
RVC= NC-VNM x 100 NC
Example:
RVC= –90 x 100
182
RVC= x 100
RVC= %
RVC= %

19. NAFTA Preference Criteria
The NAFTA Preference Criteria are grouped into categories identified on the Certificate by letters A through F.

20. Preference Criteria
A – Natural resources, e.g., anything grown, harvested, fished, or mined in any one of the NAFTA countries.
B – Manufactured goods that contain foreign parts, components, or raw materials and meet the requirements of its specific NAFTA Rule of Origin.
C – Goods manufactured exclusively with NAFTA originating parts or components.
D – Covers goods where the HS code for the product and its parts is the same and the manufacturer is allowed to use Regional Value Content to determine whether the good originates.
E – HS code-specific Automatic Data Processing equipment.
F – Applies to certain “agricultural” products exported only to Mexico.

21. Complete the NAFTA Certificate of Origin

23. NAFTA Certificate of Origin
Completed by the exporting (or selling) company
Original is forwarded to customer

24. Recordkeeping
Importers and exporters should maintain documents to support a NAFTA claim for up to seven years after importation
Documents relate to the purchase, cost, value, and payment for all materials, direct or indirect, used in production
Customs officials can seek information from either party

25. Free Trade Agreements
Bill of Materials (BOM) chart is a widely employed and accepted method of documenting origin determinations
BOM chart lists all inputs by product description, supply source, origin, HS classification, and value

26. NAFTA Successes
Turner Marine in Neoga, IL - Exporting for the first time, contacted the Commercial Service and received necessary international trade information and NAFTA assistance allowing them to successfully export to Canada.
Roe Sales in Peoria, IL - Called the Commercial Service and received NAFTA information and assistance with qualifying their product. It was later learned that they had successfully completed a NAFTA Certificate of Origin and exported their product the same day to Canada.

27. RepCAN 2009 Business Matchmaking
Toronto, Ontario - September , 2009
Montreal, Quebec - September 30 - October 1, 2009
Vancouver, British Columbia - October 5-6, 2009
RepCAN 2009 offers:
 One-on-one business meetings with potential business partners in each city
Opportunities to display and distribute your promotional materials
Networking events with Canadian business, industry and government contacts
National market exposure for your product and services in Canada
Visibility on Commercial Service Canada's Featured U.S. Exporters (FUSE) webpage
Assistance with logistics and customs
Expert business counseling before, during and after your participation

28. RepCAN 2009 Business Matchmaking
 Register Today for RepCAN - Space is Limited!
Small Company Cost: US $1,500 per city location
Large Company Cost: US $3,000 per city location
For Additional Information Contact:
Madellon Lopes, Project Manager
(416) , Ext. 227

29. JoAnn Queen Phone: 800-872-8723 ext.35226 or 202-482-5226
For further information or assistance contact:
JoAnn Queen
Phone: ext or
Fax: