Donald Trump and Hillary Clinton talked about the North American Free Trade Agreement (“NAFTA”) during the U.S. Presidential Debate on September 26th. Donald Trump and Hillary Clinton spoke about NAFTA during the primaries and on the campaign trail. NAFTA is relevant again! This is good for customs lawyers and trade lawyers. With all this talk about NAFTA, it is also a time for Canadian importers to review their NAFTA certificates of origin.
One of the most common misconceptions about NAFTA is that “all goods purchased from the United States are duty free under NAFTA”. This is NOT CORRECT! Only goods that qualify as “originating goods” are entitled to duty-free treatment under NAFTA.
It is important to periodically review and revisit determinations that goods qualify for NAFTA. It may be that corporate decisions relating to sourcing of goods or inputs has changed since the last review. If the rule of origin requires a good undergo a regional value content analysis, a change in the sourcing of a major input could affect the overall calculation.
It is also possible that the Canadian International Trade Tribunal (“CITT”), Federal Court of Appeal or the Supreme Court of Canada has made an important decision in the area of tariff classification or origin. For example, the Supreme Court of Canada recently issued a decision in Attorney General of Canada v. Igloo Vikski and established rules for the tariff classification of goods.
If the tariff classification of goods changes, then the applicable rule of origin may also change. If the rule of origin changes, then an importer should determine whether the new rule of origin results in the good being considered to be an originating good or not.
Originating goods must be accompanied by a properly completed certificate of origin or be covered by a blanket certificate of origin in order to qualify for NAFTA duty-free treatment.
A Certificate of Origin (CO) is an important international trade and legal document that certifies certain information provided therein is correct and attests that the goods identified in the certificate are wholly obtained, produced, manufactured or processed in a particular country. The NAFTA Certificate of Origin (and most certificates of origin) requires certain information be provided by the exporter about the goods described in the certificate. Customs documentation is completed by customs brokers and importers based upon the information provided in a certificate of origin (when they receive a copy prior to the shipment). Whether customs duties are charged and at which preferential rate are determined by the importing country’s customs authorities based, in part, on the certificate of origin.
A blanket certificate of origin is completed for a period of time, generally one calendar year. Instead of requesting an individual certificate of origin for each and every shipment, in certain circumstances, the CBSA allows importers to maintain a blanket certificate of origin covering importations over a given period of time. This is meant to save time and effort for both the importer and the CBSA, which only has to deal with a single certificate of origin as opposed to a larger number dealing with the same goods.
The common errors (but by no means an exhaustive list) include:
- Preferential treatment is not available because the rule of origin has not been satisfied;
- An incorrect country of origin is identified;
- Incorrect H.S. code for the importing country is used;
- An incorrect or incomplete or unclear or ambiguous description of the goods is provided;
- Incorrect preference criteria are used;
- Incorrect producer is identified (or the exporter states it is the producer when the goods are purchased by the exporter for resale);
- An incorrect net cost is stated;
- Incorrect importers are identified; or
- An incorrect “blanket period” is stated.
For more information about tariff classification and origin decisions and verifications of origin, please contact Cyndee Todgham Cherniak at 416-307-4168 or email firstname.lastname@example.org. For more free information about Canada’s customs laws, please go to the LexSage web-site.
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