NAFTA

Origin Criteria “C” The good is produced from in the territory of one or more of the NAFTA countries. Exclusively from Originating materials. One or more of the materials may not fall within the definition of “Wholly produced or obtained” Some Materials are Criteria “A” Some Materials are Criteria “B”,”C”,“D1”,or “D2”

NAFTA

Criteria “C” Example

Table Made in Mexico

NAFTA

Material 1:

Wood from USA Origin Criteria “A”

NAFTA

Material 2

Lacquer made in Canada Origin Criteria “B”

NAFTA

Material 3

Hinge made in Mexico from Coal imported from Brazil Origin Criteria “B”

NAFTA

As one or more of the materials do not fall within the definition of “Wholly produced or obtained”origin criteria “C” is used.

A C

+

B

+

B

=

NAFTA
Origin Criteria “D 1” A good was imported into the territory of a NAFTA Country in an unassembled or disassembled form, but was classified as an assembled good as per H.S. General Rule of Interpretation 2(a) “Incomplete, unfinished, unassembled or disassembled articles are considered to be the same as the Complete, Finished, or assembled article, as long as the articles presented have the same essential character”

NAFTA

Bicycle from U.K.
-Unassembled -Imported from UK -Classification when cleared into Canada was 8712.00

Must meet regional value content to qualify under Criteria “D1” 60% Transaction Value or 50% Net Cost Value

Bicycle from U.K.
If parts were worth $150.00, and the selling price was $400.00 would the bike qualify?

RVC = RVC =

TV

- VNM TV

x100 Qualifies !!

400.00 - 150.00 x 100 62.5% = 400.00

Criteria “D2”
Toy car HS # 9501.00 Materials: Plastic Pellets Chapter 39 Pigment Chapter 32 Toy Car Parts HS# 9501.00

Does the Toy Car Qualify for NAFTA?

NAFTA

NAFTA

Criteria “D2”
Toy car HS # 9501.00 Materials: Plastic Pellets Chapter 39 Pigment Chapter 32 Toy Car Parts HS# 9501.00

No!

Does the Toy Car Qualify for NAFTA Under “B”

No change in Chapter!!

Qualifies!!!!! Under D2

Criteria “D2”
Toy car HS # 9501.00 Materials: Plastic Pellets Chapter 39 Pigment Chapter 32 Toy Car Parts Value $15.00 HS# 9501.00

Selling Price $67.00

Does the Toy Car Qualify for NAFTA Under “D2”
RVC = RVC = TV - VNM TV 67.00 - 15.00 x 100 = 67.00 77.6% x100

NAFTA
Origin Criteria “D 2” The good incorporated one or non-originating materials, provided for as parts under the H.S. which could not undergo a change in tariff classification because the heading provided for both the good and its parts”

NAFTA
De Minimis Except in some exceptions, a good shall be considered to be an originating good if the value of all nonoriginating materials used in the production of the good that do not undergo an applicable tariff change in tariff classification as set out in Annex 401B is not more than seven percent of the value of the good. Or

NAFTA
De Minimis A good that is otherwise subject to a regional value content requirement, shall not be required to satisfy such requirement if the value of all non-originating materials used in production of the good is not more than than 7% of the FOB value.

NAFTA
De Minimis Does not apply to specific material specified in Article 405 of the NAFTA agreement. - Dairy Preparations of 1901.90 - non-originating material of Chapter 4 (dairy) etc.

NAFTA
De Minimis Example:

+

+

=

Watch Band Taiwan 9113.90 $1.00

Watch Movement 9108.91

Watch Case

Finished Watch 9102.11 $20.00

Originating Originating Mat. Mat. 9112.10

Does Watch Qualify for NAFTA????

NAFTA
De Minimis Example:

BUT WAIT!!!!!

+

+

=

Watch Band Taiwan 9113.90 $1.00

Watch Movement 9108.91

Watch Case

Finished Watch 9102.11 $20.00

Originating Originating Mat. Mat. 9112.10

Watch Band Does not change Chapter as required by Annex 401B. Good Does Not Qualify!!!

NAFTA
De Minimis Example:

BUT WAIT!!!!!
Try de minimis!!!!

+

+

=

Watch Band Taiwan 9113.90 $1.00

Watch Movement 9108.91

Watch Case

Finished Watch 9102.11 $20.00

Originating Originating Mat. Mat. 9112.10

Value of Strap Value of Watch

Therefore, non$ 1.00 100 X 5% originating material $20.00 does not make up more Watch Now Qualifies!! than 7% of the finished

=

good

NAFTA
Accumulation For the purposes of determining whether a good is an originating good, the production of the good in the territory of one or more of the Parties by one or more of the producers shall be considered to have been performed in the territory of any of the Parties by that exporter or producer.

Cotton – China 5201.

South Carolina Makes Fabric HS# 5208

Vancouver makes Cotton into Yarns and Threads HS# 5205

Mexico Make men’s jackets HS #6204

NAFTA

NAFTA

Can combine or “accumulate” production in 2 territories. South Carolina needs to get a letter from Vancouver stating the Cotton was from offshore. The receipt of that letter will make the Vancouver production as being done in South Carolina. South Carolina then can issue a NAFTA certificate using

Cotton – China 5201.

South Carolina Makes Fabric HS# 5208

Mexico Make men’s jackets HS #6204

NAFTA
Transhipment

Goods lose NAFTA eligibility if transhipped through a non-NAFTA country.

NAFTA
Intermediate Materials aka: “Self Produced” Material If a company produces one of it’s own materials, and it qualifies for NAFTA even if it was produced from some nonoriginating materials, that material can be considered 100% NAFTA in the NAFTA determination of the final good it is a material of.

NAFTA
Intermediate Materials Example: A Company manufactures a washing machine pump which comprises part of it’s final product, a washing machine.

- the pump is made from non- originating materials, but the finished pump qualifies under the rules of origin in Annex 401B.

NAFTA
Intermediate Materials In the NAFTA calculation of the washing machine, the pump is considered 100% NAFTA, and no part of the pump is considered non-originating. If the washing machine contained other nonoriginating materials, designating the pump as an intermediate material

NAFTA – Fungible Goods

Goods or materials that are interchangeable for commercial purposes and whose properties are essentially identical. Mixtures of a material that are non-originating and originating. Agreement does not make the producer specifically identify each good, but allows the use of Inventory methods set out in the regulations. LIFO and FIFO are utilized

NAFTA – FIFO

“First In. First Out” Fungible materials are identified in the order of their receipt as originating or not originating.
Receipts Date Quantity Dec 01 1000 (N) Dec 05 1000 (N) Dec 10 1000 (O) Production Date Dec 08 Dec 09 Dec 14

Quantity 500 500 1500

Using FIFO How many are left & do they originate or not?

500 Originating items are left using FIFO

NAFTA – LIFO

“Last In. First Out” Fungible materials are identified in the reverse order of their receipt as originating or not originating. The newest is used first.
Receipts Date Quantity Dec 01 1000 (N) Dec 05 1000 (N) Dec 10 1000 (O) Production Date Dec 08 Dec 09 Dec 14

Quantity 500 500 1500

Using LIFO How many are left & do they originate or not?

500 Non- Originating items are left using LIFO

NAFTA
Three Tariff Treatments Arise out of NAFTA:

United States Tariff: Mexican Tariff:

“UST” “MX”

“Tariff Treatment 10” “Tariff Treatment 11” “MUST” “Tariff

Mexican – United States Tariff: Treatment 12”

NAFTA - UST

Goods originate in the territory as per rules of origin in Chapter 4 of the NAFTA Agreement. Any Mexican content is treated as non-territorial and the goods still qualify as originating If the goods underwent any processing in Mexico the increase in value is not greater than 7% or no more than 6.5% of the value for duty.

NAFTA - MT

Goods originate in the territory as per rules of origin in Chapter 4 of the NAFTA Agreement. Any US content is treated as non-territorial and the goods still qualify as originating If the goods underwent any processing in the USA the increase in value is not greater than 7% or no more than 6.5% of the value for duty.

NAFTA - MUST

Goods originate in the territory with inputs from both Mexico and United States

Goods do not qualify for either MT or UST

NAFTA Certificate
Importer must have a completed NAFTA Certificate on Hand at Time of Customs Clearance. Tax Identification number: USA: “EIN” “Employer Identification Number” Canada: “Business Number” Blanket Period Can Be for 1 year. HS Classification 6 digits unless good is subject to a specific rule of origin in Annex 401B that calls for 8 digits. In box 8 if not the producer you must specify how you know the good qualifies for NAFTA: 1 – Based on your knowledge (guess!) 2 - Based upon written representation by the producer 3 - Based upon a NAFTA Certificate supplied by

NAFTA Certificate
Importer: 90210 EIN#: Exporter: 3M2 Controller; 2342 2344 Producer: A Mfg. Company 225 Anystreet Los Angeles California 14237555 Izzy A Jerk Inc. 134 Go Away Road Toronto Ontario L5G Biz# 123456789RM0001 Izzy A Jerk 416-345Fax: 416-345Another Mfg. Company 45 Main Street Erin Ontario L9W 4R4

Commodity: Aircraft Propellers HS# 8803.10.00.00

Origin Criteria “B”. Told Over the phone by someone at Another Mfg Co. that the good qualifies for NAFTA.