FTS-DOC-ITA
Moderator: Linda Abbruzzese
February 27, 2008
1:00 pm CT
Coordinator: Good afternoon and thank you all for holding. At this time I would like to inform all parties that your lines will be on a listen only mode for the duration of today’s call.
Also today’s call is being recorded, if you have any objections please disconnect at this time.
I’d like to turn the call over to Linda Abbruzzese, ma’am you may begin.
Linda Abbruzzese: Thank you. Good afternoon for those of you joining on the east coast and good morning for those of you joining us on the west coast.
I’d like to thank everybody for joining us for our webinar on the NAFTA documentation. I am pleased to note that we have more than 109 people registered for this webinar today.
I’m Linda Abbruzzese, International Trade Specialist for the Marketing Communications Office of the US Commercial Service at the Department of Commerce.
This webinar is being brought to you in cooperation by the US and Foreign Commercial Service, and I’d like to welcome all the US Commercial Service clients and other participants joining us all across the USA to learn about NAFTA documentation and how to properly fill out these documents when exporting your products to Canada and Mexico.
In a moment I’ll turn the presentation over to JoAnn Queen, International Trade Specialist and Certified Global Business Professional from the Trade Information Center in Washington DC.
She will be available at the end of the presentation to answer your questions, and her contact information will also be provided.
Now for those of you who just joined, you can still log onto our webinar by entering the URL website and pass code per instructions that were sent to you by email.
We do have a few housekeeping details to make sure everyone gets the most benefit from this afternoon’s webinar. You will be able to hear your presentation via your telephone and view it simultaneously via your computer.
If you are not hooked up through both, please take a moment to do this. If you are experiencing any technical difficulties, please press star 0 any time during the presentation.
Now because of the large number of participants on line, we have now more than 100 participants, we invite you to type in your questions on your screen as they occur to you during the webinar.
There is a box at the bottom of the screen on the right hand side where you can click and type in your questions at any time. We will compile the questions and present as many as time allows after the presentation.
Typed questions which are not answered during the webinar due to time constraints will receive personal emails after the webinar.
In addition all listeners will be provided with information for any individual follow up counseling, expert assistance or market research you may need to pursue opportunities in this market, or in NAFTA for the NAFTA documentation.
For those of you who just joined us and logged in you can still join in our internet conference.
Now I would like to introduce live on line from the Trade Information Center in Washington DC, International Trade Specialist JoAnn Queen. Joanne thank you for joining us.
JoAnn Queen: You’re welcome Linda and good afternoon to everyone participating in the webinar and welcome to what you always wanted to know about NAFTA but were afraid to ask.
This is going to be your opportunity to get the information that you need, or maybe you can think of this as NAFTA 001.
Due to time constraints I have quite abbreviated my remarks, but my overall objective is to give you a better understanding of what is expected of you if you want to properly and accurately complete a NAFTA certificate of origin.
Before you do anything, ask yourself, am I familiar enough with free trade agreements? Were my products manufactured in the US, Canada or Mexico? Do I have personal intimate knowledge about or documentation detailing how the items were produced and whether they qualify?
Today’s the day that you get much needed insight into what needs to happen before you pick up that NAFTA certificate of origin or honor a request from your Canadian or Mexican customer to provide them with a NAFTA certificate of origin.
Take good notes, there may be a quiz at the end. Linda?
Linda Abbruzzese: Okay, thank you, Joanne, I’ll present you with the first slide, number two.
JoAnn Queen: So what I’d like everyone to keep in mind is the objective of the free trade agreement, and since today we’re talking about NAFTA, you can keep NAFTA in mind, but it applies to all of them.
And that is to promote trade and give greater market access to products created, produced, manufactured by US companies.
Also to promote fair competition so that if you’re putting a bid on a contract in one of the NAFTA countries, your bid should get the same treatment as someone in country bidding on the same project.
And also, the objective is to establish a framework for further cooperation because there are always regulations that need to be created and put in place to continue allowing US companies to successfully enter into these two particular markets.
Linda? Now the benefit, or the immediate benefit of the free trade agreements are no duties. However, duty free entry into Canada or Mexico or even the United States is not automatic.
Certain steps must be followed. And last but not least, products must contain sufficient North American content, or they need to meet the requirements of the NAFTA rules of origin.
And there are rules of origin for absolutely everything that is produced in the United States and around the world. Linda?
So in taking advantage of free trade agreements, it is imperative that you at least have a working understanding of the specific trade agreement, in this case NAFTA.
It is also important that you ensure your products meet the NAFTA requirements, and that’s what we call the NAFTA rules of origin. You’re going to notice that I’m trying to provide this briefing in a particular order.
And I also want you to keep in mind that this is the order in which you should approach qualifying your products.
And then in the end, yes, you will want to make that decision about completing the documentation. And the reason why I’m saying you want to make that decision is it is not mandatory that a NAFTA certificate of origin be completed and provided to your customer.
It is a voluntary activity, qualifying your products, figuring out classification numbers, completing the documents.
However, if you are going to do the NAFTA certificate of origin for your customers in Canada and Mexico, or you’re going to place a certification statement on your invoice, you absolutely have to qualify your product.
Linda? So in order to get the benefits, like I said, the products require certain steps. And the very first step would be to find the appropriate harmonized system number, or HS number.
The next thing that we suggest people do is to check the duty rates that are currently in a Canadian customs schedule and the Mexican customs schedule under MFN, or most favored nation, see if there are duties there.
If there is a duty percentage, you want to continue on and qualify your product. If under MSN, most favored nation, there are no duties, don’t worry about NAFTA.
That means the item should go into Canada and Mexico duty free without worrying about completing the NAFTA certificate of origin.
But if you have to continue on, you need to determine if your product meets the requirements of its specific NAFTA rule of origin, and there’s a rule of origin for everything that gets manufactured and shipped around the world.
Linda? So I’m sure many of you have come upon these different classification systems in the trade information center when someone needs the classification number, we usually send them to the Schedule B search engine, which is sometimes a quick way to do a search and come up with a classification number.
There’s also the harmonized system number, or HS number. And that would be the first six digits of the Schedule B number, or the first six digits of the harmonized tariff schedule of the United States.
And the HTS numbers are normally associated with goods that are coming into the United States. So the foreign exporter should be using the HTS numbers.
The Schedule B numbers are normally used when you’re exporting and you have to complete the shipper’s export declaration or the automated export system.
Linda? So when you’re looking at the product classification, and there is a reason for presenting it the way you see it on the screen. Once you get into the NAFTA rules of origin, you’re going to be reading things that talk about chapters, headings, subheadings as far as items.
So this is what you’re going to be looking at, so if a rule talks about a change from a chapter, you know you need to look at the first two digits. If a heading is mentioned, you need to look at the first four, and the subheading, first six.
And then the tariff item number, and believe me when I say that these rules of origin are specific, they really are very specific, sometimes down to the tariff item number. Linda?
And here’s another one, plastic bags, and I’m using these two particular products because once we get to the rules of origin we’re going to be looking at the rules of origin for these two particular products.
Linda? So if you need to find the classification number for your particular product, you can absolutely get started by visiting the census website at www.census.gov/scheduleb.
And use the Schedule B search engine to obtain classification numbers for both your end product, the finished good, and its foreign component, that’s a must.
Next one Linda. Okay, so once you have your classification numbers and then you start looking into the NAFTA rules of origin, some of you probably remember that when NAFTA went into force, we had to look in Annex 401 for the rules of origin.
Now those - you know Annex 401 still exists, but the rules of origin for the three countries, for the three partners, have undergone at least two changes in the rules of origin for certain categories of goods.
And what I mean by that is some of these categories, the rules of origin for these categories became liberalized. It became a little easier to meet the requirement of the specific rule of origin.
So in order to get to the updated rules of origin, you will need to get to general note 12T, which can be found behind the harmonized tariff schedule of the United States on the website for the International Trade Commission.
And that web address is www.usitc.gov. Keep in mind the rules of origin are the rules that help define how much foreign input is going to be allowed in a particular product.
And the specific products are - the rules are based on the harmonized system, just like when we were talking about the classification numbers, you’re going to see the harmonized number, or you’re going to see a heading.
So pay strict attention to that as you are looking up your rules of origin. The rules of origin may also require a tariff shift or regional value content or it may require both.
And a tariff shift is pretty much just a change of the classification number of the foreign input to a different number for the finished good. And regional value content, you’re going to get formulas for mathematically determining how much North American content is in your products.
And a little later on we are going to see what those formulas look like. Some of the rules of origin may require both a tariff shift and regional value content.
I’ve also seen rules that all the rule says is regional value content must be net using the net cost method. Now if you have the particular classification number that when you look at that number, that’s your rule, that’s your rule.
You can’t go by a tariff shift, you’re not going to use the transaction value, the rules stipulate you have to use the net cost formula. Linda?
So now we’re back to the example, and here are the paints, and the HS number is 3208.10 and the paints include acrylic acetate that was imported. And the HS number, or the HS chapter for the acetate is Chapter 39, whereas the paints are in chapter 32. Linda?
So here is the rule of origin, but it’s a tariff shift, and it’s a change to headings or a change to paint from the acetate. But what the rule says is a change to heading 3208 through 3210 from any heading outside that group.
So the acetate might have a number like 3921, so 3921 is absolutely outside of the group 3208 through 3210. Linda?
And then the other example is a tariff shift and it is using regional value content and actually it - the example kind of tells us that using either the transaction value or net cost, the regional value content is 75%.
So you know just by that, the product is going to qualify. But looking at it closely, you’ve got a finished good, plastic bags, 392329, and it was made from plastic pellets from Taiwan. And that number, HS number 3902.10.
Can I get the next slide Linda? So here are the formulas. And for those plastic bags made from plastic pellets from Taiwan, the manufacturer could use either one of the formulas.
And this is what it should look like as you are plugging in numbers. If you have to figure out regional value content, you’re going to be plugging in numbers at TV, which is transaction value.
You’re going to subtract VNM, which is the value of non-originating material, divided by the transaction value, times 100 and that will give you a percentage. And as some of you probably know, on the transaction value, the minimum, the minimum percentage is 60%.
Under 60%, your product is not meeting the rule of origin and it does not qualify into NAFTA. With the other formula, the net cost, you’re going to have pretty much the same formula setup. However, because you’re using a net cost amount, net cost is a lesser amount than transaction value.
And then you’re going to subtract the value of non-originating materials. The net cost is the amount that you would arrive at if you took the transaction values and you have to subtract out some of the production expenses.
That’s how you’re going to arrive at your net cost, and then subtract the value of non-originating materials divide by net cost, times 100 and you’ll get your percentage.
And 50% is the minimum if your percentage is lower than 50%, then it is not meeting that requirement. So some of the rules you have a choice of both formulas and if you want to work both formulas to see which one works best, that would be fine to do.
If the rule of origin specifies net cost, that’s your only choice, you have to use net cost. Linda, could I have the next?
The other thing about the NAFTA certificate of origin, once you are able to make a determination your goods qualify, they are meeting the requirements of the specific NAFTA rule of origin you then have to figure out, okay, what preference criterion am I going to use?
The NAFTA preference criteria are grouped into categories identified by letters A through F. A would cover products that are natural resources, things that they - it’s planted, it’s grown, it’s harvested and then it’s loaded up on to trucks or trains or what have you and exported into Canada and Mexico.
Any natural resource, something that comes out of the earth, out of our forests, out of the ocean, those are the kinds of things, especially when - if there’s nothing done to them, those are going to fall under A.
Most manufacturers when they’re looking the preference criterion, it’s going - I would say it’s going to be a toss up between B as in boy or C as in Charlie.
The other thing to keep in mind is as you are qualifying your finished good or if you’re qualifying parts that you manufacture, whatever it is, once they meet the rules of origin requirement, they are considered NAFTA originating.
So a finished good can be NAFTA originating, an input to that finished good can be NAFTA originating. So you’re going to look at these letters and make a determination and on the back of the certificate of origin, there are instructions.
Let me tell you now the instructions in my mind you know were an attempt to explain the field. There’s nothing within those instructions that tell you about any classification numbers for everything and you know paying attention to whether or not there are foreign inputs.
And what you do once you get to that rule of origin and figure out my good qualifies, there’s nothing there that tells you this. So that’s the purpose of this webinar today, so when your looking at the letters, think about B as a good that combines with US input and foreign input to make that part of that finished good.
But any time you’ve got that mix of US NAFTA originating parts or components and foreign, you’re looking at B.
If your product is made, your end product is made exclusively from NAFTA originating parts, components, what have you, you’re looking at C. So C would be strictly US NAFTA originating parts, components.
Once you mix or add something in there that came from another country, it’s going to go back to being B as in Boy.
And then there’s D, and I’ve had - I have a lot of people who will look at the preference criteria and try to fit their product or whatever their understanding is of the specific preference criteria and their product they’re trying to fit their product under that.
That is not always a good thing to do. First of all, when you are classifying your product, and this is sort of leading into D, when you classify your product using this Schedule B search engine or some other tool, you absolutely want to choose the appropriate classification number for what the item is.
Don’t think about how it’s going to be used. If it’s an automotive part, don’t look under automotive parts and accessories and take that number. If it’s a wire of some sort, then do a search for wires.
If it’s a plastic or rubber part, go to the chapter and look at the number four articles of plastic or rubber.
And the reason I’m stressing that is when you go to the rule of origin and you’re trying to meet a tariff shift, you’re not going to need it if a classification number for the end product and its parts have the same classification number or the same heading or they fall in the same chapter.
You’re not going to meet that rule of origin. So you want to make certain, get the classification number for what the item is, not how it’s going to be used or where it’s going to be used.
And that brings me to preference criterion D as in David. D covers a finished good and its parts, and these are rare instances. You’ve got the finished good and its parts with the exact same classification number.
Therefore you know it would never need a tariff shift. So if that should happen, a manufacturer is allowed to use regional value content. So we’re talking about the goods are foreign.
And then you have you know you put it all together and out comes a finished good. But the finished good and the parts have the same classification number.
So you can use regional value content to see if your product will qualify and if it does on the NAFTA certificate you’re going to use D as in David.
E covers very specific electronic items and right now no one should be using E. And if anybody has questions on that, we can talk about that later today or tomorrow or next week. But don’t worry about E.
F as in Frank is a letter that would be used on certain agricultural products that are going into Mexico. So this agricultural section of the agreement was negotiated bilaterally rather than trilaterally and we already had something in place between ourselves and Canada.
So F pertains strictly to certain agricultural products being exported into Mexico. And again, these have to be NAFTA originating products. Linda?
And so we come to the NAFTA certificate of origin and I get a lot of questions from my callers who are told because their shipment is very low value, oh they don’t have to worry about NAFTA certificates of origin.
Well I just want all of you to know that in order for your customer in Canada and Mexico to get the benefit, and the benefit is the elimination of duties, you’ve got to qualify your product and provide them with a NAFTA certificate of origin,.
Or if we’re talking about a low value shipment, you can put a certification statement on your commercial invoice. And you sign that and you date it, but you just - you have to indicate in some way that these items are NAFTA originating and should get the benefit.
The other thing that a NAFTA certificate of origin would do, or the certification statement, if you are exporting into Mexico, it will not only eliminate the duties, but it will also eliminate the customs processing fee.
Linda? And so now we come to the NAFTA certificate of origin. And as you can see, in order, you know sometimes I get questions from callers wondering if they have the latest NAFTA certificate of origin.
And at the top if it says United States Department of Homeland Security then you have the most current NAFTA certificate of origin.
Can you do other NAFTA certificates of origin? That’s between you and your customer. If you want to get a NAFTA certificate that’s in French and you complete it in French, you can do that.
You don’t have to. If you want to get one that’s in Spanish and you want to complete it in Spanish, that’s your choice.
Just like whether you do this exercise or not, that’s your choice. There is no law, it’s not mandated anywhere that you have to do this exercise and complete NAFTA certificates of origin.
They should only be done on goods that originate, that were produced, manufactured, grown in the US, Canada or Mexico.
So in looking at the form it doesn’t look like it should you know get anyone any problems, but it invariably does. The - on the form the only field that you could truly just leave it blank is field two.
You don’t have to make your NAFTA certificates of origin blanket certificates. And a blanket is where you indicate dates, and you’re saying that when I send these products listed on this form during these dates, this certificate of origin covers those goods.
It doesn’t mean that once those dates end your goods no longer qualify. That is not what the blanket period means. And companies use the blanket, do blanket certificates if they are exporting the same US made NAFTA originating product on a regular basis to their customer in Canada or Mexico.
So instead of having to create NAFTA certificates of origin every week or every other week, they make a blanket certificate. And they put dates in there, usually the best dates to use I think would be January 1 to December 31st.
You can make it a practice that in the fall you revisit your NAFTA certificates and make sure that everything is the same, nothing’s changed in production, you haven’t changed suppliers which might change the production of your item.
Or how a foreign item was classified, maybe that’s changed. So don’t worry about making blanket certificates unless you absolutely need to. And that’s - you determine that by how often, how regularly you are shipping your NAFTA originating products to your customer in Canada or Mexico.
In the other fields, in the field one, three and four, yes, tax ID numbers are needed. You cannot do a NAFTA certificate and not provide tax ID numbers, and if there is no tax ID number then a social security number will suffice.
The other thing about the form, if you are the manufacturer and exporter and seller of course you’re going to be completing this NAFTA certificate of origin and you’re going to put your information in field one and three.
If you’re the manufacturer and you’re doing the NAFTA form and you go to forward it to your US customers, you can fill it out as though your customer is filling it out.
So you just put their name as the exporter or seller, and your information as the producer. If you don’t know who they are exporting it to in Canada or Mexico, in field four you can just say various.
So once you’ve put this together and you send it to your customer, your US customer, they are going to complete their own NAFTA certificate of origin. And that company may not want their Canadian or Mexican customer to know who the producer is.
So in field three it is appropriate to put available to customs upon request. So whoever ends up you know completing their NAFTA certificate of origin and sending it to their customer in Canada or Mexico, if you’re not the producer you may indicate in three, available to customs upon request.
In the description of goods in field five, be very careful when you’re describing your goods. Please make it as clear and as specific as you can. Don’t use vague terms, don’t say automotive parts, or computer parts.
You want to state what it is, exactly what it is, and in the next field, in field six, you’re going to put the harmonized number for that part, or that piece of equipment.
And again, the harmonized system number is going to be the six digits. And that’s what those in field six. In field seven, that’s where you are going to put the preference criterion that you’ve decided is appropriate for your item.
If you are exporting natural resources, then you’re going to say - put A. If it’s a finished good that includes US NAFTA originating parts and foreign parts, you’re going to use B.
If it’s totally completely made from NAFTA originating parts and components then you’re going to use C as in Charlie. And when you get to field eight, if you are the exporter, seller, producer, you’re one in the same, you’re going to say yes.
If you are the exporter seller, you’re going to indicate no. Usually it can be followed by a one, a two or a three. I would recommend using three. Say no, three for any good you don’t manufacture.
It’s manufactured by another US source. No three just means no I’m not the producer, but I know they - the good qualifies because I have a NAFTA certificate of origin prepared by the manufacturer and provided to me voluntarily.
And when we get to net cost, it refers to regional value content. You have to have looked at your rule of origin for your good to know whether you need to put NC, for net cost, or no.
If your rule of origin does not require regional value content, you’re going to say no. If your rule requires regional value content and you use the transaction value, you’re going to say no.
If you had to use regional value content, use net cost or had to use net cost, then you’ve got to say to NC, net cost.
And then the other thing that seems to give people a little bit of difficulty is country of origin. On the instruction page, you only have three choices, US, for the United States, CA for Canada, MX for Mexico. Those are the choices.
So don’t be tempted to put USA. Once your document is complete, read the certification, read that statement and then you’re going to sign and date and put your title on the NAFTA certificate of origin.
Now it doesn’t have to be, the signature does not have to be of the president. Some companies may want it to be the president, and some companies maybe the head of company may designate someone who’s authorized or being authorized by the company to take care of compliance and qualify the - your products, complete the NAFTA and sign and date the NAFTA certificate of origin.
Because this is a legal document, it does carry some liability with it, so you want to pay very close attention to qualifying the good and collecting information for parts and components that you are not familiar with.
You don’t make them, they come from another source, you need to find out about those parts and components and you’ve got to create your technical file.
That is very important because this is a legal document, it can be audited. And if you’re asked to complete a verification questionnaire, or you’re asked for some other information, you want to be able to pull that technical file and answer whatever question comes your way.
So that is absolutely crucial, and it can also bring fines and penalties if you don’t have a file where you are holding all the supporting documentation that proves your good qualifies.
Can I have the next one Linda? So the NAFTA certificate of origin is completed by the exporting or the selling company. So if you - you know if you’re ever questioning it, my suggestion is to take a look at the purchase order.
Who is on the purchase order? If your company is the one selling the good to someone in Canada or Mexico, but you didn’t produce the item, well, you would still be the one to do the NAFTA certificate of origin.
If you send your goods from one state to another state, and then it goes across the border into Canada or Mexico, if you are selling them to someone in Canada or Mexico, you would complete the NAFTA certificate of origin.
I would also recommend that the original be forwarded to the customer if there are any questions on it, customs is going to ask to see the original.
So complete your documents and run off more than one original after it’s signed and dated, get it to your customer and then keep an original for your technical file.
Canada does not necessarily ask that copies be sent with other paperwork, export paperwork, such as the invoice of a Canada customs invoice.
If you want to send copies, that’s fine. Mexico on the other hand, they want at least two copies of certificates of origin to accompany the other documentation that US companies prepare for their exports into Mexico.
Now the other thing I want to point out, some of you may know this, some of you may not, but the NAFTA certificate of origin is not an entry document. That is not the document that says whether your goods will get in.
In Mexico, there is an entry document, it’s a pedimento, and it is completed by the Mexican customs broker. So you’ve got documentation that you’re going to complete, and a customs broker has a document that they have to complete.
So just keep that in mind and also keep in mind that your certificate that you’ve prepared and it’s supporting documents need to be kept on file for at least seven years.
If you’re dealing with Mexico, I would keep it a little longer just to be on the safe side. Again, the NAFTA certificate of origin, the process for qualifying goods, completing the NAFTA certificate of origin, it is totally voluntary.
Some companies just don’t have the staff power to get this done and some companies do have the staff power. So if you - I think it would be a good thing to discuss with your customer, the NAFTA and whether you are able to qualify your goods and provide them with certificates of origin.
The one thing you don’t want to do, don’t let your customer badger you in to doing a NAFTA certificate, especially if your good that you’re selling to them was manufactured in the United Kingdom.
The UK is not part of NAFTA, so you can’t use a NAFTA certificate of origin for that. You cannot list other countries on a NAFTA certificate in field ten. You cannot do that, you should not do that.
You should not allow someone in Canada or Mexico to complete a NAFTA certificate of origin and send it to you to sign. Don’t let anyone do that. In the NAFTA is the US company, the manufacturer, it’s your decision to make.
And you should do it in a particular fashion and the Power Point that is right here before you, that is the process. You’ve got to know about the items that are in your finished good.
You have to know if there are any foreign inputs, you want their classification number. And once you have all of this and you can you know create a bill of materials where you’re listing all of this kind of information, especially the foreign inputs and their classification numbers.
You should also be keeping your purchase orders and your invoices where bought things. All of these things need to become part of your technical file.
And you should, taking everything into consideration use them, make that decision about going forward and going through the process and qualifying your products.
And then doing that NAFTA certificate of origin, or if it’s a low value shipment put the certification statement on the invoice.
Now low value shipments for Canada it would be anything under $1600 Canadian dollars. In Mexico, anything under $800, that would - those amounts would indicate low value shipments.
You still have to do the same process. You still have to collect, maintain, and hold on to all of your supporting documentation, and keep them for seven years.
It is a legal document. I like to sort of liken it to when it’s time to do your income tax, there are a lot of things, a lot of steps that all of us do to prepare for that day, when you have to do your income tax.
Think about the free trade agreement in a similar manner. Do you have to find classification numbers for things that came from other countries, yes you do if you’re using it in the production of your finished products. Linda, can I have the next?
So last but not least, I’m JoAnn Queen and here are my phone numbers, my extensions, fax number if you want to fax me, and my email address if you’d like to send me an email. Linda?
Linda Abbruzzese: Thank you Joanne.
JoAnn Queen: You’re welcome.
Linda Abbruzzese: Thank you very much. Now we’ll have a sampling of more than 21 questions that were submitted by our participants. Now for those of you who asked questions earlier about will we be able to receive a copy of Power Point presentation slides, yes.
We will have these Power Point presentation slides as well as a copy of this webinar and a transcript in English uploaded on our website at www.export.gov under a link called View Webinars.
And I’ll repeat that again, we will have copies of the Power Point presentation slides, a copy of this webinar, as well as a transcript in English. It will be uploaded on www.export.gov for government, under a link called View Webinars.
Now we are going to answer the questions that have been submitted, and if you’ve left your email address with me when you registered, you can expect also reply via email from JoAnn.
We’ll try to cover as many questions as we possibly can within the hour, and for those questions we don’t, we will definitely get back with you and JoAnn will get back with you with some answers.
But let’s go forward and ask the first question. I have a question here from (Patrick Flannery), he would like to know JoAnn, what are the tariffs or export charges to export to Canada?
JoAnn Queen: Well the tariffs will vary depending upon what you are exporting and its classification number. That’s how it’s presented in the Canadian Customs Schedule.
There are certain items that are duty free right now, but it would be hard to tell you exactly which ones without having the harmonized system number. But it varies and I’ve seen duties going into Canada anywhere from zero, duty free, up to 15, 20%.
And that’s under most favored nation.
Linda Abbruzzese: Okay great, thank you. Let’s go to the next question here, it looks like this question is from also (Patrick Flannery). He would like to know who collects tariffs?
JoAnn Queen: Tariffs and taxes are provided to the importing country. So when you export something into Canada, it is the responsibility of the importer to take care of any duties and taxes that are owed to the Canadian government.
And it may not be paid right then and there, but based on the importer’s tax ID number, there is some way, you know some accounting made of them bringing goods in and that there were duties and taxes assessed.
And the importer at some point in time will have to rectify that accounting. They will have to submit to Canada, to the Canadian government whatever is owed in the way of duties and taxes.
Linda Abbruzzese: Okay, and the piggyback question to that previous question, he would like to know when are they collected?
JoAnn Queen: Well sometimes it is done right away and then sometimes it’s not. I think it has a lot to do with you know the relationship with the customs brokers, and many people work through customs brokers.
So it - believe me, the duties and taxes, if they are owed, they will get paid. It may not be right then and there when the goods tip Canada, but at some point in time, that importer will have to make an accounting.
Just like we do with our income tax, we have to do our paperwork, and if we underpaid we owe the government some money and we’ve got to pay it.
Linda Abbruzzese: Great, thank you JoAnn, this is a very good question. (Marie Kindon) wants to know are key words helpful when looking up an HTS number?
JoAnn Queen: Well I’m not sure about the HTS number because I’ve never used a search engine for that. However, with the Schedule B search engine, yeah, the key words are important. However I’ve noticed that if you don’t have just you know the right key word you may not get many hits.
When you’re - if it’s computers, they will show it as automatic data processing machine. So you may try that key word. Or you could say keyboard, or you could say you know metal tubing or rubber tubing or just use tubing.
So yes, key words help greatly.
Linda Abbruzzese: Okay great, thank you. There’s still more questions here, I will continue again with (Patrick Flannery), he would like to know does every item exported to Canada need a certificate of origin?
JoAnn Queen: Only the items that were manufactured in the US, Canada, Mexico, and they qualify.
Linda Abbruzzese: Okay great, thank you. And then his - another question from (Patrick) is, if this is a NAFTA then why are we paying duties to Canada?
JoAnn Queen: Because you - okay. Duties get paid to the country, the importing country. So when - if (Patrick) imports goods into the United States he would pay duties and taxes to the US government. When you export to Mexico, duties and taxes are paid by the importer to their government.
NAFTA eliminated duties, it absolutely did. But there are certain products, apparel, textiles, apparel, food items, cars, they all have duties under MFN. So in order to eliminate those duties for your Canadian and Mexican importer, you qualify these items or you do a NAFTA certificate.
NAFTA includes the three countries.
Linda Abbruzzese: (Juan Medina) has a question, he says how do we find out if our product qualifies for MFN?
JoAnn Queen: You can call the trade information center at 1-800-USA-TRADE, give us the classification number, the Schedule B number, the harmonized number and we can look in the customs schedule for Canada and Mexico and give you an idea of the duty percentage that would be applied.
And we can tell you how to calculate it, the duty.
Linda Abbruzzese: Thank you JoAnn. (Stacy Hinton) has a question, she says in the past we have been charged more by our customs broker when a NAFTA was not completed and sent to them.
If NAFTA is not a requirement, then how can they charge us for a duty?
JoAnn Queen: Well the customs broker is a - they’re not charging the duty. The government charges a duty. If you have a bill, I’m hoping your bill would indicate brokerage fees, duty charge, tax fees, etcetera, etcetera.
That’s the only way to know exactly what you are paying. Right now if - you know when you - as you’re talking about fees, it could be a combination of things. And you know we can explore that further.
Linda Abbruzzese: Okay great. And (Patrick Flannery) has one more question, he would like to know then when he sends things, exports to Canada, what are the specific tariffs charged when he exports to Canada?
I think you’ve covered that based on (unintelligible).
JoAnn Queen: Right.
Linda Abbruzzese: …harmonized tariff number.
JoAnn Queen: Right.
Linda Abbruzzese: Okay, great. We still have some more questions and we’ll try to answer as many as we can.
The gentleman (Juan Medina) also has a question with regarding to transaction value. He says is the transaction value the list price minus any discount?
JoAnn Queen: Okay, it can be. The transaction value is what your customer in Canada or Mexico owes you. So sure, that could be the list price, you know you establish that you’re going to take the list price and give them the discount.
So on your invoice, that’s going to show what they provide to you, what they owe you. But if you’re talking about in figuring out what the, you know the regional value content, then you need to be looking at the transaction value.
Whatever the transaction value is, that’s what you need to be looking at.
Linda Abbruzzese: And then (Jeanette DiGinaro) asks can you please define transaction value?
JoAnn Queen: Transaction value is the amount for something that you’ve sold to someone in Canada or Mexico, and your invoice indicates that importer owes you a certain amount of money.
That’s the transaction value.
Linda Abbruzzese: Okay, great, thank you. We’ll still take a couple more questions here. The next question I have here is from (Greer Bailey), what criteria should a pallet company take into consideration when going into Mexico to export customized pallets?
Any major legal barriers?
JoAnn Queen: Well, okay. If you are selling pallets to someone in Mexico, then what you would be doing is the process. You’re going to go through and get classification numbers for pallets, you’re going to get classification numbers for inputs, foreign inputs.
You’re going to get NAFTA certificates of origin for US inputs. And then you’re going to use the HS number for a pallet and look up the rule of origin and see what the rule says.
If the pallet meets the rule, then okay, it’s NAFTA originating and you complete a NAFTA certificate and send it in to Mexico.
Linda Abbruzzese: Okay, great. (Mark Algar) has a question, what is the company’s responsibility in determining whether raw material is domestic or foreign?
For example, well we purchase minerals (unintelligible) domestic use company which comes from petroleum. But it is known that not all petroleum comes from US sources.
How does one determine NAFTA content or does one even need to do so?
JoAnn Queen: Okay, so no. My understanding is we’re talking about an input…
Linda Abbruzzese: We’re talking about raw material, he’s trying to determine…
JoAnn Queen: Right, an input that is obtained from another US source and so and the question had to do with okay so what is the company’s - okay. If your company decides that they’re - you’re going to go with NAFTA and you’re going to work the process, your finished good is your finished good.
But you’ve got inputs that you have to account for. And if that means calling up the supplier or the producer of that input, that’s what you have to do.
And just point blank ask the producer, is this a foreign material? Is it a foreign input? Or is it US? If it’s US, then ask that producer for a NAFTA certificate of origin if they have qualified whatever that input is.
Linda Abbruzzese: Okay great. Thanks JoAnn. Another question here from (Deb Latrelle), if we have several different types of items going on one shipment, do we have to have different classifications for each one?
JoAnn Queen: Yes, I mean if you have five different products, then absolutely you’re going to have five different classification numbers. Absolutely, they’re going to be different classification numbers.
You know you can’t just say apparel and then - or list different pieces of apparel, and then you just take one classification number for all of it.
Because everything pretty much has a classification number. And if we’re talking about apparel, cotton shirts have a classification number that’s probably going to be a little different from a cotton dress, or a woman’s dress.
Or bib overalls will be different. So whatever your products are, each item has its own classification number and that is what is going to show up on the NAFTA certificate of origin.
The other thing is this. Absolutely everything you are selling goes on the invoice. Only US made NAFTA originating goods that qualify will show up on a NAFTA certificate of origin.
And so each one of those things needs its HS number to be on that NAFTA certificate of origin.
Linda Abbruzzese: Okay, great. (Doug Page) has a good question, so who monitors their certificate of origin for correctness? For (correctiveness)?
JoAnn Queen: Each company.
Linda Abbruzzese: So each company, or is it - is the customs broker that also looks at…
JoAnn Queen: Each company who decides that they’re going to take a look at free trade agreements and work the process and qualify their goods, the company is responsible for monitoring you know information about your product.
Classification numbers for that product, whether inputs that go into that product are foreign or come from US companies, getting documentation, if anything changes the company is responsible for updating the NAFTA certificate.
If you are making a change that somehow changes that item and maybe it no longer qualifies.
Linda Abbruzzese: But if for some reason it’s incorrect, it goes through customs, it’s incorrect, who then - who corrects it? Does it come back to the company?
JoAnn Queen: Well, usually what happens if a customs broker in Canada or Mexico looks at the document and they see incorrect information they will definitely send it back and say I’m sorry, this is incorrect, it’s not preference criterion A.
Or you don’t have the right classification numbers for the different products. Or they’ll say I’m sorry but this is not a good enough description.
Now if you’re talking about when you really do something egregious, and the actual customs agent decides to audit some NAFTA certificates of origin and yours is one of them, then if they find something wrong, they may or may not you know tell you to fix it.
You’re supposed to be monitoring that and staying on top of that. They’re - you know they’re going to pull a sample of certificates of origin, they’re going to send you something to fill out.
And if you don’t fill it out correctly or if you can’t answer the question, or if you indicate you have no technical file, no supporting documentation, then the customs people, the customs agents, you know the customs authority, they’re going to make a determination, your goods don’t qualify and your NAFTA certificate is invalid and then possibly fines and penalties be levied.
Linda Abbruzzese: Okay great. We still have more questions, which is great, and they’re really good questions, so I’m going to ask you more questions JoAnn…
Joanne: They are good questions.
Linda Abbruzzese: ….if I can still continue because I think this is - these are really good. (Jeanette DiGinaro) asked what is considered then a low value shipment?
JoAnn Queen: Fifty dollars, $200.
Linda Abbruzzese: Is there a limit to what is considered a value shipment?
JoAnn Queen: Low value - Canada, under $1600 Canadian dollars, Mexico, $800.
Linda Abbruzzese: Okay, great. Thank you. Another question here is from (Cindy House) it says is there a (mini-items) for the NAFTA replacement parts for the main manufactured item?
Can I add my own list and put parts to say see attached list?
JoAnn Queen: Yeah, I mean if you’ve got a - well if you have a long list, the only problem that I could envision your list isn’t necessarily set up the way like the NAFTA certificate of origin is.
I mean if your list is set up that way, then I don’t see where that would be a problem, because the NAFTA certificates of origin aren’t very long. But there are continuation sheets.
Linda Abbruzzese: Okay, where do you get continuation sheets?
JoAnn Queen: From the Customs and Border Protection website.
Linda Abbruzzese: Okay, do you have that - do you know what that is, yeah, what is that?
JoAnn Queen: Yeah, it’s www.C as in Charlie, B as in boy, P as in peter .gov.
Linda Abbruzzese: And can you repeat that?
JoAnn Queen: Yeah, the website is www.C-B as in boy, P as in peter, .gov.
Linda Abbruzzese: Okay great. I’ll continue on with another question here from (Sal Berrigan). He would like to know how do we get HS numbers from products bought from vendors, or do we only provide for products produced by our own company?
JoAnn Queen: Well if you know whether you manufacture a product or some other US company manufactures a product, you know the harmonized numbers are going to be needed.
So if you buy from another US manufacturer, you could certainly request that they provide it, because they may be exporting, you know these items and they may know what the - you know what the classification number is that they used.
So you could use that, and if you get classification numbers from somewhere and you want to check them out, you can always you know go on the Schedule B, go to the Schedule B portion of the census website and check them out, you know make sure that you know you agree with the classification number.
I mean it’s nothing worse to put your products down, put a classification number and come to find out the number you’re using is for jams and jellies, but you’re shipping rubber hosing.
Linda Abbruzzese: That’s a very good example. Okay, that’s a good example. Okay, good. (Linda Kozesowski) has a question. This is a good question, should extra zeros be added after first four to six digits on the harmonized tariff classification number?
Canadian customers are requiring a ten digit.
JoAnn Queen: Okay. Canada, Canada does have a ten digit harmonized code. And you can find that on their website. If you go on their website and you get that ten digit number, you may put those ten digits on your commercial invoice.
On the NAFTA certificate of origin, you would only use the first six digits. But the ten digit Canadian HS code, absolutely can be - you can use that on your commercial invoice.
Linda Abbruzzese: Okay. Can you spell the name, this is from (Tracy Detero), can you spell the name of the Mexican entry document?
JoAnn Queen: P E - P as in Peter, E as in Edward, D as in David, I, M as in Mary, E as in Edward, N as in Nancy, T as in Tom, O as in Oscar.
Linda Abbruzzese: And how do you say that?
JoAnn Queen: And it’s longer, it’s - I know it’s something, you know it’s in Spanish and it may have a couple more words, but I guess I just kind of shortened it to pedimento.
Linda Abbruzzese: Okay, and then could you repeat that again?
JoAnn Queen: Pedimento - P-E-D-I-M-E-N-T-O. And it’s in Spanish, I don’t know Spanish and it may be a little longer, but that is the entry document that the Mexican Customs broker has to prepare.
Linda Abbruzzese: Okay good, thank you. (Jason Fujoka) has a question, he says he exports computer equipment to Mexico and Canada. How can he determine if this qualifies as originating in the United States?
JoAnn Queen: Well right now, computer hardware and software going into Canada, they have no duties under MFN. Don’t worry about NAFTA.
Linda Abbruzzese: Wonderful.
JoAnn Queen: I’m not sure about Mexico. But if you have classification numbers, we - you know you can call the 800 number here and we could look that up.
But there are no duties on hardware, computer hardware and software going into Canada, and I would suspect pretty much the same for Mexico.
But keep in mind Mexico also has a customs processing fee, the only way you eliminate that is with a NAFTA certificate of origin.
Linda Abbruzzese: Thank you. (Cindy Lewis) has a question. On the harmonized tariff schedule under quote rates of duty, could you please explain the three columns?
JoAnn Queen: Well we - because our focus is on exporting, we really don’t look at the harmonized tariff schedule. But I think what you’re talking about is like maybe a general and special and maybe preferential.
And so the general may be akin to most favored nation, and the preferential may be where you would find the free trade agreement. So - and also keep in mind the harmonized tariff schedule of the United States, that - those numbers are for imports, goods coming into the United States.
So if we - okay we have a free trade agreement with Canada, Mexico, Chile, Australia. So when those goods come into the US, if they qualify, you would look in the preferential column.
If they don’t qualify then you would probably use the general column, and if there’s a special column that may refer to least developed countries or something like that.
Linda Abbruzzese: Okay great. Well we’re still getting more questions, this is very good, I hope we can still answer them.
We’ll put about five more minutes into this.
JoAnn Queen: Okay.
Linda Abbruzzese: The question I have here, it says here, this is from (Bill Chandler). As a producer, can he complete the certificate and indicate unknown in the exporter field?
JoAnn Queen: No, don’t - see I would never use unknown for anything. It’s - you know I think it’s better because we’re talking about your company as the producing company completing NAFTA certificates because your items qualify.
And you would want - I would think you would want to have a record of okay, what was the US company that you provided that NAFTA certificate to?
And so if you say unknown, that to me would kind of raise my eyebrows. I’m not sure what the reason would be for doing that.
Linda Abbruzzese: Okay. (Leanne Pacheko) has a question. For item number eight on the NAFTA certificate of origin, please explain what number one means, or oh I’m sorry, No one means.
JoAnn Queen: Okay. No one, means, I’m not the producer, but I have personal intimate knowledge that the good qualifies. No one also means audit me first. No two is I’m not the producer but I know it qualifies because I have some other written representation from the producer indicating that it qualifies.
The best is No three having that NAFTA certificate of origin from the manufacturer is the best document to have.
Linda Abbruzzese: Okay thank you. Then (Deb Latrelle) would like to know why do we have to figure the RVC, why can’t we use our net sales price?
JoAnn Queen: You cannot use - okay, I’ve not seen anything in NAFTA that would indicate to me that the lawyer said you can use your net sales price. I just haven’t seen that.
And I guess I would need to know a little bit more about the net sales price, because I’m just not sure what exactly that means to the individual asking that question, so let’s talk some more about that.
Linda Abbruzzese: Okay, thank you. (Joe Stabline) has a question, why not five years for retaining records? Why seven years?
JoAnn Queen: Well for - it’s you know - and see, now I’m trying to answer for the customs authority or you know governments of other countries, but you know I would say that maybe it has to do with the governments wanting to have maybe a little more time to take a look at certificates, NAFTA certificates of origin that their importers are using and saying oh these goods qualify.
I’m not really - you know I’m just not really certain why that is, but…
Linda Abbruzzese: I’m sorry, I’m sorry to interrupt, (Joellen June) says that under the US export regulations, they say that documents are now only held up for five years, two on site and two off site.
So NAFTA…
JoAnn Queen: Well we’re talking about you know documents, you know a document that’s being sent into Canada and Mexico.
Linda Abbruzzese: Okay, so it’s different from US export regulations.
JoAnn Queen: Well, I mean it’s my understanding that the US is doing the same, and I don’t know what you know the export regulations are, are they - have they been updated?
Linda Abbruzzese: Yes, because it has been said now it’s five years. So you if you just wanted to find out why NAFTA is seven, for seven years.
JoAnn Queen: But okay, all right. We need to talk some more about that because I guess I need more information about what we’re talking about. Are we talking about in general, or are we talking specifically about free trade agreements.
Linda Abbruzzese: Okay great, thank you. A couple more questions here, (Tracy Hindon) says in the past we’ve been charged more by our customs broker when a NAFTA was not completed.
JoAnn Queen: Oh I had that one.
Linda Abbruzzese: Huh?
JoAnn Queen: I had that one.
Linda Abbruzzese: Okay. So how can they charge us a duty if it’s - NAFTA is not a requirement?
JoAnn Queen: Well okay, the fact that NAFTA is not a requirement, I guess I’m not really sure what you know the question - but okay. NAFTA is not a requirement. It is not a document used to get products into Canada.
It’s not an entry document. It eliminates duties. I don’t know - you know and I don’t know if duties are being charged or if these are brokerage fees.
Linda Abbruzzese: Okay.
JoAnn Queen: I don’t know, but if that item has a duty on it, and there’s no NAFTA certificate of origin, then the duties are charged.
Linda Abbruzzese: Okay. Okay, and we’ll go through our last question, (Fess Tomei), excuse me, can you clarify the term seller? For example if the seller is a distributor in the US and not a producer or export of the goods, do they have the ability to complete and forward a NAFTA certificate to their US customers?
JoAnn Queen: Linda, give me that question again.
Linda Abbruzzese: Can you clarify the term seller? For example if a distributor in the United States and not a quote producer or quote exporter of the goods, do they have the ability to complete and forward a NAFTA certificate of origin to their customers, to their US customers?
JoAnn Queen: To the US customers?
Linda Abbruzzese: Yes.
JoAnn Queen: Well I would say no, you know if they’re not the manufacturer, then they would have to do like anyone else, they you know go to the manufacturer that they get the goods from and ask for a NAFTA certificate of origin.
I’m assuming this seller, distributor maybe doesn’t want everybody to know who they get goods from, I don’t know, but they could certainly get the same proof, you know get a NAFTA certificate of origin indicating that what they’re selling is NAFTA originating
And then do a NAFTA certificate of origin for a company in the US that they sell product to and then that company maybe is going to sell into Canada or Mexico.
But I mean you know there is sort of like - I mean there’s a paper trail. You know the seller or distributor, or the seller exporter, none of them are saying we’re the producer, we know what qualifies, here’s a NAFTA.
It’s all based on what was obtained from the actual manufacturer.
Linda Abbruzzese: Okay great. Well thank you JoAnn.
JoAnn Queen: You’re welcome Linda.
Linda Abbruzzese: And everyone, I’m afraid that is all the time we have right now for questions, and remember for those of you who’s questions we weren’t able to answer, you can expect a reply via email from JoAnn.
Also for questions that occur to you after this webinar, please do make a note of the contact information on your screen. You can contact JoAnn Queen at any time so please take a moment to write down her contact information.
Also please do check out the website at www.export.gov for more information on NAFTA and other upcoming information and thank you everybody for joining us for this wonderful webinar on NAFTA documentation.
Please check your email boxes for more information on upcoming webinars. Thank you and good bye.
JoAnn Queen: Thanks Linda.
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