Nafta Rules of Origin Explained

Since the imported steel used in the manufacture of legs and drawer fittings comes from a heading other than 9403.90, they are considered originating. The drawer legs and accessories are considered original, as the desk does not need to be further qualified. The goods are deemed to have been manufactured exclusively from materials originating in the NAFTA area. NAFTA originating status describes goods that meet the requirements of Annex 401 of the Agreement. Appendix 401, which is now General Note 12 to the U.S. Harmonized Customs Schedule, specifies which goods originate in the Agreement and excludes goods from other countries from obtaining these benefits simply by transportation to Canada, Mexico or the United States. Explanatory Note: For all goods classified under HS headings 1902 to 1905, all non-NAFTA inputs must be classified in an HS chapter other than HS Chapter 19 for the good to qualify for preferential tariff treatment. These bakery goods would qualify for a tariff preference since non-originating goods are not classified in Chapter 19 of the HS. (Flour is in Chapter 11). However, if these products were manufactured with non-originating mixtures, they would not qualify, since blends are classified under Chapter 19 of the HS, the same chapter as bakery products. Once an exporter determines that the exported goods comply with the NAFTA rules of origin, a NAFTA Certificate of Origin must be completed accurately and legibly.

The exporter must then send the certificate to the importer. Although the certificate does not have to accompany the shipment, the importer must have a copy of the certificate on hand before they can apply to customs for the NAFTA tariff preference. Certificates of origin may, at the discretion of the exporter, cover one or more imports of identical goods. You can also consult the CBP Free Trade Agreement Comparison Table (Origination section), which lists the reference documents where rules of origin can be found. “Rules of origin are agreed-upon guidelines that define the regional share of value and/or conversion that must take place to ensure that goods imported from Mexico and Canada are actually produced in the three countries of the trade treaty. This applies if you invoice accessories, spare parts or tools with the goods and the quantities and value are customary in the trade. However, if the goods are subject to a regional value requirement, you must consider the value of the accessory, spare part or tool when calculating the regional value content of the goods as originating or non-originating materials. Some in Mexico, including Francisco de Rosenzweig of law firm White & Case, believe stricter rules of origin for the auto industry will encourage more auto suppliers to migrate to Mexico. Automotive suppliers building new plants in Mexico benefit from both duty-free treatment of their products in the North American Free Trade Agreement region and advantageous labour costs. A good is considered originating if it consists entirely of components and materials that are considered separate products originating in a NAFTA country. The goods are made from materials that may contain non-NAFTA materials, but the materials comply with the NAFTA rule of origin. Opponents of introducing new, stricter NAFTA rules of origin argue that tightening content requirements would increase the cost of producing goods.

These costs would ultimately be borne by the consumer. They argue that higher trade barriers implemented in this way would lead to global economic inefficiencies. The rule of origin for HTS 41.04 is as follows: “A change of heading 41.04 from any other heading, except headings 41.05 to 41.15. In the United States, the exporter is required to retain the original or a copy of the certificate for five years from the date of signature. The importer is required to keep the certificate and all other relevant documents for five years after the importation of the goods. Adequate records of the goods, their materials and manufacture must support the facts alleged in the certificate. Mexican exporters must keep a copy of the certificate for 10 years. Canadian importers and exporters must retain the importer`s certificate for six years from the date of the transaction and six years from the date of signature for the Canadian exporter. Today, rules of origin are set out product by product in the more than three hundred pages of Chapter 401 of the North American Free Trade Agreement. According to sales experts, they are bulky and very complex. Many believe that positive reform and retooling of NAFTA rules of origin should create a single “lower regional value threshold that can be applied uniformly to all products.” This would not only reduce the costs for producers and consumers of goods imported and exported to NAFTA, but also the administrative costs required for guarantees of origin.

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