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Make NAFTA Work For You In 2015

The terms of the North American Free Trade Agreement (NAFTA) can be an important tool in your savings initiative toolbox. Learn how to make NAFTA work for you in the New Year by utilizing the below tips from our NAFTA experts.

Understand the Agreement
Savvy businesses have effectively used NAFTA to save money on transportation costs for 20 years.  The agreement provides preferential status to qualified products that are shipping from one NAFTA country to another, effectively eliminating duty upon importation. If a company is buying (or selling) goods that cross borders between North American countries it may be in the best interest of that company to understand the ins and outs of the agreement, so it can explore the applicability of NAFTA. The end result could be savings for the company or a sales incentive for their customer. 

Purchased Parts
Equipping your company with the knowledge that the agreement only extends to products originating in the territory of a NAFTA party, taking stock of your supply chain, and obtaining supplier NAFTA certificates are great ways to kick off NAFTA savings initiatives. 

The end of quarter 3 typically marks the beginning of the NAFTA solicitation season for the upcoming year.  NAFTA solicitation can be a long process so it is important to tackle the project in a methodical way. 
Begin by identifying and reaching out to those suppliers who can fulfill requests for a NAFTA certificate.  Take note of the person’s name and email address, you may have to ask questions about the certificate that they supply later. Keep track of what has been sent and the responses that have been received.  

Produced Parts
Understanding how to properly validate parts for NAFTA is a necessity for manufacturers producing items for sale to clients in NAFTA countries. 

HTSUS General Note 12 provides a breakdown of definitions, applicable rules of origin, and any regional value formulas required for NAFTA validation.  In order for a manufactured part to qualify for NAFTA, the specific rule of origin corresponding to the HTS must be met. 
The customs regulations will also come in handy, as NAFTA information can be found in 19CFR chapter 181.

Review the Certificates
When certificates start pouring in, it’s time to pull out the red pen and make sure that everything is in order. There are a few key elements to a valid NAFTA certificate: 

  1. All fields on the certificate MUST be filled in, including the signature at the bottom.
  2. The blanket period can extend for only one year, minus one day. For example, if the blanket period begins on 1/1/2015 it must end on 12/31/2015.
  3. The tariff classification number in block 6 should match what is on file for the part.
  4. Be wary about using preference criterion “A” in box 7. This is reserved for items that are grown, harvested mined, and should not be used for any manufactured item. 
  5. Pay particular attention to the country of origin in box 10. It is important that the country that is listed in box 10 is a NAFTA country. 

Manage your Brokers
So far we have mentioned the practical steps in NAFTA solicitation and validation. Additional steps taken upon importation will ensure that imports are declared correctly.  

It is important to validate the recordkeeping and NAFTA declaration process of any customs brokers that are declaring NAFTA on entries.  Brokers must declare NAFTA when parts actually qualify and a valid certificate is in hand. It is the importer’s responsibility to ensure that the brokers are following compliant practices. Leaving brokers unmanaged and left to their own devices will greatly increase the risk level of NAFTA imports. 

Brokers should supply a report of entry numbers and part numbers where NAFTA has been claimed. This report can be formulated to keep track of instances where NAFTA is being claimed and the corresponding duty savings. This will also allow an importer to easily identify riskier entries. 

Consult an Expert
NAFTA solicitation, validation, and broker management do not have to be daunting. If you are brand new to NAFTA, need a refresher course, or need a resource to help manage your NAFTA compliance program, Allyn International can help. To find out how Allyn can help make NAFTA work for you contact Global Trade Compliance Leader Danielle Brazil at brazil.d@allynintl.com.

 

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