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A Canada Customs Invoice or Commercial Invoice is require

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Title: A Canada Customs Invoice or Commercial Invoice is require


1
The Importance of NAFTA in an Era of Increased
Compliance
Presented by Ron Ubels A A Contract Customs
Brokers Ltd. in partnership with U.S. Commercial
Service.
2
The Customs Clearance Process and NAFTA
NAFTA does not allow for the unchecked movement
of goods into Canada
The Customs Clearance Process
Order in Council (OIC) Shipments with a value of
CDN 20.00 or less
Low Value Shipments (LVS) Courier shipments
where the value is greater than CDN 20.00 but
less than CDN 1600.00
High Value Shipments Any shipment valued at more
than CDN1600.00 courier and other modes of
transport, require formal clearance before
release. There are a number of Customs
initiatives that can expedite the clearance of
these shipments.
A Canada Customs Invoice or Commercial Invoice
is required to clear goods through Customs.
The NAFTA Certificate of Origin will not expedite
your goods through Customs or delay the process
The NAFTA Certificate is a post release document..
3
The NAFTA Certificate of Origin
Only importers who possess a valid Certificate of
Origin can claim preferential tariff treatment
  • Low Value Shipment requirements For goods which
    are valued at less than CDN1,600.00, customs
    will accept an informal statement of origin which
    may be handwritten, typed or otherwise indicated
    on the paperwork.

4
The NAFTA Certificate of Origin (Continued)
Example of statement STATEMENT OF ORIGIN FOR
COMMERCIAL IMPORTATIONS OF LESS THAN CDN
1,600.00 I certify that the goods referenced in
this invoice/sales contract originate under the
rules of origin specified for these goods in the
North American Free Trade Agreement (NAFTA), and
that further production or any other operation
outside the territories of the Parties has not
occurred subsequent to production in the
territories. NAME________________________________
__________________________________ TITLE_________
__________________________________________________
_______ COMPANY___________________________________
___________________________ STATUS
EXPORTER________PRODUCER__________OF THE
CERTIFIED GOODS TELEPHONE_________________________
FAX________________________________ COUNTRY OF
ORIGIN_________________________________ (For
purposes of determining the applicable
preferential rate of duty as set out in Annex
302.2, in accordance with the marking rules or in
each Party's schedule of tariff elimination.)
5
The NAFTA Certificate of Origin - (Continued)
  • High Value Shipment requirements For goods that
    are valued over CDN1600.00, a formal NAFTA
    Certificate is required 
  • NAFTA Certificate per shipment
  • Blanket NAFTA Certificate covering one calendar
    year

6
The Importance of the NAFTA Certificate
Why does it matter? Its all duty free anyway,
right?
  • Importers using an invalid NAFTA Certificates of
    Origin, will be denied NAFTA origin duty free
    status, and duties will be applied retroactively.
    Duty rates will apply, based on the
    classification number declared at time of import.
  • Exporters are responsible for determining
    qualification under NAFTA, and for completing an
    accurate certificate. The importer of record is
    ultimately responsible for un-remitted duty and
    GST on imported goods, as well as applicable
    penalties.
  • Periodic Verification Audits With the
    introduction of Periodic Verification Audits by
    Canada Customs, NAFTA Certificates are coming
    under greater scrutiny.
  • AMPS (Administrative Monetary Penalty System)
    AMPS was introduced in the fall of 2001 as a
    penalty regime to be used in case of intentional,
    or negligent misclassification, where there is no
    difference in rates between the MFN rate and the
    NAFTA rate (UST).

AMPS imposes a graduated corrective approach,
starting with warnings and escalating to higher
penalties if non-compliance continues.
7
NAFTA Article 401 The Rules of Origin
For a good to originate it must meet the
requirements set out in the Rules of Origin -
Article 401 of the NAFTA Agreement
  • The NAFTA grants benefits to a variety of goods
    from the region (Canada, United States, and
    Mexico). For a good to originate, it must
    meet the requirements set out in the Rules of
    Origin Article 401 of the Agreement.
  • Within the context of NAFTA the words origin,
    originate, or originating are used differently
    than in the context of determining country of
    origin.

8
NAFTA Article 401 The Rules of Origin
(Continued)
  • Article 401 of NAFTA defines originating in four
    ways
  • Wholly obtained or produced in the NAFTA region 
  • Goods produced in the NAFTA region wholly from
    originating materials

Goods taken from the seabed, the soil or the air
in the NAFTA territories
  • Goods meeting the Annex 401 origin rule
  • Unassembled goods, and goods classified with
    their parts, which do not meet the Annex 401 rule
    of origin, but contain 60 regional value content
    using the transaction method, or 50 using the
    net cost method

Goods can originate in Canada, Mexico, or the
United States, even if they contain
non-originating materials, as long as the
materials satisfy the rules of origin specified
in Annex 401 of the Agreement
9
NAFTA
The Keys to a True and Accurate Certificate
10
Tariff Classification
If your goods are initially misclassified, all
work done to establish eligibility will be
meaningless.
  • The rules of origin ensure that parts and
    materials that do not originate in the NAFTA
    territory undergo a sufficient amount of
    processing which then transforms into qualifying
    products.
  • The rules of origin are based on tariff
    classification, therefore it is important that
    you have the correct HS tariff classification for
    the finished product, and any non-originating
    parts and materials.
  • In most cases the HS tariff classification is
    required to the six digit level only. For the
    purposes of the Rules of Origin, it is important
    to understand the structure of the tariff.

Example Tariff classification 2007.99 20 -
First two digits are the chapter 2007 - Third
and fourth digits are the header 2007.99 - Fifth
and sixth digits are the subheader
11
Tariff Classification (Continued)
Example 1 Tariff Change   Strawberry jam is
manufactured in the United States from sugar that
is the product of Jamaica, and strawberries that
are the product of Mexico.
The tariff of the finished product, Strawberry
Jam is 2007.99   The tariff for the sugar
(Jamaica)  1701.99
The tariff item for the strawberries does not
need to be determined, since they originate in
one of the NAFTA territories. The rule of origin
for tariff 2007.99 reads as follows 20.01
20.07 A change to heading Nos. 20.01 through
20.07 from any other chapter. Since the sugar
(Jamaica), is from outside of headings 20.01
through 20.07 the jam is originating and
qualifies under the NAFTA duty free tariff.
12
Tariff Classification (Continued)
Regional Value Content   As well as a required
tariff change, the specific rules of origin may
ask that a Regional Value Content (RVC) be met.
The RVC, which is always expressed as a
percentage, may be determined by using one of the
following two formulas   RVC Transaction
Value Value of Non-Originating Materials X
100 Transaction Value
OR   RVC Net Cost Value of Non-Originating
Materials X 100 Net Cost
  • It is the exporters choice to use either the
    Transaction Value or Net Cost
  • The transaction value must be at least 60 of the
    value
  • The net cost must be at least 50 of the value

13
Tariff Classification (Continued)
Example 2 Regional Value Content   Goods of
tariff (subheading) 8703.10, are shipped to
Canada from Mexico. The transaction value of the
goods is 3,600.00 the net cost of the good is
3,500.00 and the value of the non-originating
material is 1,495.00.
The Specific rule of origin for 8703.10
states 8703.10 A change to subheading No.
8703.10 from any other heading number, provided
there is a regional value content of not less
than
  • 60 percent where the transaction value method is
    used, or
  • 50 percent where the net cost method is used

14
Tariff Classification (Continued)
Assuming the first specific rule of tariff change
has been met, the RVC calculation is as follows
Transaction Value   RVC 3600.00 - 1495.00 X
100 2105.00 X 100 58
3600.00                3600.00
Must be at least 60, so it doesnt qualify
under this method
Net Cost
RVC 3500.00 1495.00 X 100 2005.00 X 100
57 3500.00
3500.00
Must be at least 50, so the goods qualify under
this method
15
Determining Origin Criteria
All goods which qualify under the NAFTA rates of
duty, must fall into one of six criteria (must be
indicated on field 7 of the Certificate of
Origin).
Criterion A Goods must be wholly obtained or
produced entirely in the territory of one or more
of the NAFTA countries. No foreign materials.
For goods of Criterion A, there is no tariff
change or Regional Value requirements that must
be met.
Criterion B Goods which are produced entirely
in Canada, the United States, or Mexico, and
satisfy one of the rules set out in the annex 401
of the Agreement (change in tariff or regional
value content requirements or combination of the
two).
Criterion C Goods must be produced entirely in
the territory of one or more of the NAFTA
countries using only originating materials. In
this case some of the materials are originating
due to the fact that they have undergone a tariff
and/or RVC.
NOTE Criterion D, E and F are rarely used or
used in very specific cases only
16
North American Free Trade AgreementCERTIFICATE
OF ORIGIN
For confidential reasons always state Available
to Customs upon request if the producer is
different from the exporter. If same as exporter
state SAME if the producer is unknown state
UNKNOWN.
To be completed for Blanket Certificates only
FROM is the date upon which the Certificate
becomes applicable to the good covered by
the Certificate. TO is the date upon which
the blanket period expires. The importation of
a good for which a good for preferential
tariff treatment is claimed based on this
Certificate must occur between these dates.


2
1
Blanket Period
Exporters Name and Address
ABC Exports 1550 Executive Drive San Diego,
CA 92101
D D M M Y Y D D M M Y Y
To
To
0 1 1 2 0 5
From
3 0 1 1 0 6
If the exporter is established as a Non-Resident
Importer show exporter name and address. If
Canadian company is the importer and there
are multiple importers state VARIOUS.
Tax Identification Number
Full legal name and address and the legal tax
ID (employers Id or Social Security) number of
the exporter.
3


4
Importers Name and Address
Producers Name and Address
Available Upon Request
ABC Exports 1550 Executive Drive, San Diego,
CA 92101
Tax Identification Number
Tax Identification Number
17
For each good described in Field 5, state what
criterion (A through F) is applicable. The key
ones used are A, B, or C.
(1) your knowledge of whether the good
qualifies as an originating good
Provide a full description of each good. The
description should be the same as that shown on
the subsequent invoices and be in a generic
language.
For each good described in Field 5, state YES
if you are the producer of the good.
If you are not the producer of the good, state
NO followed by (1), (2), or (3), depending on
whether this certificate was based on
North American Free Trade Agreement CERTIFICATE
OF ORIGIN
Show the name of the Country of Origin (ie US
for originating goods from the US).
For each good described in Field 5, identify the
HS tariff classification to the six digit level.
(2) your reliance on the producers
written representation that the goods
qualify, or
6
8
9
5
7
10
HS Tariff Classification Number
Preference Criterion
Country of Origin
Producer
Net Cost
Description of Goods
For each good described in Field 5, where the
good is subject to a regional value content (RVC)
requirement, indicate NC if the RVC is
calculated according to the net cost method
otherwise indicate NO.
No
US
Strawberry Jam
2007.99
B
Yes
(3) a completed and signed Certificate for
the good voluntary provided by the
producer.
18
North American Free Trade AgreementCERTIFICATE
OF ORIGIN
11
I certify that __ the information on this
document is true and accurate and I assume the
responsibility for proving such representations.
I understand that I am liable for any
false statements or material omissions made on or
in connection with this document __ I
agree to maintain, and present upon request,
documentation necessary to support this
Certificate, and to inform, in writing,
all persons to whom the Certificate was given of
any changes that would affect the accuracy or
validity of this Certificate __ the
goods originated in the territory of one or more
of the parties, and comply with the origin
requirements specified for those goods in
the North American Free Trade Agreement, and
unless specifically exempted in Article 411 or
Annex 401, there has been no further
production or any other operation outside the
territories of the Parties and __ this
Certificate consists of _____ pages, including
all attachments.
To be completed, signed and dated by the exporter
on the date the Certificate was completed.
?
?
?
1
?
Authorized Signature
Company
ABC Exports
Name
Title
Mr. Smith
President
Telephone
FAX
Date
(800) 555 - 0398
(800) 555 - 8300
05/10/00
19
Exporters Responsibilities
NAFTA records must be kept for a period of six
years
  • Exporters or producers that prepare Certificates
    of Origin must maintain records pertaining to the
    exportation for 6 years.
  • Exporters or producers must notify all parties to
    whom the certificate was given of any changes
    that could affect its accuracy or validity
  • Exporters or producers must provide copies of the
    NAFTA Certificate to their own customs
    administration on request.

20
Customs Verification Audits
NAFTA authorizes the importing countrys customs
administration to conduct verification of the
exporter or producer to determine whether the
goods qualify as originating as certified on the
Certificate of Origin
  • Verifications are usually done by questionnaire
    or verification visit
  • Questionnaires are usually sent to the exporter
    or producer, who completed the Certificate of
    Origin and are used to determine if the goods in
    fact qualify.The information should be readily
    available to the exporter or producer as it would
    be the information they used to determine
    qualification under NAFTA before the Certificate
    was signed. If insufficient information is
    available a verification audit will be considered.

21
Customs Verification Audits (Continued)
  • Verification visits are conducted by the
    importing countries customs administration.
  • Before conducting a verification visit, customs
    must provide written notification of their
    intention to conduct a visit to the exporter or
    producer.
  • The exporter or producer can have their customs
    broker present during the audit

22
Customs Verification Audits (Continued)
Simplifying the Canada Customs Invoice
23
Customs Verification Audits (Continued)
Eliminate Additional Documentation
  • The perception that shipping international
    packages can be more cumbersome because of
    documentation requirements is simply that...a
    perception. Done properly shipping
    internationally can be as easy as shipping
    domestically.
  • Use existing documents - The key document to
    clear goods into Canada is the Canada Customs
    Invoice. Using this form can create additional
    work for your shipping department and may in fact
    slow down the shipping process and create
    opportunity for error in the transposing of
    invoice information.

24
Customs Verification Audits (Continued)
Eliminate Additional Documentation cont.
  • This can be replaced by your commercial invoice
    which is usually generated through your computer
    system and is a document that is required on
    domestic as well as international sales. Use of
    the commercial invoice for customs clearance is
    perfectly acceptable as long as the information
    customs require is shown on the invoice. This
    results in very minor changes to your invoice.
  • NAFTA Certificate of - For product that
    qualifies under NAFTA a Certificate of Origin is
    required. A Blanket Certificate of Origin, valid
    for one year, can be completed by U.S. shippers
    and kept on file for goods frequently imported
    into Canada. A Blanket Certificate will
    eliminate the need to provide a certificate with
    each shipment.

25
Customs Verification Audits (Continued)
Eliminate Additional Documentation cont.
  • The following information is required on your
    commercial invoice to make it acceptable for
    clearance through Canada Customs. This can be in
    any format.
  • Vendor
  • Purchaser
  • Importer of Record
  • Description
  • Number of Packages
  • Number of Units in Shipment
  • Unit Price
  • Value
  • Country of Origin
  • Country of Settlement
  • Conditions of Sale

26
Customs Verification Audits (Continued)
Opening Up the Canadian Market Using the Border
as an Advantage to Grow your Business.
27
Customs Verification Audits (Continued)
What is a Non Resident Importer?
  • When you pay all the charges into Canada,
    including any duties and/or taxes you can
    clear the goods into Canada in your name as a
    Non-Resident Importer.
  • You become the importer of record even though you
    are not physically located in Canada.

28
Customs Verification Audits (Continued)
Duplicate Analysis To US Vendors
  • Product sales are the same as domestic. Goods are
    sold on a delivered price basis
  • Makes the border transparent
  • Controls the timely delivery of product
  • Creates a level playing field with Canadian firms
  • Uses the trade process to gain advantage over US
    competitors
  • Eliminates the need for warehouse, distribution
    points
  • Provides complete control over sales, pricing and
    profits
  • Empowers company sales team
  • Unprecedented success at trade shows
  • Opens door to larger retailers
  • Expand the Canadian market

29
Customs Verification Audits (Continued)
Duplicate Analysis To Canadian Purchaser
  • Creates a domestic purchase environment
  • The border becomes transparent
  • Goods are ordered and delivered
  • Easier to compare price with Canadian competition
  • They know the bottom line price to shelf
  • Consistent delivery

30
Customs Verification Audits (Continued)
NRI FAQs
What does it cost? Nothing. All that is
required is to set up an account with a broker
of your choice. Who can become and NRI? Any
firm is eligible. No special requirements. Can
a firm become an NRI for select shipments ? Yes
some firms are NRI just for warranty goods or
commercial. samples.
31
Customs Verification Audits (Continued)
Tools for Canadian Market Success
32
  • Exporters Compliance Program
  • As you expand your business to Canada, being
    customs-compliant is a critical component of any
    successful trade strategy. Ensuring your Canadian
    customers realize a efficient and compliant
    release through customs while taking full
    advantage of trade concessions can come own to
    how you complete your export paperwork.
  • Non Resident Importer Program
  • Have you examined all of your options for
    increasing your companys Canadian market share?
    The Non-Resident Importer Program can help you
    increase sales of your products into Canada. Sell
    your product in a domestic purchase environment
    while virtually eliminating the border for both
    current and prospective customers.

33
  • Consolidated Program
  • As your cross-border package volume grows it is
    important to look at way to streamline your
    processing, improve your time to market and
    create cost savings that can reduce the delivered
    price of your product.

34
  • Direct to Market Program
  • For U.S. companies who import product from
    overseas into the U.S. market and then export
    some of these goods to Canada is it time to look
    at the benefits of shipping direct to the
    Canadian market.
  • Consider the benefits
  • Elimination of the need to pay duty twice (U.S.
    and Canada)
  • Possible reduction in the duty payable when
    entering Canada
  • Product strategically located in Canada to create
    quicker access to market
  • No international freight costs, creation of
    documents or customs issues for each order.

35
Returns Management Program When dealing with
returns in the domestic market most companies
have designed a simple and customized return
program. Unfortunately it isnt always that easy
when dealing with cross-border returns. Having
to deal with customs documentation, arranging
shipping and other uncertainties can create an
unmanageable returns program at best
36
The Importance of NAFTA in an Era of Increased
Compliance
Presented by Ron Ubels A A Contract Customs
Brokers Ltd. in partnership with U.S. Commercial
Service.
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