Introduction to NAFTA (overview of 3 new FTA s)
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1 Introduction to NAFTA (overview of 3 new FTA s) NASBITE International Conference Albuquerque, NM April 11, :15 a.m. - 12:30 p.m. Importer/Exporter Responsibilities It is the importer/exporter s responsibility to be aware of and comply to, all existing and future regulations of any and all U.S./Canadian/Mexican government agencies controlling NAFTA imports/exports within the NAFTA territories. Every effort is made to ensure that the information presented is current and accurate. I assume no liability or responsibility for the application of the information presented, or any changes, updates, additions or corrections that may exist at the time of presentation. This training is not intended as legal advice or legal guidance. You should consult with an attorney to obtain legal advice. No portion of this material maybe copied or distributed without the express written permission from Mike Allocca. 1
2 Table of Contents What is NAFTA Overview of the 3 new FTA s Steps to determine if your products qualify Originating material Rules of Origin /Annex 401 Preference criteria Examples/NAFTA Resources Summary What is NAFTA Free trade agreement with CA,MX,US Effective Jan 1, year phase in period (free trade on all eligible goods by end of 2008) 1 st agreement that allows other governments customs officials to come into USA 2
3 S. Korea - US FTA Oct 21, 2011 President signed legislation approving agreement. March 15 th,2012 went into effect. 95% of US exports of eligible consumer/industrial products to S. Korea will become duty free within 5 years; if products meet rule of origin Remaining tariffs phased out over 10 years Colombia - US FTA Oct 21, 2011 President signed legislation approving agreement. May 15 th, 2012 went into effect. 80% of US exports of eligible consumer/industrial products to Colombia will become duty free immediately; if products meet rule of origin Remaining tariffs phased out over 10 years 3
4 Panama - US FTA Oct 21, 2011 President signed legislation approving agreement. Oct 31 st, 2012 went into effect. 87% of US exports of eligible consumer/industrial products to Panama will become duty free immediately; if products meet rule of origin Remaining tariffs phased out over 10 years What is NAFTA Free trade agreement with CA,MX,US Effective Jan 1, year phase in period (free trade on all eligible goods by end of 2008) 1 st agreement that allows other governments customs officials to come into USA 4
5 NAFTA Benefits Benefits the importer, reduced or duty free goods. No MPF from Canada for NAFTA goods Can make the exporter more competitive then other non-participating countries 345% increase in trade among the 3 countries. Increase market access within each country. Saves your client a step if it is an intermediate product Copyright 2008 Mike Allocca. All 5
6 Determining if your products qualify Step 1 1. Should you be filling out a NAFTA certificate? 2. Determine your proper HTS classification for each item. 3. Look up the duty rate, if any, in country of destination. Steps to Classify your products with the correct HTS code 1) You must use the GRI- General Rules of interpretation mandatory by law 2) You must read the chapter/section notes mandatory by law 3) Strongly recommend you use the CROSS- not mandatory but should be 4) Strongly recommend you consider purchasing the (EN) Explanatory Notes to the WCO not mandatory but should be 6
7 Sample Canadian Import Database Copyright 2008 Mike Allocca. All Looking up Duty rates 7
8 Determining if your products qualify Step 2 4. Look up definitions of originating/ nonoriginating material. 5/6. Determine if you are or are not the mfg and have supporting documentation. 7. Look up the specific rule of origin for each of your products. (annex 401) 8
9 Rules of Origin Websites Panama- Rules of origin oad_file527_10897.pdf Colombia Rules of origin pload_file13_10153.pdf S. Korea Rules of origin d_file680_12704.pdf Examples Electric train set - Tariff shift Wooden Furniture Tariff shift & RVC Formulas for RVC Transaction Value/ Net Cost for NAFTA only 9
10 Determining if your products qualify Step 3 If you meet each of the rules of origin for Colombia, Panama and Korea FTA s notify your customer in writing that your product is eligible (there are NO official FTA forms or certificates for these (3) three FTA s. However an unofficial form does exist.) Record keeping requirements. (5 years) Determining if your products qualify Step 4 If you meet each of the rules of origin, begin to fill out a NAFTA certificate. Determine what is your correct preference criteria. Be aware of blanket NAFTA s, DeMinimis Rule/Fungible goods rule. Record keeping requirements. Copyright 2010 Mike Allocca. All 10
11 Common Errors to avoid when declaring eligibility Use 1 st (6) six digits of HTS code only There is no official certificate- do not use an old NAFTA form for the (3) three new FTA s There are NO preference criterion (letters A-E) like under NAFTA There is NO Net cost or transaction value like under NAFTA. They are called the build up and build down method. Country of origin (2) two choices per certificate Other FTA s 14 FTA s in effect currently covering 20 countries. 5 FTA s in negotiations Copyright 2010 Mike Allocca. All 11
12 14 US Free Trade Agreements Currently in effect covering 20 countries 1. Australia 2. Bahrain 3. CAFTA (6 countries + US) 4. Chile 5. Israel 6. Jordan 7. Morocco 8. NAFTA (2 countries + US) 9. Oman 10. Peru 11. Singapore 12. Korea 13. Colombia 14. Panama NAFTA Resources Dept of Commerce - Trade Information Center CBP HTS numbers NAFTA Interactive Certificate of Origin Office of NAFTA & Inter-American affairs Formal training programs/ Trade consultants 12
13 Summary 1. Create a FTA Team. Get a Team Leader. 2. Begin determining qualifications whenever you source new/existing products. 3. Ask, does an FTA make sense for your business? 4. Continually ask for sourcing changes from your suppliers. 5. Review your FTA policy, procedures, training as needed. 6. Learn about other FTA s as they are implemented Thank You Allocca Enterprises, Inc. Mike Allocca mallocca@alloccaenterprises.com 13
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