Navigating the Rigors of NAFTA
The North American Free Trade Agreement (NAFTA) has been the catalyst for many small- to mid-sized U.S. importers to expand their comfort zone and test the waters with new suppliers and customers.
While many large or multi-national importers have processes in place to determine and track eligibility for NAFTA and other special trade programs, smaller importers are often forced to manage these activities with a one- or two-person traffic department. In these circumstances, the challenge of finding an efficient way through the importing process can be difficult and downright frightening.
To help you better navigate the rigors of import/export shipping, a successful NAFTA import strategy should be segmented into three basic processes—information, organization, and communication.
1. Information. The first thing you need to do is gather information to assess whether or not NAFTA works for your company. Do you typically import from a NAFTA-eligible country? Do you pay duties? Do you want to eliminate the payment of duties? Are you willing to make the investment it takes to ensure that you are compliant with Customs regulations?
Various web sites and seminars are available to companies interested in exploring NAFTA opportunities. The best option is to gather information and apply that data against your firm's business model.
If you typically import from Canada or Mexico and are currently paying duties, ask your suppliers if the goods you import from them are eligible for NAFTA treatment. Most suppliers have already analyzed their product line and will know the answer. If the goods qualify, you are well on your way.
You will need to obtain a certificate of origin from your supplier attesting to the source of the goods you plan to import. These certificates are issued on a blanket (good for one year) or transactional basis. If your supplier indicates that NAFTA does not qualify, you will need to understand why, then determine if you should source the material from a different supplier in order to gain the benefits of NAFTA treatment. Or you might want to work with your current vendor and modify the product requirements so that you can take advantage of NAFTA.
Once you have determined that a potential benefit or opportunity exists and that you have validated your vendor's ability to supply you with qualifying material, you can begin the next step—organizing the information.
2. Organization. As you organize the data to support a NAFTA claim, you must ensure that you take all the necessary steps to ascertain compliance with NAFTA and document the process. Record the details of conversations with your vendors about the country of origin of your goods. Collect and retain this information at a part-number or product-level detail.
For example, if you import blue shoes that qualify for NAFTA and red shoes that do not, your records need to clearly reflect this distinction. The description used on your import documentation should describe in detail the products being imported so NAFTA/non-NAFTA distinctions can be made.
As you collect information on the parts you import and begin to develop your internal system of part-number details, ensure that country of origin and NAFTA eligibility are included. Once you've begun to investigate the origin of goods and are able to definitively determine that the product meets NAFTA eligibility requirements, attach this data to your permanent record. This will ensure that you take advantage of the NAFTA treatment on future import transactions.
While developing your internal system—whether it is through a filing cabinet or a database—it is critical that you are able to record your findings. You can organize the information by part number or by supplier, making sure that, whatever system you use, the information can be easily retrieved. This will be an important element if Customs challenges your claim of NAFTA eligibility.
Your internal system for tracking this information should also provide for an annual review of the data elements for a specific part. If the components of products sourced in Canada or Mexico are volatile, you may want to validate the country of origin more frequently.
Also, be sure that your traffic or customs coordinator is aware of product specification changes and can validate NAFTA eligibility when substantive product changes occur.
3. Communication. You've done your homework and organized your data. Now you are ready for the final step. You must communicate your intent to file an entry using the NAFTA benefits or you might find yourself with unexpected duty payments.
Make sure that the documentation used for Customs purposes clearly states NAFTA eligibility. This means speaking with the shipper and ensuring the shipper's invoice is properly completed.
Make sure that you have instructed your Customs broker that NAFTA applies to your imports. The broker should be able to add this data to its systems so that your entries are filed properly. Once your broker knows of your intent, it can alert you if the documentation needed to support NAFTA is not present and it can work with you to ensure you are taking advantage of NAFTA whenever possible.
Ensure that your imports are covered by a valid NAFTA certificate of origin (blanket or per transaction) from the manufacturer of the goods. Blanket certificates typically expire after one year, so make sure you work with your supplier to have a new certificate on file before the old one expires.
NAFTA is a complex agreement that requires interested parties to establish intricate methods to track and record data, especially data related to the origin of the goods under consideration. The end result—"free trade"—is well worth the effort of gathering the information, organizing the process, and communicating the instructions.
But remember, NAFTA declarations are serious business. As the importer of record, it is your responsibility to ensure that the declarations you make are accurate. Penalties for avoiding the payment of duties are stiff.
The steps you take to validate the country of origin and NAFTA eligibility are critical to the success of your NAFTA program.