Updated: The Free Trade Agreement between Canada - US - Mexico, also known as CUSMA/USMCA/T-MEC has been implemented. Please visit our NAFTA 2.0 series for more information.
Completing A NAFTA Certificate Of Origin
The North American Free Trade Agreement (NAFTA) Certificate of Origin can be one of the most difficult documents for Importers to complete. With most documents an importer would simply take the data from their invoice and enter it into their respective fields. But with the NAFTA Certificate of Origin can you use the same document completion philosophy? There is much more to a NAFTA Certificate than just "completing another form".
A quick glance at a NAFTA Certificate, one might assume it is just another form. However, when we read the NAFTA completion instructions, and gather a full understanding of what data is required, we realize there is a lot more to know and complete than many other Customs forms.
The main difference between a NAFTA Certificate of Origin and the aforementioned documents is that all the products you list on this document must qualify under the NAFTA Rules of Origin.
Some fields on the NAFTA Certificate of Origin are fairly basic and you can easily fill them in. The focus of this article is to provide clarification on the less understood areas to raise awareness of their complexity.
Clarity On Complex NAFTA Certificate Of Origin Fields
Field 6: Harmonized System (H.S.) Tariff Classification Number
As emphasized in a previous article, it is very important the H.S. tariff classification is correctly assigned to each product, as the first six digits will determine which of the NAFTA "Specific Rules of Origin" will apply. In order to correctly qualify the product under these Rules, you must be sure the tariff classification is correct. If you are unsure regarding the tariff classification, please contact a customs broker for assistance.
Field 7: Preference Criterion
The completion of the Preference Criterion field is going to depend on where a product was sourced or manufactured, the extent of the manufacturing and transformation process, and/or the source and place of manufacturing for any raw materials. Note that the Preference Criterion chosen for one product might not be the same as for another, and each situation will need to be evaluated on its own merit.
Field 8: Producer
For the Producer field you have 4 options; YES, NO(1), NO(2), and NO(3). The "NO" options of (1), (2), and (3) refer to what you are basing your NAFTA claim on, whether you:
(1) Just know it is NAFTA eligible
(2) Have documentation from the producer that it is NAFTA eligible (other than a NAFTA)
(3) Have a voluntarily provided & accurately completed NAFTA Certificate from the manufacturer
You are advised to go for (3), as this assures the actual producer has done their due diligence in confirming the product they are providing is NAFTA eligible.
Field 9: Net Cost
In order to properly complete this field, you will need to understand the NAFTA Specific Rule of Origin applying to a product to determine if Regional Value Content is a factor and whether the Net Cost method will be used. In this field, you will either show "NC" if the Net Cost method was used, or "NO" (all other situations). It is important you never place a dollar amount in this field, as this indicates to Customs you did not read the instructions for the Net Cost field.
Field 10: Country Of Origin
To start, the Country of Origin must be Canada, the U.S. or Mexico. Another common mistake is for someone to automatically assume that just because certain products are made in Canada, the U.S. or Mexico they qualify for NAFTA. In fact, if they do not qualify, they must not be listed on this document. Sound complicated? In some cases, it is straight forward, but in many others (for example, products with many foreign components), NAFTA qualification can be a difficult task. The point we are making is for companies and individuals to realize that much care needs to be exercised. Before signing your NAFTA Certificate of Origin, please read the disclaimer at the bottom of the form so you understand your responsibilities.
NAFTA Certificate Of Origin Repercussions
Let's say we have a NAFTA Certificate that has all the boxes completed with what appears to be correct data. We clear and account for the goods and bill you. No duty is paid. Then 11 months later or more (up to 4 years after the date of release), Canada Border Services Agency (CBSA) decides to audit your NAFTA. They will go to the exporter with a NAFTA Verification questionnaire. Let's say CBSA comes to the decision that the goods actually do not qualify. The importer will be held responsible. You get the penalty applied to your importing profile and you have to remit the unpaid duty with interest. So keep that in mind when you see NAFTA Certificates that are not properly completed. It is a red flag that the supplier actually has no clue whether or not the goods qualify. It should be noted that similar rules apply for any Certificate of Origin relating to a Free Trade Agreement (FTA). For instance, if you grab a copy of a Canada-Chile FTA Certificate of Origin, you will notice many similarities.
Still need clarity over the completion of the NAFTA Certificate of Origin, or whether or not your goods qualify under NAFTA? If you require advice or have questions related to NAFTA, please contact our expert Trade Advisor for experienced trade advice.