On March 11, 2013, USTR sent a letter to the US International Trade Commission (ITC) advising the ITC that negotiators from the NAFTA parties reach agreement in principle on the fourth series of proposed modifications to the NAFTA origin rules. Based on this letter, the ITC has opened Investigation No. TA-103-027, Probable Economic Effect of [...]
On March 11, 2013, USTR sent a letter to the US International Trade Commission (ITC) advising the ITC that negotiators from the NAFTA parties reach agreement in principle on the fourth series of proposed modifications to the NAFTA origin rules.
Based on this letter, the ITC has opened Investigation No. TA-103-027, Probable Economic Effect of Certain Modifications to the North American Free Trade Agreement Rules of Origin that will examine the economic impact of these modifications on U.S. trade under NAFTA, total U.S. trade and domestic industries.
This investigation covers a wide variety of articles, including miscellaneous edible preparations; mineral fuels; products of the chemical or allied industries; plastics; rubber and related articles; cork; glass and glassware; copper, nickel, lead, tin, zinc and other base metals; nuclear reactors, boilers, machinery, mechanical appliances and related parts; electrical machinery and related parts; rail locomotives and parts; parts for trailers and semi-trailers; optical, medical, measuring or checking instruments and apparatus; certain furniture; certain toys and games; lighters; and smoking pipes.
There will be no public hearing in connection with this investigation but written submissions for the record are being accepted from all interested parties through June 4, 2013. The ITC expects to submit its advice to the Office of the U.S. Trade Representative by November 12, 2013.
So many negotiations, so little time… As Canada starts working on the second phase of its Global Commerce Strategy, trade experts say that the Harper government has to take a careful look at its strategy for negotiating trade agreements. “Our Government will aim to complete negotiations on a free trade agreement with the European Union [...]
So many negotiations, so little time…
As Canada starts working on the second phase of its Global Commerce Strategy, trade experts say that the Harper government has to take a careful look at its strategy for negotiating trade agreements.
“Our Government will aim to complete negotiations on a free trade agreement with the European Union by 2012. It will also seek to complete negotiations on a free trade agreement with India in 2013. In all international forums and bilateral negotiations, our Government will continue to stand up for Canadian farmers and industries by defending supply management.”
Overly ambitious? What we do know is that these forecasts in the June 2011 Throne Speech have not always matched reality. Negotiations between the EU and Canada have yet to be concluded, and on a recent trade trip to India, Prime Minister Harper was forced to recognize the slow pace of trade talks aimed at boosting trade with the world’s largest democracy. And while Ottawa has officially made its way into discussions concerning a potential Transpacific Partnership, more and more Canadians are adamantly demanding an end to supply management, which is the backbone of much of Canada’s farming industry.
This is the backdrop against which International Trade Minister Ed Fast, last May, mandated a panel of leaders from the business world to advise him on how to proceed in the coming years. He is expected to unveil his new Global Commerce Strategy within the next few months.
The most recent draft of the White Paper on Canadian international trade dates back to 2007. At the time, the persistent deadlock in the Doha round of trade talks signalled a shift away from the multilateral approach, and Canada dove into a series of bilateral and regional negotiations. Those efforts produced a half dozen free-trade agreements with some 10 countries as well as a dozen foreign investment promotion and protection treaties, most notably one with China last year.
So what might the next step be? Should the government continue along the same path? Or has it gone too far, too fast? Should Canada take the time to better gauge its needs and the risks associated with such an intensive agenda? Lawyers and other experts weigh in.
Click here to read the complete article.
Source: Hugo de Grandpré — CBA National
If you are buying products from Mexico or the U.S. and are not getting NAFTA benefits, you should ask why. Tariff re-engineering is a new approach to costing, where more expensive domestic components may, in the long run, make the final product cheaper. The NAFTA Certificate is a complex document that is not easy to [...]
If you are buying products from Mexico or the U.S. and are not getting NAFTA benefits, you should ask why. Tariff re-engineering is a new approach to costing, where more expensive domestic components may, in the long run, make the final product cheaper. The NAFTA Certificate is a complex document that is not easy to navigate, but with some patience and understanding it can help make your product cheaper and more appealing to your customers.
I.E. Canada’s NAFTA webinar will provide not only the basics on NAFTA, but will also investigate some of the more complex parts of the agreement. And a deeper understanding of NAFTA will assist you in making the strategic decisions that can help your business thrive.
Date: December 11, 2012 1:00 pm – 2:30 pm EDT
Cost: $150 (IE Canada Members) | $200 (Non-Members)
Please note that registration for this session will close on December 10th at 7:00 pm EDT.
While U.S. and other companies manufacture in Mexico to save money, it is not wise to skimp on customs compliance, one expert asserts. Jim Clarke is vice president of new business development for FOCUS Business Solutions, Inc., a Michigan-based firm assisting companies in more effectively handling their import processes. “I have been working 18 years [...]
While U.S. and other companies manufacture in Mexico to save money, it is not wise to skimp on customs compliance, one expert asserts.
Jim Clarke is vice president of new business development for FOCUS Business Solutions, Inc., a Michigan-based firm assisting companies in more effectively handling their import processes.
“I have been working 18 years in this program and see how many companies struggle in this area,” Clarke notes. “Resources and expertise – or knowledge they once had to ensure compliance with NAFTA and other free-trade agreement requirements – are no longer at the company,” he adds. “In such instances, companies that manufacture in Mexico need customs assistance.”
Companies manufacturing in Mexico routinely moving items across the border in both directions usually operate smoothly when they have professional assistance in navigating customs, Clarke observes. But it is not uncommon for companies without guidance to issue incorrect tariff classifications for their manufactured goods, or to claim an item qualifies for NAFTA status without proper substantiation. If values of shipped goods are stated incorrectly or other errant information is supplied, it starts to raise red flags with customs personnel.
Most often, audits are a product of recurring errors, Clarke says.
“Usually there is some ability to understand that an investigation is under way; formal information requests will be sent to a company,” he notes. “If a knowledgeable customs specialist is not on staff, sometimes (audit notices) can sit on a desk within the company for a prolonged period of time. The customs service will get annoyed. When this happens, they begin to pay close attention. Sometimes this is how the investigation ball gets rolling.”
The Offshore Group recently spoke with Jim Clarke, vice president of new business development, with Taylor, Michigan-headquartered FOCUS Business Solutions. FOCUS has assisted companies involved in international trade to move their products into and out of the U.S. for the past twenty-five years, and has developed a particular expertise in servicing manufacturers located in Mexico, [...]
The Offshore Group recently spoke with Jim Clarke, vice president of new business development, with Taylor, Michigan-headquartered FOCUS Business Solutions. FOCUS has assisted companies involved in international trade to move their products into and out of the U.S. for the past twenty-five years, and has developed a particular expertise in servicing manufacturers located in Mexico, as well in the rest of the NAFTA region.
During the session, Clarke talks about five challenging issues that confront companies navigating Customs related issues. They include:
• Tariff Classification – It is critical that companies use the correct Customs classification for the goods that they are importing and/or exporting.
• NAFTA Claims – Manufacturers must correctly substantiate claims that their goods are subject to preferential duty treatment.
• Customs Valuations – Parties involved in international trade between Mexico and the U.S. must make sure that they state the value of their merchandise correctly.
• Customs Reconciliation – Importers and Exporters must understand the process by which information submitted to Customs in error can be corrected.
• Audits – Manufacturers must understand what is required to successfully pas audits and examinations conducted by the Customs service.
According to Clarke, “Many times there are very common errors related to U.S.-Mexico trade in the area of Customs. It doesn’t matter what the size of the company is. If importers and exporters don’t have direct knowledge of critical issues or someone on staff that has the experience in this area, they can run into difficulties.”
Click here to listen to the 40 minute podcast.
Source: The Offshore Group
For nearly 80 years, dating back to the Depression-era Buy America Act of 1933, the U.S. government has had protectionist domestic sourcing – or “Buy America” – laws on the books to create jobs, maximize the use of American-made products and ensure that federal tax dollars are reinvested in the U.S. economy. To support the [...]
For nearly 80 years, dating back to the Depression-era Buy America Act of 1933, the U.S. government has had protectionist domestic sourcing – or “Buy America” – laws on the books to create jobs, maximize the use of American-made products and ensure that federal tax dollars are reinvested in the U.S. economy. To support the country’s national security capabilities, “Buy America” laws were expanded in the 1940s to apply to defence spending. In the early 1980s, President Ronald Reagan signed into law a further expansion of “Buy America” for highway and mass transit projects that are funded by federal grants.
As one of his first domestic initiatives, in 2009, President Barack Obama signed the American Recovery and Reinvestment Act (“Recovery Act”), a sweeping $787-billion plan aimed at stimulating a devastated economy still reeling from the catastrophic meltdown of the real estate and financial markets the previous year.
The Recovery Act contained a controversial “Buy America” provision that required all iron, steel and manufactured goods used in construction projects receiving stimulus funding to be produced in the United States. This significantly expanded on existing U.S. legislation stipulating domestic preference criteria by widening the scope of products covered to include “all manufactured goods” with respect to any project funded by the Recovery Act.
Pressured by Canadian exporters complaining that the latest “Buy America” measures violated market access exemptions under the North American Free Trade Agreement and were therefore unfairly costing them business and jobs, the Harper government entered into negotiations with the Obama administration that eventually reached a procurement agreement in early 2010 which provided limited relief and access to some Recovery Act projects for Canadian goods. Key to the accord was persuading the Canadian provinces and territories to finally open up their procurement markets to U.S. suppliers by signing onto the WTO’s Government Procurement Agreement (GPA); a multilateral arrangement mandating that member countries provide reciprocal access to federal procurement projects and, in some cases, at the sub-federal level (i.e. states, provinces and cities).
Although the protracted dispute over the “Buy America” provisions effectively scuttled bidding access for Canadian exporters to most Recovery Act projects – funding having already been allocated by the time waivers pursuant to the Canada-US Procurement Agreement were finalized – it was widely assumed at the time that the bilateral accord and new commitments made under the WTO GPA had largely resolved the nettlesome issue of government procurement going forward.
Evidently not. In October 2011, President Obama proposed the American Jobs Act, a massive spending bill designed to inject billions of federal dollars into infrastructure projects such as the renovation of schools, the construction of roads and bridges and improving transit. Much to the surprise and frustration of the Canadian government and trade community the new bill included the exact same “Buy America” constraints of 2009’s Recovery Act. Continue reading »
Continue reading »
(World Trade Interactive) Mexico is expected to suspend 50% of its retaliatory tariffs on U.S. exports as of July 8 after the U.S. and Mexico signed July 6 a memorandum of understanding resolving their longstanding dispute over Mexican trucks. U.S. officials cast the MOU as an agreement that will ensure roadway safety, create jobs in [...]
(World Trade Interactive)
Mexico is expected to suspend 50% of its retaliatory tariffs on U.S. exports as of July 8 after the U.S. and Mexico signed July 6 a memorandum of understanding resolving their longstanding dispute over Mexican trucks. U.S. officials cast the MOU as an agreement that will ensure roadway safety, create jobs in the U.S. and support economic development in both countries.
Mexico currently imposes tariffs of 5-25% on $2.4 billion worth of goods imported from the U.S. in retaliation for Washington’s failure to allow Mexican long-haul trucks to operate beyond U.S. border zones, as required under NAFTA. In April the Department of Transportation announced details of a new phased-in pilot program that will allow Mexico-domiciled motor carriers to operate throughout the U.S. for up to three years and grant U.S.-domiciled motor carriers reciprocal rights to operate in Mexico for the same period. Read more here.
(DFAIT) Bilateral trade between Canada and Mexico has increased by over 400% since NAFTA took effect in 1994, surpassing $27 billion in 2010. Through the years, Canadian firms secured a strong Mexican presence in various sectors such as banking, aerospace, communication technologies, mining, automotive and advanced manufacturing. However, Mexico has witnessed an increase in violence [...]
Bilateral trade between Canada and Mexico has increased by over 400% since NAFTA took effect in 1994, surpassing $27 billion in 2010. Through the years, Canadian firms secured a strong Mexican presence in various sectors such as banking, aerospace, communication technologies, mining, automotive and advanced manufacturing. However, Mexico has witnessed an increase in violence and insecurity in recent years.
Is this a game changer for trade and investment?
This webinar will look at the insecurity situation; its impacts; and will address how companies can best mitigate risks. Whether you already are active in Mexico or simply considering investment or export opportunities, this webinar will provide important information that will help you adapt your strategies and reduce your exposure to potential threats.
This webinar is organized in collaboration with the Canadian Embassy in Mexico and Multilaten Advisors, a security consulting company.
Learn More About This Webinar, and register here.
Date: Thursday, June 2nd, 2011
Time: 1:00 to 2:00 p.m. EDT (Ottawa Time)
Please register by June 1, 2011.
After the presentation, there will be a 10-minute Q&A period. The presentation will be in English but the speaker will take questions in both French and English. We invite you to provide your questions in advance to email@example.com. Through the Virtual Trade Commissioner, a) the webinar will be made available for on-demand viewing following the live session; b) participants may also download the presentation slides, in both French and English.
For additional information, please email Marie-Pier.Brunelle@international.gc.ca.
Sound advise regarding NAFTA certificates from F. Gordon Lee from Nossaman, LLP
You have noticed that we have posted a number of pieces recently about NAFTA related topics. Why is this such a hot topic for such an old trade agreement? Simple answer is easy pickings for North American Customs Agencies. Because the trade agreement has been around so long now, importers and exporters are getting sloppy and not ensuring that all aspects of compliance related to using a NAFTA declaration are in fact true and supportable, it may have been a decade ago when they created the original NAFTA decalaration, but with globalized supply chains is that still true today?
Here is F. Gordon Lee’s Insight from a recent E-Alert:
The DOC has extended from April 4 to April 18 the deadline for public comments on ways to address unnecessary regulatory divergences…
(World Trade Interactive)
The Department of Commerce has extended from April 4 (not June 1, as originally reported) to April 18 the deadline for public comments on ways to address unnecessary regulatory divergences in North America that disrupt U.S. exports. Methods under consideration include information-sharing agreements, technical assistance, memoranda of understanding, mutual recognition agreements, collaboration between regulators before initiating rulemaking proceedings, agreements to align particular regulatory measures, equivalency arrangements, and accreditation of testing laboratories or other conformity assessment bodies. Comments received will serve as a basis for discussions with the U.S.-Mexico High-Level Regulatory Cooperation Council and the U.S.-Canada Regulatory Cooperation Council.
(Embassy – Anca Gurzu) Even as Canadian and European Union negotiators sit down this week for the sixth round of free trade talks, a series of sensitive issues – both political and technical – are causing delays. A Canadian request for inclusion of a dispute settlement mechanism similar to NAFTA’s controversial Chapter 11 is stalling [...]
(Embassy – Anca Gurzu)
Even as Canadian and European Union negotiators sit down this week for the sixth round of free trade talks, a series of sensitive issues – both political and technical – are causing delays.
A Canadian request for inclusion of a dispute settlement mechanism similar to NAFTA’s controversial Chapter 11 is stalling part of the talks, as the European Commission must obtain an extended negotiating mandate from member states.
Meanwhile, there are fresh accusations that Ontario and Quebec are not ready to open their doors to foreign bidders even as Canada and the EU grapple with how to liberalize services.
A European Commission document dated Dec. 12 states that negotiators “made it clear that [investment protection] is an important negotiating objective for Canada,” and asks the European Council to allow it to hold discussions on this topic, including an investor-to-state dispute settlement mechanism.
This is a controversial provision, also included in the North American Free Trade Agreement, that allows corporations to seek compensation from states if government policies hurt their business interests. It has long served as a lightning rod for critics of NAFTA. Read more here.
A “virtual” apparel manufacturer with globally subcontracted operations inadvertently failed to accurately declare the correct identity and origin
A “virtual” apparel manufacturer with globally subcontracted operations inadvertently failed to accurately declare the correct identity and origin of the finished product upon importation into the US. This oversight ultimately resulted in a demand for duties several months later by Customs of over $70,000, plus penalties and interest. The additional costs imposed were written off as unrecoverable, negating a significant share of the profits earned for the contract in question.
Unpacking the Lessons Learned
A number of issues become evident from this case. The first and foremost is that Vendor relationships are very important in situations like this. Can you imagine having a discussion like this with a vendor who you have a casual or weak relationship with. Strong relationships can allow you to at least have open dialogue about this issue and it’ s direct impact on your bottom line.
The second lesson is that Vendors who are part of the process of delivering a final product on your clients must be part of your trade compliance strategy. In this case the vendor manufactured the product and delivered a finished good for distribution. As an example think of how do you ensure that your vendor is compliant and understands NAFTA determination rules?
One tip we use is to provide a NAFTA indemnification clause for inclusion on purchase orders, below is the text we recommend you use:
This purchase order is conditional upon receipt of a valid NAFTA Certificate of Origin prior to delivery. Vendor to indemnify against all costs and duty arising from misrepresentation or false declaration in the Certificate of Origin.
Of course this raises the issue that perhaps as part of your trade compliance strategy you include not only your trade partner but your legal partner to ensure that the sourcing process you use indemnifies you for problems like in this case.
While not in existence today if we look at the stated future direction of customs agencies around the globe, what we hear is the constant messaging that they all want to share more information with each other to create a supply chain that is focused on the health, safety, and security for their citizens.
In this case the issue was found by CBSA for one importer and by looking back at their database they found this vendor supplied others including the importer in this case study. The did a detailed NAFTA audit with the vendor, determined that the vendor was making a mis-declaration. They knew that the issue then applied to all importers who buy from this vendor. If customs agencies are able to share data across borders, imagine the impact if the data was shared with CBP. This domino effect in future would flow from issues found from sourcing to sales. As you see from this case the foundations of an Integrated Trade Compliance Strategy are reflected in the integrated manner that sourcing process to sales process would cover not only addressing the compliance issues of vendors who would be part of the trade compliance strategy, but also resulting compliance issues that could flow through the supply chain.
A leading manufacturer of household accessories was able to save over $6,000,000 annually in duty by designing and implementing an effective NAFTA management strategy.
NAFTA and Duty Recovery Saves $6 Million
An industry leading organization specializing in window covering was able to save over $6M in duty as a result of having an effective integrated trade compliance strategy. By coordinating NAFTA with organizational processes by use of a compliance champion, the company was able to assign tariff to every item. This then allowed the organization to have clear visibility of duty payments thus allowing the option of duty recovery for particular items. By integrating a well structured NAFTA program throughout the industry, the organization was able benefit from multiple drawbacks and save both time and cost.
The message is clear, by using the model of an Integrated Trade Compliance Strategy, this firm created efficiencies in terms of process but also cash management with an integrated strategy that factored NAFTA status and duty drawback for Non-NAFTA related products. The resulting $6 million savings were a result of their in-house trade compliance champion who oversaw the entire process on imports as well as exports and worked in conjunction with their professional trade services provider to handle the claims paperwork on both sides of the border.
Ascertaining NAFTA in motor vehicles is a complex process as referenced in the case of Duhamel & Dewar Inc. vs. the Department of National Revenue. Just because you have an NAFTA Certificate signed by the United States Exporter doesn’t ensure ‘duty free status’. When claiming NAFTA the importer is always in a position of ‘Buyer Beware’.
Importing a North American Made Vehicle – doesn’t mean it’s ‘Duty Free’
Ascertaining NAFTA in motor vehicles is a complex process as referenced in the case of Duhamel & Dewar Inc. vs. the Department of National Revenue. Just because you have an NAFTA Certificate signed by the United States Exporter doesn’t ensure ‘duty free status’. When claiming NAFTA the importer is always in a position of ‘Buyer Beware’, says Alan Dewar, Vice President Canadian Operations, GHY International
CBSA can request import duties up front or EVEN UP TO 4 YEARS LATER (perhaps after you no longer own the vehicle)
Importers should always exercise caution including a NAFTA indemnification clauses to minimize their risks on retroactive duty assessments
Be aware that when importing a vehicles there are 2 Canadian Government agencies that have regulations that must be met;
- Transport Canada – controlling the registration, recalls, etc. (which is really a hindrance to dealerships or organizations who buy vehicles for sale)
- Canada Border Services Agency (CBSA) import declaration purposes and taxation
We have worked with a partner who can add a LOT with respect to vehicles (challenges, regulatory elements, etc.) heading either north or southbound (including RIV process, Motorhomes, etc.) You can check out their offerings on this topic at:
Linkedin: Inspired Solutions International
Website: Inspired Solutions International
Case in Point – NAFTA Regional Value Content
In North America the key event that started driving focus on Trade Agreements was the original Canada/USA Free Trade Agreement (FTA). That evolved into NAFTA which included Mexico along with Canada and the USA. One of the key components about declaring NAFTA status on goods that are imported or exported is the process of defining Regional Value Content (RVC)
Regional Value Content is simply the calculation of the percent of the value of a good that comes from manufacture/assembly in a NAFTA originating country. The are 2 methods to calculate the RVC; a Transaction Value Method or the Net Cost Method, but that is a topic for another day.
The case in point today relates to an aspect of why you need to consider an integrated trade compliance strategy. It comes from a North American manufacture of electrical transformers, Chapter 84 of the harmonized Tariff.
When this manufacture began exporting they went through the exercise and calculated their Regional Value Content. At that time the goods in question were 94% of RVC. Although the regulations suggest that you need to validate your RVC annually, the effort involved was extensive for this manufacture and they renewed for many years their NAFTA declarations by simply changing the date and providing it to their export clients.
Problem is they began to be challenged as all manufactures have been with global based sourcing in order to stay competitive, and this was never factored in to their NAFTA declarations. The risk of course is that by changing the sourcing or inputs they may no longer qualify for NAFTA benefits, thereby increasing their costs and potentially making their product non competitive in the markets the sell to.
To compound the risk, the issue only came to light when the US CBP requested a NAFTA verification audit. They have been doing this a lot lately because they know that manufactures are facing a global sourcing challenge and that leaves a large GAP in the past trade agreement declarations, especially when there are preferential duty rates as there are with the NAFTA program. This can lead to large financial penalties and other costs that the manufacture did not allow for on the original contract, thereby reducing or eliminating any profit related to that sale.
The risks are increased substantially if issues are found during an audit, especially with US CBP who take a rather black and white approach to mitigating the issues they find during an audit.
The outcome in this case is good news, but clearly a warning that something must change in the strategy used to manage global trade issues. The cut off for RVC content when declaring NAFTA preferential tariff’s is 60%, and while in this case the goods pre global sourcing started at 94%, the revised calculations came back saying the RVC was now 64%. So while the did not incur any financial issues related to RVC calculations on their NAFTA declarations, they are clearly very close to no longer qualifying for those extended trade benefits.
Bob Cowie, Vice President Consulting, GHY International says, “some products which seem very simple compared to an electrical transformer can be even less obvious if NAFTA benefits apply when you consider Regional Value Content.” He offers this advise, “as an example if you look at Chapter 39, Products made of Plastic as defined by the US HS Tariff, the regional value content rules are very clearly laid out for every product in that category, we find numerous mistakes because the assumption is made because a product was made in a NAFTA country from plastic pellets as an example, that it qualifies and the NAFTA benefits are built in to their costing, When doing a detailed evaluation it is often not applicable so caution should be used when making these declarations that you understand the RVC rules and how they apply to your products.”
Key issue is global supply chains created intersection of compliance between sourcing for manufacturing purposes against export costing including declaration that goods were NAFTA qualifying.
Does this sound like your organization? Could you use an integrated trade compliance strategy?