This document summarizes a webinar about managing risks and compliance with NAFTA rules of origin. It discusses the webinar format and speaker's background in international trade. The agenda covers an overview of NAFTA, rules of origin, importer/exporter obligations, and risks of non-compliance. It then provides details on rules of origin including preference criteria, tariff shifts, and calculating regional value content. The document emphasizes proper documentation practices to withstand customs audits.

1. NAFTA
North American Free Trade Agreement
Administration and Compliance – How to
properly apply it and manage your risks.

2. House Keeping
• This event will be recorded and both the recording and the
presentation slide deck will be made available after the
webinar.
• You will all be in the “Listen Only” mode for the webinar.
• If you have a question please use the “Ask a Question”
function on your GoTo Webinars panel.
– All questions will be addressed at the end of the presentation unless
there is a common, reoccurring question.
• If you are experiencing technical difficulties, please use the
“Chat” function on your GoTo Webinars panel; OR email
Justin directly at justin@ghy.com

3. About the Class
• This course will provide an understanding of the NAFTA
agreement and how to apply the rules of origin. In
addition we will look at the potential risks and the
compliance requirements.

4. About the Speaker
• Darcy Calder is both a Certified Trade Compliance
Specialist and a Certified Customs Specialist with over
20 years of experience in cross border trade facilitation
and relationship management. In addition Darcy also is a
CITT-Certified Logistics Professional (CCLP).
• In Darcy’s career he has held roles that have given him a
broad perspective of understanding across multiple
industry sectors, including automotive manufacturing,
agricultural, food/produce, retail, etc.

5. Agenda
• Overview & Historical context
• Rules of origin and administration
• Importer/Exporter Obligations
• Risks of non-compliance

6. NAFTA Overview
• Roots are founded in 1989 FTA (US/CA)
• Came into force on January 1st, 1994
• Reduce trade barriers and tariffs
• Expand trade, free flow of goods

7. Why is NAFTA Important?
• In 2012 three way trade between Canada, US and
Mexico = $1.2 Trillion Dollars (more than tripled from
1993: $288 billion)
• The combined GDP has also increased from $7.7 trillion
in 1993 to $19.2 trillion in 2012

8. Rules of Origin and Administration

9. Common Errors
• Preference Criterion
• Tariff
• Description
• Signature

10. Preference Criterion
• Indicates how the goods qualified for NAFTA
• 6 Preference Criterion – A through F
− “A” Wholly obtained or produced in the NAFTA region
− “B” Goods meeting the Annex 401 Rule of Origin
− “C” Goods produced in the NAFTA region wholly from originating
materials
− “D” unassembled goods, goods classified with their parts which
do not meet Annex 401 rules, but meet Regional Value Content
Requirements.

11. Preference Criterion A
• Goods wholly obtained or produced entirely in Canada,
Mexico or the United States.
• Contains no non-North American parts or materials
anywhere in the production process.

12. (A) Wholly Obtained or Produced
Wheat grown in Canada
Coal mined in Montana (USA)

13. Criterion “B”
• Corresponds to article 401(b) of the Agreement, which
covers goods that a producer makes using non-originating
materials. The non-originating materials
must meet the conditions set out in the specific rule of
origin that applies, which can be found in Annex 401 of
the Agreement.
• These rules can requires:
− Tariff Shift
− Tariff Shift and/or Regional Value Content (RVC)
− RVC only

14. Tariff Shift
• Tariff shift is the process by which all NON-NAFTA
materials undergo a change in tariff classification as a
result of significant transformation in the NAFTA area.
• The material that is being used not only loses its
original commercial identity but also its original tariff
classification when it becomes or is incorporated into a
new product.

15. • Tariff classification of a safe –
8303.00.00.00
Tariff Shift
• Rule of origin for 83.03
• “83.02-83.04 A Change to
headings 83.02 through 83.04
from any other heading,
including another heading
within that group.”

16. Tariff Shift
• Non- originating material:
• Gauges
• Iron & steel fittings
• Plastic lining
• Steel for the cabinet

17. Tariff Shift
• Gauges – Ch. 90
• Iron & Steel Fittings –
Ch. 73
• Plastic Lining – Ch. 39
• Steel for the cabinet –
Ch. 72

18. Regional Value Content (RVC)
• Regional Value Content is the calculated percentage
of the value of the product that represents its North
American content
• May be calculated using one of two methods,
depending on the rule:
− Transaction Value Method
− Net Cost Method

19. Regional Value Content (RVC)
Net Cost Method (NC):
RCV = NC -VNM X 100
NC
= 50% or more
Transaction Value Method (TV):
RVC = TV - VNM X 100
TV
= 60% or more
VNM = Value of non-originating material

20. RVC – NC or TV
• It is easier to use the TV method if goods are sold at
a very high margin.
• Cannot use TV method if >85% related party sales,
auto industry, etc.

21. Duty Free – MFN & UST
Canadian Manufacturing of Motor Mixers
8474.31 – US Origin 8474.31
Mortar Mixer Pts (except some
naming items) are classified as
8474.90.
If parts are NAFTA eligible, EVEN
THOUGH DUTY FREE, should
have NAFTA.
Mortar Mixers 8474.31 – A change to subheading 8474.10 thru 8474.80 from
subheading 8474.90 providing there is ‘regional value content’ of not less than:
a) 60 percent where transaction value method used, or
b) 50 percent where the net cost method used

22. RVC – NC or TV?
Example
• The Mixer cost $500 to build and is sold for $1000 and
incorporates $300 in non-qualifying materials
$500 - $300
RVC = 40%
NON-NAFTA
$500
Net Cost =

23. RVC – NC or TV?
Example
• The Mixer cost $500 to build and is sold for $1000 and
incorporates $300 in non-qualifying materials
$1000 - $300
RVC = 70%
NAFTA QUALIFYING
$1000
Transaction Value =

24. Preference Criterion C
• The goods are produced entirely in the territory of
one or more of the parties exclusively from
originating materials

25. (C) Originating Goods
United States
Mexico
Chapter 26
Brazil
Canada
IRON ORE IRON ORE

26. Preference Criterion D
• When a tariff shift cannot occur, the good can still
be certified using the RVC calculation
• There are only two conditions under which this can
occur:
− Products imported in an unassembled or disassembled
form are classified under the same tariff provision as the
assembled good
− When parts for a good are classified under the same
heading or subheading as the good itself

27. (D) Goods and Their Parts
• No change in tariff classification
• Must meet regional value content
pump
chair
footrest
HS 9402.10
Dentist’s chair and
parts thereof
Assembled in Canada and sold to
Mexico and the United States

28. In Simple Terms
A: Wholly obtained or produced
B: Tariff shift
Tariff shift and/or RVC
RVC only
C: Made exclusively from originating materials
D: Assemblies and RVC
Parts in same provision as good and RVC

29. DeMinimis Rule
• Any foreign material that is incorporated into a
good and does not undergo a tariff classification
change can be disregarded when determining the
country of origin of the good provided the total
value of the non qualifying material is not greater
than 7%

30. DeMinimis
• A change to heading 91.02 from
any other chapter
Non-originating strap 9113.90 $1.00
made in Taiwan
Originating Watch movement 9108.91
Originating case 9112.10
Finished watch 9102.11 $20.00

31. The Final Step
Build your audit trail to withstand customs audit
1. Bill of material
2. Tariff classification backup
3. Rule of origin
4. RVC or tariff shift analysis
5. NAFTA certificates for raw materials
6. Rulings
7. Memo explaining work done, assumptions etc.

32. • Same form in English, French, or Spanish
• Blanket period covers identical goods for up to 12
months
• Completed by exporter
• Required for commercial goods valued at $2500 US
or CAD
Certificate of Origin

33. Sample Wording of Statement
of Origin
STATEMENT OF ORIGIN FOR COMMERCIAL IMPORTATIONS OF LESS THAN
$2500
“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: I.M.Exporter
TITLE: Controller
COMPANY: WORLD EXPORTER
DATE: April 1,1995
TELEPHONE: (613)123-4567 FAX: (613) 123-4568
I am the exporter of the goods__X__or producer of the goods______.

34. North American Free Trade Agreement
1 2
3 4
Protected (when completed)
Blanket Period
5 6 7 8 9 10
11 I certify that...
CERTIFICATE OF ORIGIN
Revenue Revenu
Canada Canada
Canada
Instructions attached
} i- Header
} ii- Body
} iii- Trailer
From To
Exporters name and address
Producers name and address Importersmane and address
Description of goods

35. Revenue Revenu
Canada Canada Protected (when completed)
North American Free Trade Agreement
CERTIFICATE OF ORIGIN
Please print or type (Instructions attached)
1 2
Exporters name and address Blanket period
EXPORTER
Tax Identification Number
3 4
From To
BLANKET PERIOD
Producers name and address Importers name and address
PRODUCER IMPORTER
Tax Identification Number Tax Identification Number
i
01 01 9 4 31 12 94

36. 5 6 7 8 9 10
Description of Good(s)
HS Tariff
Class
Number
Preference
criteria
Producer
Net
cost
Country of
origin
DESCRIPTION
HS# A
B
C
D
E
or
F
ii

37. 5 6 7 8 9 10
Description of Good(s)
HS Tariff
Class
Number
Preference
criteria
Producer
Net
cost
Country of
origin
Yes
or
No
(1)
(2)
or
(3)
ii
1-Your Knowledge 2 -Reliance on producer 3 -Certificate of origin

38. 5 6 7 8 9 10
Description of Good(s)
HS Tariff
Class
Number
Preference
criteria
Producer
Net
cost
Country of
origin
Ca
US
MX
or
JNT
(Canada
only)
ii NC
or
No

39. iii
11 I certify that:
DECLARATION
EXPORTER/PRODUCER
Canada
Authorized Signature Company
Name Title
I.M.EXPORTER CONTROLLER
DATE
Date Telephone Fax
B232E Printed in Canada

40. Risk and Compliance

41. Importer Obligations
• Claiming NAFTA – must be in possession of a valid
certificate of origin.
• Refund of duties can be filed no later that one year after
the date of import
– Copy of the Certificate of Origin

42. Exporter Obligations
• Solid audit trail
• Respond to request from Customs authorities
• Notify of any changes to all parties to whom a Certificate
has been provided.

43. Record Keeping
• Maintain books and records for:
– 5 years in U.S.A.
– 6 years plus current in Canada
– 5 years in Mexico

44. Compliance
• Send an origin verification questionnaire
• Conduct an origin verification audit
• Conduct a full compliance audit

45. Compliance
• Loss of NAFTA benefits could result in risk and
financial exposure
• Penalties
• Customs audits
• Interruption in your Supply Chain
• Loss of competitive edge

46. • Each country has their own penalties and enforcement
structure for NAFTA.
• Canada – Administrative Monetary Penalty System
(AMPS)
• U.S. – penalties for negligence, gross negligence and
fraud
Compliance

47. Protection
• Strong supplier relationships
• Requirement to respond to requests from Customs
• Exporter will reimburse any costs from
improper/negligent Certificates.

48. Summary
• Understand the rules of origin for your products
• Complete and accurate completion of Certificate of
Origin
• Strong audit trail
• Comply with all requests from Customs
• Strong supplier relationships

49. Thank You!
Contact Information:
Darcy Calder, CCLP, CTCS, CCS
Manager, Canadian Operations
darcy@ghy.com
204-947-6700 ext. 239