Practical Advice from NAFTA’s “Front Lines”
1. Language matters.
NAFTA uses some common words such as materials, goods, parties, territory, exporter, and producer. When Customs uses these words, they do so using a limited definition. Frequently, exporters misunderstand the idea of a “producer” and freely accept COO’s from non-producing distributors or intermediaries. Under NAFTA, these documents are of questionable value.
2. “A” is for audit.
Preference criterion A (one of several codes, A through F, that NAFTA allows you to assign to the method used to qualify your product as NAFTA) has limited use and is generally reserved for natural or agricultural products produced wholly in North America. Most manufactured goods will originate under criteria B or C. While an “A” might be a good grade in school, using this preference criterion improperly will trigger unwanted regulatory scrutiny.
3. Don’t forget the processing fees.
Imports into the US are subject to a merchandise processing fee (MPF = .3464% min $25, max $485) while imports into Mexico are subject to Derecho de Trámite Aduanero (DTA = 0.8 percent). NAFTA originating goods are exempt from these fees. Even if your good has low or no duty, the elimination of these fees may be a benefit. Canada has no processing fees.