The North American Free Trade Agreement (NAFTA) is a trilateral agreement between Canada, the United States and Mexico which effectively removes tariff barriers and subsequently allows for the free trade of goods from one country to another. Thanks to NAFTA each country is easily able to sell their goods across borders and reap the financial benefits, as well as to allow for positive competition in the marketplace.
What is a NAFTA Certificate of Origin?
According to the Office of the U.S. Trade Representative, “The NAFTA Certificate of Origin is used by the United States, Canada, and Mexico to determine if imported goods are eligible to receive reduced or eliminated duty as specified by the NAFTA. For purposes of obtaining preferential tariff treatment, this document must be completed legibly and in full by the exporter and be in the possession of the importer at the time the declaration is made.”
This means that obtaining and filing a valid Certificate of Origin will allow the good of an importer/exporter to be accepted into one of the three North American countries either without being taxed or the good may be eligible for a reduced tax rate. It is important to note that for a Certificate of Origin to be accepted, the information written on the form must be legible as well as filled out correctly.
Failure to correctly fill out a Certificate of Origin may cause for a good to lose its preferential status and subsequently face a higher tariff.
Due to the confusing nature of determining which goods can and do not allow for preferential tariff treatment, mistakes will occur, and ultimately the decision is left up to the customs agents of the country the item is being imported to.
If by chance an importer/exporter fails to claim preferential treatment and their good does qualify for preferential treatment, they are in luck. Importers and exporters who do not file a Certificate of Origin when their product was imported have up to one year from the date the good was imported to file a Certificate.
Who are the Parties Listed on a NAFTA certificate?
When filing a Certificate of Origin there are three parties referenced on the form and it is important that they be correctly identified. Failure to correctly identify a party may result in a rejection of a certificate and a tax will then be levied against the good being shipped.
The three parties involved in a Certificate of Origin are identified as:
- Exporter: An individual or company who transports goods and services to other countries
- Producer: An individual or company who creates and or produces a good
- Importer: An individual or company who brings goods into a country
When filing a NAFTA Certificate of Origin only the individual who is exporting the good is required to fill out the form. The individual who is importing the good is not required to fill out the form, rather they will need to have it in their possession at the time of declaration.
A Certificate of Origin may voluntarily be completed by the producer of a good on behalf of the exporter, however this is not required and the decision is ultimately left up to the discretion of the producer and exporter.
If a producer voluntarily completes a Certificate of Origin, the exporter should always verify that the information on the certificate is accurate before beginning the process of exporting the good. Failure to verify the validity of a Certificate of Origin may result in goods not being allowed to be exported.
U.S. Customs and Border Protection requires “Exporters or producers that complete a Certificate of Origin must notify all parties to whom the Certificate was given of any change that could affect its accuracy or validity.” (CBP)
Where can I get a NAFTA Certificate of Origin?
Importers and exporters should not wait to fill out a Certificate of Origin until their good is being processed at a country’s border. Instead, the document should be prepared and verified by a competent individual before a good is transported.
Do I Need a NAFTA Certificate of Origin?
Not all goods require a Certificate of Origin. To qualify for a Certificate of Origin a good needs to fit the specific criteria found in the Harmonized Tariff Schedule of the United States Annotated (HTSA)
A NAFTA Certificate of Origin is required as well as it must be attached to invoices of shipments valued at or greater than the following amounts:
- $1,000(U.S. dollars) and is being sent to Mexico from either the U.S. or Canada
- $2,500 (Canadian Dollars) and is being sent to Canada from either the U.S. or Mexico
- $2,500(U.S. dollars) and is being sent to the U.S. from either Canada or Mexico
If a shipment is valued at a lesser amount than the values above, then the shipper does not need a Certificate of Origin and instead they should add a note to the invoice which “certify that the goods covered by this shipment qualifies as an originating good for purposes of preferential tariff treatment under the NAFTA.”
How Long Do Importers and Exporters Need to Keep a Used Certificate of Origin?
Once a Certificate of Origin has been signed, it needs to be retained in exporter and importer’s records. Each country has differing time periods for retaining documents:
- American Exporters or producers that provide a Certificate of Origin must retain in their files, any records pertaining to the good being exported for five years or as long as each country may require
- Mexican exporters are required to retain a copy of the Certificate for 10 years
- Canadian importers and exporters are required to retain the Certificate for 6 years
Wherein NAFTA greatly benefits the economies of North American countries as it allows for fair and reduced costs in regards to trade, it is also a very intricate and hard to understand.