In January 1994, Canada, the United States and Mexico launched the North American Free Trade Agreement (NAFTA) and formed the world’s largest free trade area. It”s intent was to reduce trading costs, increase business investment, and help North America be more competitive in the global marketplace.
In order for commodities produced in one of the three NAFTA territories to qualify for reduced duty rates, a valid NAFTA certificate must be provided in order to relieve the applicable duties applied to the commodity. For items not wholly grown or produced of items wholly grown or manufactured in a free trade agreement area, they must meet certain predetermined criteria in order to qualify for reduced duty rates. These criteria are found in the “Rules of Origin” section of the NAFTA Agreement.
There are two (2) types of NAFTA certificates:
- Low value NAFTA -used for shipments valued at less than $1,600.00 CAD
- B232E NAFTA– used for shipments valued over $1,600.00 CAD
Correctly completing a NAFTA certificate can be confusing for those who have never done it before or don’t understand the requirements of each field. The NAFTA certificate must be completed and certified by an authorized signatory of the producer or exporter of the goods who has enough knowledge of the information provided in all fields.
On a daily basis, customs brokers are faced with informing their clients of inaccuracies made when completing a NAFTA certificate. An incomplete or incorrectly completed certificate invalidates the ability to claim the lower preferential rate of duty that would have been awarded with a valid certificate.
Below are the instructions outlining how to correctly complete each field of a NAFTA certificate, as well as some of the most common errors customs brokers identify when validating certificates.
Field 1 – Exporters Name and Address:
State the full legal name, address (including country) and legal tax identification number of the exporter. Legal tax identification number is: in Canada, employer number or importer/exporter number assigned by Revenue Canada; in Mexico, federal taxpayer’s registry number (RFC); and in the United States, employer’s identification number or Social Security Number.
Field 2 – Blanket Period:
Complete field if the Certificate covers multiple shipments of identical goods as described in Field 5 that are imported into a NAFTA country for a specified period of up to one year (blanket period). “FROM” is the date upon which the Certificate becomes applicable to the good covered by the blanket Certificate (it may be prior to the date of signing this Certificate). “TO” is the date upon which the blanket period expires. The importation of a good for which preferential tariff treatment is claimed based on this Certificate must occur between these dates.
It is common for customs brokers to find that the date field is completed inaccurately to reflect a blank period covering a year and one (1) day. 01/01/10 to 01/01/11 is in fact one (1) year plus one (1) day of the next year. To be sure that the blanket period is valid, this field must read the same year in both start and end date of the blanket period.
Field 3 – Producers Name and Address:
State the full legal name, address (including country) and legal tax identification number, as defined in Field 1, of the producer. If more than one producer’s good is included on the Certificate, attach a list of the additional producers, including the legal name, address (including country) and legal tax identification number, cross referenced to the good described in Field 5. If you wish this information to be confidential, it is acceptable to state “Available to Customs upon request”. If the producer and the exporter are the same, complete field with “SAME”. If the producer is unknown, it is acceptable to state “UNKNOWN”.
Field 4 – Importers Name and Address:
State the full legal name, address (including country) and legal tax identification number, as defined in Field 1, of the importer. If importer is not known, state “UNKNOWN”; if multiple importers, state “VARIOUS”.
Field 5 – Description of Goods:
Provide a full description of each good. The description should be sufficient to relate it to the invoice description and to the Harmonized System (HS) description of the good. If the Certificate covers a single shipment of a good, include the invoice number as shown on the commercial invoice. If not known, indicate another unique reference number, such as the shipping order number.
For a blanket certificate, part or item numbers identifying each commodity covered by the certificate should be included to guarantee that there is no confusion as to which products are covered and which are not.
Field 6 – HS Tariff Classification Number:
For each good described in Field 5, identify the HS tariff classification to six digits. If the good is subject to a specific rule of origin in Annex 401 that requires eight digits, identify to eight digits, using the HS tariff classification of the country into whose territory the good is imported.
Applying accurate HS tariff codes requires in depth knowledge of the commodities being imported, the Customs Tariff and NAFTA Rules of Origin. If you are unsure if the code is correct, contact a customs broker before completing the certificate.
Field 7 – Preference Criterion:
For each good described in Field 5, state which criterion (A through F) is applicable. The rules of origin are contained in Chapter Four and Annex 401. Additional rules are described in Annex 703.2 (certain agricultural goods), Annex 300-B, Appendix 6A (certain textile goods) and Annex 308.1 (certain automatic data processing goods and their parts).
Note: In order to be entitled to preferential tariff treatment, each good must meet at least one of the criteria below.
A) The good is “wholly obtained or produced entirely” in the territory of one or more of the NAFTA countries, as referred to in Article 415. Note: The purchase of a good in the territory does not necessarily render it “wholly obtained or produced”. If the good is an agricultural good, see also criterion F and Annex 703.2. (Reference: Article 401(a) and 415)
B) The good is produced entirely in the territory of one or more of the NAFTA countries and satisfies the specific rule or origin, set out in Annex 401, that applies to its tariff classification. The rule may include a tariff classification change, regional value-content requirement or a combination thereof. The good must also satisfy all other applicable requirements of Chapter Four. If the good is an agricultural good, see also criterion F and Annex 703.2. (Reference: Article 401(b))
C) The good is produced entirely in the territory of one or more of the NAFTA countries exclusively from originating materials. Under this criterion, one or more of the materials may not fall within the definition of “wholly produced or obtained”, as set out in Article 415. All materials used in the production of the good must qualify as “originating” by meeting the rules of Article 401(a) through (d). If the good is an agricultural good, see also criterion F and Annex 703.2. (Reference: Article 401(c))
D)Goods are produced in the territory of one or more of the NAFTA countries but do not meet the applicable rule of origin, set out in Annex 401, because certain non-originating materials do not undergo the required change in tariff classification. The goods do nonetheless meet the regional value-content requirement specified in Article 401(d). This criterion is limited to the following two circumstances:
D-1) the good was imported into the territory of a NAFTA country in an unassembled or disassembled form but was classified as an assembled good, pursuant to HS General
Rule of Interpretation 2(a); or
D-2) the good incorporated one or more non-originating materials, provided for as parts under the HS, which could not undergo a change in tariff classification because the heading provided for both the good and its parts, and was not further subdivided into subheadings, or the subheading provided for both the good and its parts and was not further subdivided.
Note: This criterion does not apply to Chapters 61 through 63 of the HS (Reference: Article 401(d))
E) Certain automatic data processing goods and their parts, specified in Annex 308.1, that do not originate in the territory are considered originating upon importation into the territory of a NAFTA country from the territory of another NAFTA country when the Most-Favoured-Nation Tariff rate of the good conforms to the rate established in Annex 308.1 and is common to all NAFTA countries. (Reference: Annex 308.1)
F) The good is an originating agricultural good under preference criterion A, B or C above and is not subject to a quantitative restriction in the importing NAFTA country because it is a “qualifying good” as defined in Annex 703.2, Section A or B (please specify). A good listed in Appendix 703.BB.7 is also exempt from quantitative restrictions and is eligible for NAFTA preferential tariff treatment if it meets the definition of “qualifying good” in Section A of Annex 703.2. Note 1: This criterion does not apply to goods that wholly originate in Canada or the United States and are imported into either country. Note: A tariff rate quota is not a quantitative restriction.
Field 8 – Producer:
For each good described in field 5, state “YES” if you are the producer of the good. If you are not the producer of the good, state “NO” followed by (1), (2), or (3), depending on whether this certificate was based upon: (1) your knowledge of whether the good qualifies as an originating good; (2) your reliance on the producer’s written representation (other than a Certificate of Origin) that the good qualifies as an originating good; or (3) a completed and signed Certificate for the good, voluntarily provided to the exporter by the producer.
Field 9 – Net Cost:
For each good described in Field 5, where the good is subject to a regional value content (RVC) requirement, indicate “NC” if the RVC is calculated according to the net cost method; otherwise, indicate “NO”. If the RVC is calculated according to the net cost method over a period of time, further identify the beginning and ending dates (DD/MM/YY) of that period. (Reference: Articles 402.1, 402.5)
Many NAFTA certificates are found to be invalid due to the exporter stating the actual cost of the commodities in this field. As above states, the net cost field is not asking for actual cost of the good but which method is being used to ascertain that the commodities being imported meet the NAFTA Rules of Origin.
Field 10 – Country Of Origin:
Identify the name of the country (“MX” or “US” for agricultural and textile goods exported to Canada; “US” or “CA” for all goods exported to Mexico; or “CA” or “MX” for all goods exported to the United States) to which the preferential rate of customs duty applies, as set out in Annex 302.2, in accordance with the Marking Rules or in each Party’s schedule of tariff elimination.
For all other originating goods exported to Canada, indicate appropriately “MX” or “US” if the goods originate in that NAFTA country, within the meaning of the NAFTA Rules of Origin Regulations, and any subsequent processing in the other NAFTA country does not increase the transaction value of the goods by more than 7%; otherwise indicate as “JNT” for joint production. (Reference: Annex 302.2)
The NAFTA certificate is invalid and ineffective if the commodities listed are not produced in a participating country in the agreement. Many people do this so that whomever is clearing the goods knows where the items are made. However, the correct thing to do is indicate the country of manufacture on the invoice and back up the NAFTA qualifying items with a NAFTA certificate.
Field 11 – Certification:
This field must be completed, signed and dated by the exporter. when the Certificate is completed by the producer for use by the exporter, it must be completed, signed and dated by the producer. The date must be the date the Certificate was completed and signed.
In many cases, the number of pages is left blank or it is signed by a person in an administrative position. The Canada Border Services Agency (CBSA) has been known to question the validity of the certificate when signed by someone with questionable knowledge of the information.
The low Value NAFTA Certificate of Origin is a confirming statement that certifies the commodities in the shipment meet the requirements under the Rules of Origin specified by the NAFTA Agreement. It can only be used for shipments valued under $1600.00 CAD; and contains no blanket period, therefore it must be completed for each individual shipment. It is a much more straight forward form to complete, requiring only the producers or exporters name, address and signature to be completed.
In addition, valid NAFTA certificates used for the relief of Customs duties must be kept as part of the Importers records that are required to be kept for seven (7) years following the Customs clearance.
If you have any questions or concerns regarding NAFTA Certificates feel free to leave them in our comments section below.