Determining origin for free trade eligibility can be a complex and time consuming task. Use of the global economy often results in raw materials from multiple countries being shipped to one country for manufacture. Does the inclusion of a non-originating good eliminate the finished good from receiving benefits under a free trade agreement?
A non-originating article may be considered originating if that article undergoes a tariff shift. When a rule of origin is based on a change in tariff classification, each of the non-originating materials used in the production of the goods must undergo the applicable change in tariff as a result of production occurring entirely in the territory of one of the parties to the agreement.
This means that the non-originating materials are classified under one tariff provision prior to processing, and classified under another upon completion of processing. The specific rules of origin found in each of the agreements define exactly what change in tariff classification must occur for the goods to be considered "originating." A change in tariff classification may be from one heading in a chapter to another heading in the same chapter. In some cases, the list in GN 12(t) specifies that a shift must be from one specific chapter to another specific chapter.
Example 1- Heading Changes:
A good which will be classified in Chapter 17, under 1704, needs only to have been changed into heading 1704 from any other heading, which may include headings 1701, 1702, or 1703.
Example 2 -Chapter Changes:
In order for a good which is to be classified in Chapter 5 to be eligible under NAFTA, the good must have been changed into a good of Chapter 5 from any other chapter of the HTSUS.
Try the following problem on your own. We’ll provide the answer next week when we examine regional value content (RVC). For additional information, CBP posted a good explanation of tariff shifts on their web site. Although it is geared towards textile importers, the explanations and examples are helpful.
A travel kit imported into the U.S. from Singapore is classified under HTS 9605.00.0000. The kit contains components that originate in the U.S. or Singapore except for the following non-originating items?
· A plastic case classified under HTS 3923.10
· Sewing thread classified under HTS 5204.20
· Sewing needles classified under HTS 7319.90
· Toothpaste classified under HTS 3306.10
· A toothbrush classified under HTS 9603.21
Is the kit eligible for special treatment under the U.S. – Singapore Free Trade Agreement?
Showing posts with label NAFTA. Show all posts
Showing posts with label NAFTA. Show all posts
Tuesday, June 1, 2010
Tuesday, May 25, 2010
Free Trade Tuesday - NAFTA
Welcome to Free Trade Tuesday! This week we are discussing the North American Free Trade Agreement.
The North American Free Trade Agreement (NAFTA) was implemented in 1994 between Canada, Mexico and the U.S. to reduce and eliminate duties, remove barriers to trade and facilitate cross border movement of goods and services between the territories. Goods eligible under NAFTA for duty-free or reduced-duty status are designated by a "CA" or "MX" in the "Special" sub-column of the HTSUS. No other Free Trade Act has had a greater impact on U.S. trade than NAFTA. Many of the subsequent FTA's are modeled after NAFTA.
Preferential NAFTA treatment will only be afforded to goods that “originate” in a NAFTA country as that term is defined in NAFTA. A product will be considered to be originating and eligible for NAFTA treatment if:
· It is wholly obtained or produced in a NAFTA country.
· Its raw materials or components undergo a qualifying change in tariff classification and/or satisfy any regional value content requirement in a NAFTA country.
· It is produced wholly of originating materials in a NAFTA territory.
· The goods are unassembled, or goods classified with their parts, which do not meet the Annex 401 rule of origin, but contain 60% regional value content using the transaction value method or 50% using the net cost method.
To make a claim for NAFTA preferential tariff treatment, the importer must be in possession of a valid NAFTA certificate of origin. However, the importer has a right to make a post importation claim to obtain a refund of duties when imported merchandise would have qualified as originating when it was imported, but no claim for preferential tariff treatment was made at the time. The importer may file a claim for a refund of any excess duties at any time within one year after the date of importation of the goods. See 19 CFR 181 for information concerning NAFTA Certificates of Origin, drawback and more!
NAFTA - Key Facts
Expiration: None
HTS General Note: GN 12
Imported Directly: Yes - unloading/reloading in third countries allowed. No additional production allowed.
SPI: CA, MX
De Minimis:
7% - Non Textiles (Value)
7% - Textiles (Weight)
Some Exceptions
Origin Criteria
Tariff Shift
RVC
Accumulation
MPF: Originating goods exempt
Regulations: 19 CFR 181
Join us again next Tuesday when we continue our discussion of NAFTA.
The North American Free Trade Agreement (NAFTA) was implemented in 1994 between Canada, Mexico and the U.S. to reduce and eliminate duties, remove barriers to trade and facilitate cross border movement of goods and services between the territories. Goods eligible under NAFTA for duty-free or reduced-duty status are designated by a "CA" or "MX" in the "Special" sub-column of the HTSUS. No other Free Trade Act has had a greater impact on U.S. trade than NAFTA. Many of the subsequent FTA's are modeled after NAFTA.
Preferential NAFTA treatment will only be afforded to goods that “originate” in a NAFTA country as that term is defined in NAFTA. A product will be considered to be originating and eligible for NAFTA treatment if:
· It is wholly obtained or produced in a NAFTA country.
· Its raw materials or components undergo a qualifying change in tariff classification and/or satisfy any regional value content requirement in a NAFTA country.
· It is produced wholly of originating materials in a NAFTA territory.
· The goods are unassembled, or goods classified with their parts, which do not meet the Annex 401 rule of origin, but contain 60% regional value content using the transaction value method or 50% using the net cost method.
To make a claim for NAFTA preferential tariff treatment, the importer must be in possession of a valid NAFTA certificate of origin. However, the importer has a right to make a post importation claim to obtain a refund of duties when imported merchandise would have qualified as originating when it was imported, but no claim for preferential tariff treatment was made at the time. The importer may file a claim for a refund of any excess duties at any time within one year after the date of importation of the goods. See 19 CFR 181 for information concerning NAFTA Certificates of Origin, drawback and more!
NAFTA - Key Facts
Expiration: None
HTS General Note: GN 12
Imported Directly: Yes - unloading/reloading in third countries allowed. No additional production allowed.
SPI: CA, MX
De Minimis:
7% - Non Textiles (Value)
7% - Textiles (Weight)
Some Exceptions
Origin Criteria
Tariff Shift
RVC
Accumulation
MPF: Originating goods exempt
Regulations: 19 CFR 181
Join us again next Tuesday when we continue our discussion of NAFTA.
Tuesday, March 9, 2010
Should We Kill NAFTA?
On March 4, 2010, Rep. Gene Taylor (D-MS) along with 27 co-sponsors introduced H.R. 4759, a bill to kill NAFTA. Ok, perhaps “kill” is a strong word, but the results are the same. The bill requests that the U.S. withdraw from NAFTA within six months. The bill is currently in the House Committee on Ways and Means. Click HERE to track the status.
We included a “poll” on the side bar for our readers to share their opinions. Cast your vote and check back to see how people feel about this bill.
Should the United States withdraw from NAFTA?
We included a “poll” on the side bar for our readers to share their opinions. Cast your vote and check back to see how people feel about this bill.
Should the United States withdraw from NAFTA?
Monday, July 6, 2009
NAFTA Tariff Shifts
Thank you for joining us for our series on classification. Last Monday, we discussed the classification of decals, stickers and labels. Today, we will explore the meaning of tariff shifts in relationship to the free trade agreements.
A non-originating article may be considered originating if that article undergoes a tariff shift. The degree of change necessary in order to confer origin through tariff shift is based solely on the rules and guidelines found in General Note 12(t). The NAFTA Tariff Shift Rules are organized in order by Chapter, and tariff shift rules vary widely from Chapter to Chapter in that listing. This extensive and detailed list for NAFTA makes up more than 100 pages of the General Notes. Some of the other Free Trade Agreements also utilize the concept of tariff shifts, which are provided in the other General Notes, but for this article, we’ll focus on the NAFTA tariff shifts.
A tariff shift may be made from one heading in a chapter to another heading in the same chapter.
Example 1:
A good classified in Chapter 17, under 1704, needs only to have been changed into heading 1704 from any other heading, which may include headings 1701, 1702, or 1703.
In some cases, the list in GN 12(t) specifies that a shift must be from one specific chapter to another specific chapter.
Example 2:
In order for a good classified in Chapter 5 to be eligible under NAFTA, the good must have been changed into a good of Chapter 5 from any other chapter of the HTSUS.
Sample Question
Will a travel kit, imported into the U.S. from Mexico qualify for NAFTA if it is classified under HTS 9605.00.0000, and contains components that originate in the U.S. or Mexico except for the following non-originating items?
· A plastic case classified under HTS 3923.10
· Sewing thread classified under HTS 5204.20
· Sewing needles classified under HTS 7319.90
· Toothpaste classified under HTS 3306.10
· A toothbrush classified under HTS 9603.21
Answer: No.
First, we should look up the HTSUS number provided to make sure it is eligible for duty-free treatment from Mexico. We find the symbol "MX" in the Special subcolumn which indicates that the HTSUS is indeed eligible for duty-free treatment if the non-originating items satisfy the tariff shift. Turning over to General Note 12(t), we find the tariff shift must be from any other chapter to Chapter 96. All of the non-originating products on our list EXCEPT the toothbrush meets this requirement. No preferential treatment is allowed because the non-originating toothbrush classified in HTS 9603.21 does not make the tariff shift to Chapter 96 from any other chapter.
Join us next week as we tackle another challenging classification issue. If you have any specific commodities or sections of the HTSUS that you would like to see discussed in this series, please feel free to post a comment or send your suggestions to wizard@boskage.com.
A non-originating article may be considered originating if that article undergoes a tariff shift. The degree of change necessary in order to confer origin through tariff shift is based solely on the rules and guidelines found in General Note 12(t). The NAFTA Tariff Shift Rules are organized in order by Chapter, and tariff shift rules vary widely from Chapter to Chapter in that listing. This extensive and detailed list for NAFTA makes up more than 100 pages of the General Notes. Some of the other Free Trade Agreements also utilize the concept of tariff shifts, which are provided in the other General Notes, but for this article, we’ll focus on the NAFTA tariff shifts.
A tariff shift may be made from one heading in a chapter to another heading in the same chapter.
Example 1:
A good classified in Chapter 17, under 1704, needs only to have been changed into heading 1704 from any other heading, which may include headings 1701, 1702, or 1703.
In some cases, the list in GN 12(t) specifies that a shift must be from one specific chapter to another specific chapter.
Example 2:
In order for a good classified in Chapter 5 to be eligible under NAFTA, the good must have been changed into a good of Chapter 5 from any other chapter of the HTSUS.
Sample Question
Will a travel kit, imported into the U.S. from Mexico qualify for NAFTA if it is classified under HTS 9605.00.0000, and contains components that originate in the U.S. or Mexico except for the following non-originating items?
· A plastic case classified under HTS 3923.10
· Sewing thread classified under HTS 5204.20
· Sewing needles classified under HTS 7319.90
· Toothpaste classified under HTS 3306.10
· A toothbrush classified under HTS 9603.21
Answer: No.
First, we should look up the HTSUS number provided to make sure it is eligible for duty-free treatment from Mexico. We find the symbol "MX" in the Special subcolumn which indicates that the HTSUS is indeed eligible for duty-free treatment if the non-originating items satisfy the tariff shift. Turning over to General Note 12(t), we find the tariff shift must be from any other chapter to Chapter 96. All of the non-originating products on our list EXCEPT the toothbrush meets this requirement. No preferential treatment is allowed because the non-originating toothbrush classified in HTS 9603.21 does not make the tariff shift to Chapter 96 from any other chapter.
Join us next week as we tackle another challenging classification issue. If you have any specific commodities or sections of the HTSUS that you would like to see discussed in this series, please feel free to post a comment or send your suggestions to wizard@boskage.com.
Tuesday, March 4, 2008
Free Trade Agreement Update
The U.S. House of Representatives and the Senate approved a ten-month extension of the Andean Trade Preference Program that was due to expire on February 29, 2008. The new expiration date has been extended to December 31, 2008, which gives the USTR and Congress additional time to approve the U.S-Columbia FTA and implement the U.S. – Peru agreements.
The U.S. and members of CAFTA agreed to extend the deadline for Costa Rica to complete its obligations under the CAFTA-DR until October 1, 2008. Since Costa Rican voters approved CAFTA-DR in October 2007, Costa Rica has made significant process towards implementing certain requirements by the February 29 deadline, but they needed additional time to implement certain legislative and regulatory requirements.
On a political note, both Obama and Clinton indicate that they would take a tougher position on future trade agreements and might opt out of NAFTA if certain provisions are not renegotiated. In the meantime, President Bush continues to press Congress to approve the U.S. free trade agreement with Colombia.
The U.S. and members of CAFTA agreed to extend the deadline for Costa Rica to complete its obligations under the CAFTA-DR until October 1, 2008. Since Costa Rican voters approved CAFTA-DR in October 2007, Costa Rica has made significant process towards implementing certain requirements by the February 29 deadline, but they needed additional time to implement certain legislative and regulatory requirements.
On a political note, both Obama and Clinton indicate that they would take a tougher position on future trade agreements and might opt out of NAFTA if certain provisions are not renegotiated. In the meantime, President Bush continues to press Congress to approve the U.S. free trade agreement with Colombia.
It looks like 2008 will be an interesting year for free trade agreements.
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