NAFTA

Origin Criteria “C”

The good is produced from in the territory of one or

more of the NAFTA countries.
Exclusively from Originating materials.
One or more of the materials may not fall within the
definition of “Wholly produced or obtained”

Some Materials are Criteria “A”

Some Materials are Criteria
“B”,”C”,“D1”,or “D2”
 NAFTA

Criteria “C” Example

Table Made in Mexico

 NAFTA

Material 1:

Wood from USA

Origin Criteria “A”
 NAFTA

Material 2

Lacquer made in Canada

Origin Criteria “B”
 NAFTA

Material 3

Hinge made in Mexico from Coal imported from

Brazil
Origin Criteria “B”
 NAFTA

As one or more of the materials do not fall

within the definition of “Wholly produced or
obtained”origin criteria “C” is used.

A + B + B =
C
 NAFTA

Origin Criteria “D 1”

A good was imported into the territory of a NAFTA

Country in an unassembled or disassembled form,
but was classified as an assembled good as per H.S.
General Rule of Interpretation 2(a)

“Incomplete, unfinished, unassembled or

disassembled articles are considered to be the same
as the Complete, Finished, or assembled article, as
long as the articles presented have the same
essential character”
NAFTA
 Bicycle from U.K.

-Unassembled
-Imported from UK
-Classification when
cleared into Canada
was 8712.00

Must meet regional value content to qualify under

Criteria “D1”
60% Transaction Value or 50% Net Cost Value
 Bicycle from U.K.

If parts were worth

$150.00, and the
selling price was
$400.00 would the bike
qualify?

RVC = TV - VNM x100

TV
RVC = 400.00 - 150.00 x 100 62.5%
= Qualifies
!!
400.00
 Criteria “D2”

Toy car
HS # 9501.00
Materials:

Plastic Pellets
Chapter 39

Does the Toy Car Qualify for

Pigment
NAFTA?
Chapter 32

Toy Car Parts

HS# 9501.00
NAFTA
NAFTA
 Criteria “D2”

Toy car
HS # 9501.00
Materials:

Plastic Pellets No!

Chapter 39

Does the Toy Car Qualify for

Pigment NAFTA Under “B”
Chapter 32
No change in
Toy Car Parts
Chapter!!
HS# 9501.00
 Qualifies!!!!! Under D2

Criteria “D2”

Toy car
HS # 9501.00
Materials: Selling
Price
$67.00
Plastic Pellets
Chapter 39

Does the Toy Car Qualify for

Pigment NAFTA Under “D2”
Chapter 32 RVC = TV - VNM x100
TV
RVC = 67.00 - 15.00 x 100 = 77.6%
Toy Car Parts Value $15.00 67.00
HS# 9501.00
 NAFTA

Origin Criteria “D 2”

The good incorporated one or non-originating

materials, provided for as parts under the H.S. which
could not undergo a change in tariff classification
because the heading provided for both the good and
its parts”
 NAFTA

De Minimis

Except in some exceptions, a good shall be considered

to be an originating good if the value of all non-
originating materials used in the production of the
good that do not undergo an applicable tariff change
in tariff classification as set out in Annex 401B is not
more than seven percent of the value of the good.

Or
 NAFTA

De Minimis

A good that is otherwise subject to a regional value

content requirement, shall not be required to satisfy
such requirement if the value of all non-originating
materials used in production of the good is not more
than than 7% of the FOB value.
 NAFTA

De Minimis

Does not apply to specific material specified in Article

405 of the NAFTA agreement.

- Dairy Preparations of 1901.90

- non-originating material of Chapter 4
(dairy) etc.
 NAFTA

De Minimis Example:

+ + =

Watch Band Watch Watch Case Finished Watch

Movement
Taiwan Originating 9102.11
Originating Mat. Mat.
9113.90 $20.00
$1.00 9108.91 9112.10

Does Watch Qualify for NAFTA????

 BUT WAIT!!!!!
NAFTA

De Minimis Example:

+ + =

Watch Band Watch Watch Case Finished Watch

Movement
Taiwan Originating 9102.11
Originating Mat. Mat.
9113.90 $20.00
$1.00 9108.91 9112.10

Watch Band Does not change Chapter as required by Annex

401B. Good Does Not Qualify!!!
 BUT WAIT!!!!!
NAFTA
Try de minimis!!!!

De Minimis Example:

+ + =

Watch Band Watch Watch Case Finished Watch

Movement
Taiwan Originating 9102.11
Originating Mat. Mat.
9113.90 $20.00
$1.00 9108.91 9112.10
Value of Strap $ 1.00 Therefore, non-

Value of Watch
X 100
$20.00
=
5% originating material
does not make up more
Watch Now Qualifies!! than 7% of the finished
good
 NAFTA

Accumulation

For the purposes of determining whether a good is an

originating
good, the production of the good in the territory of one
or more of
the Parties by one or more of the producers shall be
considered
to have been performed in the territory of any of the
Parties by
that exporter or producer.
 Cotton – China
5201.

South Carolina
Makes Fabric
HS# 5208

Vancouver makes
Cotton into Yarns
and Threads HS#
5205

Mexico Make men’s jackets HS #6204

NAFTA
 NAFTA

Can combine or “accumulate” production in 2

territories.

South Carolina needs to get a letter from Vancouver

stating the
Cotton was from offshore.

The receipt of that letter will make the Vancouver

production as
being done in South Carolina.

South Carolina then can issue a NAFTA certificate using

Cotton – China
5201.

South Carolina
Makes Fabric
HS# 5208

Mexico Make men’s jackets HS #6204

 NAFTA

Transhipment

Goods lose NAFTA eligibility if transhipped through a

non-NAFTA country.
 NAFTA

Intermediate Materials

aka: “Self Produced” Material

If a company produces one of it’s own materials, and

it qualifies
for NAFTA even if it was produced from some non-
originating
materials, that material can be considered 100%
NAFTA in the
NAFTA determination of the final good it is a material
of.
 NAFTA

Intermediate Materials

Example: A Company manufactures a washing

machine pump which comprises part of it’s final
product, a washing machine.

- the pump is made from non- originating materials,

but the finished pump qualifies under the rules of
origin in Annex 401B.
 NAFTA

Intermediate Materials

In the NAFTA calculation of the washing machine, the

pump is
considered 100% NAFTA, and no part of the pump is
considered
non-originating.

If the washing machine contained other non-

originating
materials, designating the pump as an intermediate
material
 NAFTA – Fungible Goods

 Goods or materials that are interchangeable for

commercial purposes and whose properties are
essentially identical.

 Mixtures of a material that are non-originating and

originating.

 Agreement does not make the producer specifically

identify each good, but allows the use of Inventory
methods set out in the regulations.

 LIFO and FIFO are utilized

 NAFTA – FIFO

 “First In. First Out”

 Fungible materials are identified in the order of

their receipt as originating or not originating.

Receipts Production
Date Quantity Date Quantity
Dec 01 1000 (N) Dec 08 500
Dec 05 1000 (N) Dec 09 500
Dec 10 1000 (O) Dec 14 1500

Using FIFO How many are left & do they originate or not?

500 Originating items are left using

FIFO
 NAFTA – LIFO

 “Last In. First Out”

 Fungible materials are identified in the reverse order

of their receipt as originating or not originating. The
newest is used first.

Receipts Production
Date Quantity Date Quantity
Dec 01 1000 (N) Dec 08 500
Dec 05 1000 (N) Dec 09 500
Dec 10 1000 (O) Dec 14 1500

Using LIFO How many are left & do they originate or not?
500 Non- Originating items are left using
LIFO
 NAFTA

Three Tariff Treatments Arise out of NAFTA:

United States Tariff: “UST” “Tariff Treatment 10”

Mexican Tariff: “MX” “Tariff Treatment 11”

Mexican – United States Tariff: “MUST” “Tariff

Treatment 12”
 NAFTA - UST

 Goods originate in the territory as per rules of

origin in Chapter 4 of the NAFTA Agreement.

 Any Mexican content is treated as non-territorial

and the goods still qualify as originating

 If the goods underwent any processing in Mexico

the increase in value is not greater than 7% or no
more than 6.5% of the value for duty.
 NAFTA - MT

 Goods originate in the territory as per rules of

origin in Chapter 4 of the NAFTA Agreement.

 Any US content is treated as non-territorial and the

goods still qualify as originating

 If the goods underwent any processing in the USA

the increase in value is not greater than 7% or no
more than 6.5% of the value for duty.
 NAFTA - MUST

 Goods originate in the territory with inputs from

both Mexico and United States

 Goods do not qualify for either MT or UST

 NAFTA Certificate

Importer must have a completed NAFTA Certificate on Hand at Time of

Customs
Clearance.

Tax Identification number: USA: “EIN” “Employer Identification

Number”
Canada: “Business Number”

Blanket Period Can Be for 1 year.

HS Classification 6 digits unless good is subject to a specific rule of

origin in Annex
401B that calls for 8 digits.

In box 8 if not the producer you must specify how you know the good
qualifies for
NAFTA: 1 – Based on your knowledge (guess!)
2 - Based upon written representation by the producer
3 - Based upon a NAFTA Certificate supplied by
 NAFTA Certificate

Importer: A Mfg. Company

225 Anystreet Commodity: Aircraft
Los Angeles California Propellers
90210
EIN#: 14237555 HS# 8803.10.00.00

Exporter: Izzy A Jerk Inc. Origin Criteria “B”.

134 Go Away Road Told Over the phone
Toronto Ontario L5G by someone at
3M2
Another Mfg Co. that
Biz# 123456789RM0001
Controller; Izzy A Jerk 416-345- the good qualifies for
2342 NAFTA.
Fax: 416-345-
2344

Producer: Another Mfg. Company

45 Main Street
Erin Ontario L9W 4R4