Common NAFTA Mistakes to Avoid
The North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico was launched in 1994 to reduce trading costs and increase business investment. NAFTA has tripled trade between the three countries since 1994, growing from $297 billion to $1.6 trillion. For importers, NAFTA presents opportunities to reduce duty payout for eligible goods, which can amount to significant savings.
In order to fully reap the benefits of NAFTA, however, you’ll need to avoid these common mistakes:
Mistake #1: Not Determining if your Goods are NAFTA Eligible
You must verify that your goods are indeed eligible for NAFTA. This can be an immense challenge for importers who must rely on foreign vendors to determine how their products qualify. You’ll need to find out where the good was produced and if your vendors use any amount of raw materials sourced from outside North America.
Mistake #2: Not Understanding NAFTA Rules of Origin and Exceptions
You need to have a general understanding of how all of NAFTA’s rules and exceptions work if you want to take full advantage of them. In NAFTA, the Rules of Origin are product specific rules that outline what must happen to products from non-NAFTA countries in order for the final exported product to qualify for benefits. If your products aren’t meeting these rules, you could face penalties.
Mistake #3: Incorrectly Filling out a NAFTA Certificate of Origin (or Not Having a Valid Certificate of Origin)
In order to be eligible, all goods must be certified and declared on a NAFTA Certificate of Origin, which must be completed correctly and signed by the exporter. If you claim NAFTA for a good you must have a valid certificate of origin to support it. The certificate is a legal document with legal consequences, so you must ensure that the certificates are not missing required details nor have any inaccurate information.
Mistake #4: Not Having a NAFTA Management Program
If you are audited by customs, you will need to produce your certificates of origin and any supporting documents. Canada requires certificates to be retained for 6 years, and in the US the required retention period is 5 years. Retaining your certificates and making them readily available can save you tremendous headaches and ensure a smooth process should you ever face an audit.
The worst situation for your company to find itself in would be after importing a product for many years assuming that it qualifies under NAFTA, you then discover through a customs audit that the goods do not qualify.
If you are unsure whether your goods are eligible for NAFTA, or if you are making any of the above mistakes, enlist the help of a trusted customs broker to review and help you implement a compliance program to take full advantage of NAFTA.
Have any questions?
Talk with our NAFTA Specialists and let us answer any questions you might have about NAFTA certificates, product eligibility, and NAFTA management programs!
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