On July 1st, 2020, the Canada-U.S. Mexico Agreement (CUSMA) entered into force and replaced the North American Free Trade Agreement (NAFTA). As we approach the end of the first year, we wanted to publish USMCA information as a refresher for our clients.
Responsibility for USMCA/CUSMA Preferential Treatment Claims
An importer may submit an importer, exporter, or producer certification. The importer is responsible for exercising reasonable care concerning the accuracy of all documentation submitted to CBSA.
The importer may make a claim for preferential tariff treatment based on a certification of origin completed by the importer, the exporter, or the producer, for the purpose of certifying that a good qualifies as an originating good.
If an exporter that is not the producer of the good certifies the origin of the good, the certification may be completed by the exporter on the basis of either:
(1) having information, including documents, that demonstrate that a good is originating; or
(2) reasonable reliance on the producer’s written representation that the good is originating.
An importer will not be subject to penalties by Canada Border Services Agency (CBSA) under section 32.2(2) for making an incorrect claim that a good qualifies as a CUSAM originating good if the importer makes a corrected declaration within ninety (90) and pays any duties and taxes to that good.
Rules of Origin
An originating good is one that meets the rules of origin set forth in Annex 4-B (Product Specific Rules of Origin) of the Canada-US-Mexico Agreement and specifies the rules of origin used to determine whether a good qualifies as an originating good under the Agreement.
In general, under the USMCA a good is originating when:
– The good is produced entirely in the territory of one or more of the Parties using non- originating materials provided the good satisfies all applicable requirements of product- specific rules of origin;
– The good is produced entirely in the territory of one or more of the Parties exclusively from originating materials; or
– Except for a good provided for in Chapter 61 to 63, HTSUS: the good is produced entirely in the territory of one or more of the Parties, is classified with its the good is produced entirely in the territory of one or more of the Parties, is classified with its materials or satisfies the “unassembled goods” requirement, and meets a regional value content threshold of not less than 60% if the transaction value method is used or not less than 50% if the net cost method is used (not including RVC for autos); and
– The good satisfies all other applicable origin requirements.
For most goods, the Agreement provides for two Regional Value Content (RVC) calculation methods: (1) the transaction value method and (2) the net cost method.
The Transaction Value Method: RVC = (TV-VNM)/TV x 100 where
- RVC is the regional value content, expressed as a percentage;
- TV is the transaction value of the good, adjusted to exclude any costs incurred in the international shipment of the good; and
- VNM is the value of non-originating materials including materials of undetermined origin used by the producer in the production of the good.
The Net Cost Method: RVC = (NC-VNM)/NC x 100 where
- RVC is the regional value content, expressed as a percentage;
- NC is the net cost of the good; and
- VNM is the value of non-originating materials including materials of undetermined origin used by the producer in the production of the good.
Special Rules of Origin for Automotive Goods
The Appendix to Annex 4-B (“the automotive appendix”) of the CUSMA includes additional requirements that apply to automotive goods, including additional certification requirements. In addition to the general rules, please see APPENDIX I of this document for additional information on the CUSMA rules of origin for automotive goods.
Special Rules of Origin for Textiles/Tariff Preference Level (TPL) Claims
Textiles and apparel products may qualify as originating under CUSMA if they meet the requirements as specified in the Agreement. See APPENDIX II of this document for the implementing instructions related to textile and apparel goods.
CUSMA Verifications
Article 5.9 of the Agreement provides for origin verifications
The new regulations concern the verification of origin of goods imported into Canada from a CUSMA country, and read in part
CUSMA Verification of Origin Regulations
The new CUSMA Verification of Origin Regulations will implement definitions of concepts contained in Chapters 1, 4, 5 and 6 of the CUSMA and outline the details and procedures for the verification of origin of imported goods, including the verification of a material used in the production of the goods under CUSMA Chapters 5 and 6, specifically certain provisions of Articles 5.9 and 6.6, as well as under the Origin Verification section of the Uniform Regulations. Changes relating to details and procedures of domestic requirements will be included.
These Regulations will set out the methods that may be used in order to verify the originating status of goods, imported into Canada from a CUSMA country and any timelines associated with the verification. These methods will also apply to verifying materials used in the production of those goods. The methods include a verification visit, the review of a verification questionnaire, the review of the written response (to a verification request) completed by the importer, exporter or producer of the goods, or the producer or supplier of a material used in the production of those goods, or the review of other information received by these persons.
These Regulations will also set out details respecting the premises or places that may be entered for a verification visit (including those of the importer who completed the certification of origin) and will outline the details of a written notice of intention and how far in advance of the intended visit the notice must be sent. It must include, among other things, the names and titles of the officials who will conduct the visit, the specific purpose of the visit as well as the name of the person whose premises is the object of the visit. These Regulations will also specify the conditions under which observers may be present during a verification visit, as well the conditions under which a verification visit may be postponed.
These Regulations will specify the content of the written verification requests and questionnaires, including that they must specify the customs administration who issues them; the time within which a response to the request or questionnaire must be provided; the object and scope of the verification, including the specific issue the requesting Party is seeking to resolve; and sufficient information to identify the good that is being verified.
In addition, these Regulations will specify that all communication to the exporter or producer and to the customs administration of the Party of export be sent by any means that produces confirmation of receipt.
If your company would like Willson International to perform a proactive verification of a product, please contact the Canadian Regulatory team at transitioncdn@willsonintl.com
Record Keeping
Article 5.8: Record Keeping Requirements
1. Each Party shall provide that an importer claiming preferential tariff treatment for a good imported into its territory shall maintain, for a period of no less than five years from the date of importation of the good:
(a) the documentation related to the importation, including the certification of origin that served as the basis for the claim;
(b) all records necessary to demonstrate that the good is originating, if the claim was based on a certification of origin completed by the importer; and
(c) the information, including documents, necessary to demonstrate compliance with Article 5.4.1(e) (Obligations Regarding Importations), if applicable.
2. Each Party shall provide that an exporter or a producer in its territory that completes a certification of origin or a producer that provides a written representation shall maintain in its territory for five years after the date on which the certification of origin was completed, or for such longer period as the Party may specify, all records necessary to demonstrate that a good for which the exporter or producer provided a certification of origin or other written representation is originating, including records associated with:
(a) the purchase of, cost of, value of, shipping of, and payment for, the good or material;
(b) the purchase of, cost of, value of, shipping of, and payment for all materials, including indirect materials, used in the production of the good or material; and
(c) the production of the good in the form in which the good is exported or the production of the material in the form in which it was sold.
3. Each Party shall provide in accordance with that Party’s law that an importer, exporter, or producer in its territory may choose to maintain the records or documentation specified in paragraphs 1 and 2 in any medium, including electronic, provided that the records or documentation can be promptly retrieved and printed.
4. For greater certainty, the record keeping requirements on an importer, exporter, or producer that a Party provides for pursuant to this Article apply even if the importing Party does not require a certification of origin or if a requirement for a certification of origin has been waived.