On July 1st, 2020, the U.S-Mexico-Canada Agreement (USMCA)/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 current 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 CBP.
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 U.S. Customs and Border Protection (CBP) under 19 USC 1592 for making an incorrect claim that a good qualifies as a USMCA originating good if the importer makes a corrected declaration within 30 days of discovery and pays any duties and MPF owed with respect to that good.
Rules of Origin
An originating good is one that meets the rules of origin set forth in General Note 11 (GN 11) and all other requirements of the Agreement. Section 202 of the USMCA Implementation Act specifies the rules of origin used to determine whether a good qualifies as an originating good under the Agreement.
The HTSUS now includes GN 11, which contains both the general and specific rules of origin, definitions, and other related provisions.
In general, under the USMCA a good is originating when:
a) The good is wholly obtained or produced entirely in the territory of one or more of the Parties, as defined in Article 4.3 of the Agreement;
b) 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;
c) The good is produced entirely in the territory of one or more of the Parties exclusively from originating materials; or
d) 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
e) 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 USMCA 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 USMCA 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 USMCA 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.
USMCA Verifications
Article 5.9 of the USMCA, CBP may conduct a verification to determine whether a good entered with a claim for preferential tariff treatment qualifies as originating by one or more of the following:
(1) a written request or questionnaire, such as a CBP Form 28, Request for Information, seeking information, including documents, from the importer, exporter, or producer of the good;
(2) a verification visit to the premises of the exporter or producer of the good in order to request information, including documents, and to observe the production process and the related facilities;
(3) for a textile or apparel good, the procedures set out in Article 6.6 of the Agreement; or
(4) any other procedure as may be decided by the Parties.
Verifications, whether conducted by CBP or Willson International are unique to the individual commodity. CBP has outlined the information that may be helpful during a verification includes but is not limited to the following:
- Flow-charts, technical specifications and other documents explaining the manufacturing process.
- An explanation of how the good meets the specific rule of origin in GN 11;
- A bill of materials showing the classification number, origin, and cost of each material;
- Certifications or affidavits from the producer of each originating material attesting to the country of manufacture and its originating status;
- Purchase orders and proof of payment to substantiate values;
- Documentation pertaining to assists, inventory management methods, indirect materials, etc.;
- Raw materials invoices;
- Production records; and
- Export documents.
CBP may initiate the verification to the importer or to the person who completed the certification of origin. If CBP initiates a verification to the exporter or the producer, it will inform the importer of the initiation of the verification.
If CBP requests information from the importer, and the importer does not provide sufficient information to demonstrate that the good is originating, CBP shall request information from the exporter or producer before it may deny the claim for preferential treatment.
If your company would like Willson International to perform a proactive verification of a product, please contact the U.S. Regulatory team at transitionus@willsonintl.com
Record Keeping
The party responsible for making the claim of preferential treatment must maintain records and supporting documentation related to the importations. This includes all records and supporting documents related to the origin of the good (including any certifications or copies thereof) and records and supporting documentation necessary to demonstrate compliance with the transit and transshipment provisions. The importer must render these records for examination and inspection upon request per 19 USC 1508 –1510 and 19 CFR Part 163.6.
Additionally, any person who completes a USMCA certification of origin or provides a written representation for a good exported from the United States to a USMCA country must keep all records and supporting documents related to the origin of the good (including the certification or copies thereof), including records related to:
1. the purchase, cost, value, and shipping of, and payment for, the good;
2. the purchase, cost, value, and shipping of, and payment for, all materials, including indirect materials, used in the production of the good; and
3. the production of the good in the form in which it was exported or the production of the material in the form in which it was sold.