Manufacturers for export within NAFTA may take advantage of preferential tariff status for goods that qualify under the NAFTA Rules of Origin. Manufactured goods that qualify are said to “originate,” i.e. qualify as coming from and going to NAFTA countries, so long as certain criteria are met. For our purposes, we will explore these criteria and how and when they apply to the rules for originating goods under the NAFTA.
Generally speaking, no duties or tariffs are applied to exported finished goods or inputs for those items that are considered to be originating goods under the NAFTA. If all inputs used in the manufacture of goods bound for export to NAFTA countries are themselves imported from NAFTA countries, duty free status is granted. This is with the provision that the inputs fall into one of three mandated categories, a Certificate of Origin is acquired, and the finished products are exported to NAFTA countries. Complying with these prerequisite results in an assurance that manufacturers may receive preferential tariff status for their goods and inputs.
Three Categories for Originating Goods under the NAFTA
1. A manufactured product may qualify for preferential tariff status, if 100% of its inputs are wholly-made in the free-trade region.
2. If the manufactured product was made from non-originating materials, it may still qualify as long as each non-NAFTA input undergoes a tariff classification change or “shift,” as specified in Originating Goods (Article 401). In other words, the finished product must be significantly different – so as to be in a completely different classification chapter – from the non-originating inputs. For example, wheat flour is classified as 1101, and may come from outside the trade area to be used in pasta classified as 1902. The resulting pasta qualifies for a Certificate of Origin, because it has “shifted” to chapter 19 from chapter 11.
3. Even if the manufactured product uses mixed inputs and does not experience a tariff shift, it may still qualify as originating goods under the NAFTA under the de minimus rule, which allows goods to originate provided the non-originating materials used in the finished product do not exceed 7% of the inputs used.
Certificate of Origin
If a product qualifies as originating under one of these three criteria, a Certificate of Origin must be completed by the exporter and be in the possession of the importer at the time the declaration is made. The exporter may fill out the form in the language of the exporter or of the import country. All NAFTA countries use a uniform NAFTA Certificate of Origin printed in English, French, or Spanish. Additionally, the invoice accompanying the commercial importation must include a statement certifying that these goods qualify as originating.