A free trade agreement is an agreement between one, two or more countries. And the idea behind the free trade agreement is to foster financial benefits between the two participating countries. It allows countries to move goods and services through their borders, paying less duty than the normal transactions would take place. There are currently the United States currently has 14 free trade agreements which cover over 20 countries. These agreements help the countries deal with the United States and helps us move goods into their countries much swifter and at a better financial arrangement than without the free trade agreement.
The USMCA, which is the agreement between the US, Canada and Mexico, formerly NAFTA, carries four conditions that must exist in order for people to take advantage of USMCA. The goods must qualify according to the rules of origin Under the USMCA, they must ship from a USMCA country, which is Canada, the U.S. and Mexico. The USMCA declaration must be properly completed - that's something where we find a lot of errors. The importer must collect and maintain the support documentation to show that the goods qualify for free trade between the US, Mexico and Canada.
We hope you will gain some valuable insight into the world of customs tariffs. With all the supply chain challenges the world is facing, our aim is to maximize your duty drawback dollars and boost your bottom line. We hope you'll subscribe to our podcast to stay current with each new episode in which will unveil numerous ways to improve your international trade profitability. Thanks for listening.
A free trade agreement is an agreement between one, two or more countries. And the idea behind the free trade agreement is to foster financial benefits between the two participating countries. It allows countries to move goods and services through their borders, paying less duty than the normal transactions would take place. There are currently the United States currently has 14 free trade agreements which cover over 20 countries. These agreements help the countries deal with the United States and helps us move goods into their countries much swifter and at a better financial arrangement than without the free trade agreement.
The USMCA, which is the agreement between the US, Canada and Mexico, formerly NAFTA, carries four conditions that must exist in order for people to take advantage of USMCA. The goods must qualify according to the rules of origin Under the USMCA, they must ship from a USMCA country, which is Canada, the U.S. and Mexico. The USMCA declaration must be properly completed - that's something where we find a lot of errors. The importer must collect and maintain the support documentation to show that the goods qualify for free trade between the US, Mexico and Canada.
We hope you will gain some valuable insight into the world of customs tariffs. With all the supply chain challenges the world is facing, our aim is to maximize your duty drawback dollars and boost your bottom line. We hope you'll subscribe to our podcast to stay current with each new episode in which will unveil numerous ways to improve your international trade profitability. Thanks for listening.
Good afternoon. My name is Jill LaMadeleine, and I'm the vice president at International Tariff Management. I'm a licensed customs broker with over 28 years of experience. International Tariff Management is a fully licensed customs broker, and we specialize in duty drawback classification and free trade agreements. We have over 35 years of experience working with not only CBP, but with a multitude of industries and across the United States. Joining me today are two of my colleagues, and I'm going to ask them each to introduce themselves. My name is Jay Charkow. I'm the president of International Tariff Management. I'm one of the founders. 35 years ago, we have I have worked with the US Customs for all of that time. We have very good relationships with the CBP. We have our corporate office in Connecticut. And we have some branch offices in Florida. And I'm Carrie Erwin. I am the director of sales for International Tariff Management. I have 20 plus years across a couple of different industries, as well as different size companies as well. Today we are going to be discussing the opportunity to take advantage of free trade agreements. So Jay, what exactly is a free trade agreement. Thanks for asking, Carrie. A free trade agreement is an agreement between one, two or more countries. And the idea behind the free trade agreement is to foster financial benefits between the two participating countries. It allows countries to move goods and services through their borders, paying less duty than the normal transactions would take place. There are currently the United States currently has 14 free trade agreements which cover over 20 countries. And these agreements help international trade help the countries deal with the United States and helps us move goods into their countries much swifter and at a better financial arrangement. Then, without the free trade agreement. And the one that people are probably most familiar with would be USMCA, Joey, want to tell us more about that? Sure. The USMCA, which is the agreement between the US, Canada and Mexico, and a lot of people know it according to its former name, which was NAFTA, it there are basically four conditions that must exist in order for people to take advantage of USMCA. The goods must qualify according to the rules of origin Under the USMCA, they must ship from a USMCA country, which is Canada, the U.S. and Mexico. The USMCA declaration must be properly completed. And we're going to get into that a lot because that's something where we find a lot of errors. And the importer must collect and maintain the support documentation to show that the goods qualify for free trade between the US, Mexico and Canada. Great. I find that when I'm speaking to our clients or potential clients, their vendors are asking for us some us MCI certificates. Yes. So it is the exporter who has the knowledge of what the good is and what goes into the good. And they're shipping it to their customer. And their customer wants to qualify it for preferential treatment so they don't have to pay duty on it when they import it into their country. And that's where completing the certificates is, is the utmost importance. And the rules are complicated when it comes to the free trade agreements. And we're going to talk specifically about USMCA. I think, because it's the one we come across the most and most of our clients are interested in. And I think that also I think most of the rules are similar in all of the trade agreements that we have. And there are differences. And clients must be aware of that. And we're aware of it. So if you're if you're dealing with Singapore or if you're dealing with Australia or if you're dealing in Chile, one of the other countries, it's important to make sure that your certificates comply with the rules that are in that free trade agreement. But basically, the rules are similar. I would say they're not the same exactly, but they're similar. And one of the things we have found in creating these certificates is that many, many companies create a certificate as a blanket, and they think everything is the same. In fact, we have had companies that are using NAFTA certificates to try and comply with the USMCA, and they don't really understand the differences. And the differences, as Jill pointed out, are very complex. For example, in order to start the free trade agreement certification process, one must first classify the goods. And classifying the goods is a very difficult process. We have had numerous webinars discussing the classification of imported goods, and it is extremely important that classification be done properly because once you classify the goods for a free trade agreement, then you go into the rule that applies to that harmonized tariff number. And that harmonized tariff number creates the rule that you must follow. And if it's misclassified, then you're really classifying the wrong material. And when the governments of and using the USMCA as an example, the government of Canada or the government of Mexico will look at that and say that this could is improperly classified, your certificate is wrong, and you might have to pay the duties that were eliminated because of the relationship between the US and RCA. Right. The classification is the springboard. Everything is based on the classification. The rules for qualification and what rules you can use. It all starts with the classification and those who didn't see our classification webinar should go back and listen to it and see how important that process is and how intricate it can be leading you to this process. And then you touched upon the first step is is classifying the product. Which leads into determining the rule of origin and you determine how how the item can qualify. And the next step is to survey determining the preference criteria. So every product that falls under USMCA has to be assigned a preference criteria. And there are four and they are A, B, C, and D and preference criteria. A is only items that are wholly obtained or produced in the United States. So obviously these. Must be very few. Items. Yes, there are very few. And obviously if something is grown here, it also covers livestock. It qualifies as a good of the US. So you can claim preference criteria. A We see clients who are using preference criteria A and we know these goods are not wholly obtained or produced in the United States and if we know it, Customs knows it. We have had clients that have submitted certificates to it specifically the Canadian Customs Service with a on it that are automotive products and those are not grown in the United States. And what happens, as I mentioned before, many people that are creating these NAFTA's certificates do not have the experience that needed or the background or the knowledge to do it. Many of them have been passed on from their predecessor in a particular job, and they are just redoing and it has done in the past. And as I mentioned before, this can create a problem, a financial problem for these companies. Or just add on items to an existing certificate, which you cannot. Do. Exactly. Yes. You must look at each product individually. You can't just lump them together. The second criteria, preference criteria is very, very complicated. And that's the one where most goods fall under. And there are two primary situations here, and we're not going to get into all the details. This is a very cumbersome and detailed process. The point of this presentation in this webinar is to let you know that this is difficult and it takes Expertize and that most companies need some support in order to do this. But there are two ways to classify things under the preference criteria of preference criteria. B is items that don't originate here, but they qualify under two possible scenarios that. That's correct. Right. So the first scenario is called the tariff shift, and the second one is called the Regional Value Content Analysis. Do you want to talk about the tariff shift? We'll give it a brief description of what it is. A tariff shift is a good is imported into the United States. It has a tariff number on it. This product is then manufactured into something else that might have a different tariff number on it. For example, something might come in a product and you might use three raw materials to make that product to our imported, and one is of U.S. origin, the two imported ones. And again, I don't want to get into the nitty gritty details here of telling you what the CTS numbers are, but the two that come in have an S number because it's a specific product. And you have to compare that number to the number of the finished product. And a tariff shift means that the two imported products must change their tariff number in order to qualify. If they don't, then this good, if that was the rule of origin for that particular CTS number, then these this good would not qualify. And again, there is the importance of classifying things properly. You're classifying the components that go into the finished product. You have to properly classify the exported component. So there's a lot of classification involved. Exactly. And then we have the regional value content. Right. The regional value content is a very complex calculation. There are two ways to do it. One is the transact and value, and the other is the net cost method. Without getting into all the details, you have to take into consideration the cost of the raw materials the cost of manufacture and the cost of the finished product. And in order to qualify for, in this case, the USMCA if your rule says regional value content, you must qualify by one of the two methods. Again, it's complicated The the purpose of this webinar is not to get into the nitty gritty. It's just to indicate that you better be sure it's being done right or that you can lose the preference that the free trade agreements have been giving you. And we have that they don't need this knowledge. We have the knowledge. So if they hire an expert like us, we can tell them which one is appropriate based on what they're trying to use. Absolute And Jill, you had mentioned there were four. Preference preference. Criteria. Correct? So preference criteria would be which we talked about with the tariff shift and the net calculations is the most popular. Most things that people are qualifying for USMCA is buying under preference criteria B, but there's also preference criteria C, which covers products that are produced entirely in the territories or one or more than one U.S. and the eight countries. And preference criteria D, which is less common, is ownership of goods and goods classified with their parts. And where as a is a preference criteria that customs sees and sort of a red flag waves preference criteria is also not as popular and not as used. So if you have preference criteria deem better, be sure it falls under preference criteria because that's going to alert customs that. Wait a second, how are you coming across with preference criteria? D But there are four basic preference criterias, and that's the next step to the classification. One of the interesting things about putting out a certificate a certificate of USMCA or one of the other ones is that it must have the proper information. And what that requires you to do and when we do it for our clients, you need to go back to your vendors and get the documentation to support the fact that their products are classified properly and their origin is specific. In today's market, there's a lot of goods coming in from China and there's high duty rates and you have to make sure they are classified properly and if they're not. Again, as we said before, the whole process has been started off wrong so that it needs to be followed up. And again, as Carrie pointed out, this is something that we do. We don't we take this responsibility away from our clients so they don't have to have all of this expertize. So how can our clients, Jill, be confident that their certificates are completed accurately Well. If they are working with their certificates and they are completing them themselves, they need to have the knowledge of the product which they have. It's their product. The knowledge of the age. Yes, the knowledge of the free trade agreement that they're taking advantage of. And also a knowledge of the H-2A. So they need to have a multi informational system available to them. And a lot of our clients have that knowledge of the product, but they lack the knowledge of the other pieces. And then after the USMCA, excuse me, rules and what is required for the certification process, and that's where we come in. And those are those are many of the mistakes that we find. We find, I think we've harp to permit the classification errors. We find forms that are completed inaccurately. They have the wrong preference criteria. They have the wrong support documentation. We also find people who are still completing NAFTA's forms. And it's been several years since NAFTA has been in effect and you must use the USMCA declaration. So those are the things that people need to be aware of if they're taking advantage of these programs, they need to make sure all those processes are followed. That it's correct and complete. Exactly. There are also cases where specific case where you can import something, uh, that is foreign. And for example, you can bring in clay from a South American country, and you can make a ceramic mug out of that, and you can export the mug there's nothing of U.S. origin in that except that you've manufactured in the U.S. and you can ship it to Canada. The advantage here is that the tariff number has changed. And the rule for a mug says that the tariff number, the way you get NAFTA, where you get USMCA certification, is to use the tariff shift. In this particular case, the tariff of these clay coming in is different than the tariff number of the mug going out. It's gone through a tariff shift and therefore it qualifies for U.S. MCI. So here's an item that's come in from a foreign country been put together here in the US. The rule says it's a tariff shift. It's gone through the tariff shift. And one can get benefit of the USMCA and there's no U.S. material in it. And I think it's important to mention we work with many companies in preparing their US embassy declarations or other participation in other free trade agreements. And a lot of them are overwhelmed. They source tens of thousands of components from vendors all over the United States. And we work with those vendors and we approach the program. We have the support in-house to work the program and go back to every single vendor for every single part so that they can ensure that each component is being accounted for rather than doing a sweeping preference criteria b they all qualify. Here you go. They can ensure that they're doing it properly and that every component and every vendor has been looked at so they don't end up in trouble with Canada. The other thing is, should be they should be aware of is this has to be done every year. And things change, sourcing of materials change. And it's required that our clients, that we have everyone is looked at every year and sometimes they change during the year. If a sourcing situation in July is changed, one must re look at the certificates to make sure that they qualify. So it's not a one time thing. It's an ongoing process that needs to be maintained in order to comply with the regulations. And the bottom line is we are the experts that can absolutely save you time by managing this whole program for you. Save you time and do it accurately. Right. And make sure everything is processed properly. So I think that, you know, we talked about how we don't want to get into the nitty gritty because it's not important for people to know how to do it. But if people have a possibility to participate in free trade agreements and it could be USMCA, it could be one of the other 14 that are available, they should reach out to help. Reach out to ITIN our information is listed here and we will absolutely get back to you and help you with this process. Well, thank you all for joining us today. As we talked about free trade agreements and what goes into certifying items to participate in a free trade agreement, we encourage you if you're being contacted by your customers and they're asking you for certificates or support documentation for free trade agreements, let us help you. This is what we do and the process is involved and intricate. And you don't need to do it yourself. We can support you. So the contact information is on the screen. And if you reach out to us directly, we'd be happy to help you. And thanks again for joining us.