Take Advantage of NAFTA to Boost Profit MarginsSeptember 9, 2015
As a small business owner, finding ways to reduce costs is critical. One great way to do just that is to take advantage of international trade programs, such as NAFTA. When you qualify the goods you ship under NAFTA, you can reduce – and in some cases entirely eliminate – any duties associated with the shipped product.
The challenge comes in figuring out whether or not your goods qualify. You’ll need detailed information about their entire production process, and you’ll need to know the correct tariff classification as well.
Here are three steps to help you figure out if your goods are eligible to benefit from reduced duties.
- Determine the tariff schedule classification number for the product, and its components and raw materials.
The NAFTA rules of origin are organized by tariff classification code, and each code has specific rules. You can use your Schedule B numbers to help determine the classification as the first six digits of the Schedule B number are part of the tariff classification code.
- Assess the duty rate for the product under the General rate of duty (U.S.) or the Most-Favored-Nation (MFN) tariff agreement (Canada).
In the U.S., under the Harmonized Tariff Schedule (HTS), look to the special column for the tariff agreement code to see if the product is eligible for a preferential tariff treatment. In Canada, the MFN agreement allows for countries to form trade relationships where one nation grants another MFN status so that they benefit from reduced tariffs and duties.
Under the Canadian HS, the applicable preferential tariff column will indicate applicable trade agreements and their associated duty rate.
- Qualify your goods.
Chapter four of the NAFTA agreement outlines the requirements for goods to qualify for reduced duties under the NAFTA agreement. In order to be eligible for NAFTA treatment goods must meet the criteria of one of the possible rules of origin.
Products don’t automatically qualify for NAFTA because they’re manufactured by, or purchased from, a company from a NAFTA-member country. Every product must meet the requirements specified under NAFTA.
If your goods qualify for NAFTA tariff treatment, your next step will be to complete the Certificate of Origin and submit it with your shipment to Customs.
These three steps are just a starting point. Ultimately, you need to have in-depth knowledge of your products and a meticulous audit trail to make the most of NAFTA.
But when you do, the cost savings can make a big difference to your bottom line.
If you need more information on free trade agreements, Schedule B, Most Favoured Nation or any other part of NAFTA qualification, it’s a good idea to reach out to a customs broker. A good broker will have extensive knowledge and experience dealing with NAFTA shipments, and should be able to provide educational resources to help put you on the right path.
Livingston, one of North America’s most trusted brokers, has a special two-part webinar on NAFTA that will help you understand the basics of qualification and help you mitigate any NAFTA-related compliance risks, so that you can start saving money on your shipments. It’s free and available to watch on-demand, anytime. Check it out today!
Livingston’s Trade Advisors are also available to help answer any questions you may have. Reach out to us at 1-844-655-6411. And remember, NSBA members get access to exclusive rates – as little as $35 per transaction – when partnering with Livingston for customs clearance. To learn more click here.
* This article was contributed by Ilsie Berlanga, Director of Marketing, Small Business at Livingston International, an NSBA corporate partner