The USMCA is scheduled to take effect on July 1st. Here are a few key points from an informative webinar presented by Dan Gardner of Trade Facilitators, Inc.

NAFTA Certificate of Origin is going away. As detailed in Chapter 5 of the agreement, a certification statement is replacing the NAFTA Certificate.

The statement can be prepared by exporters and also by importers who must provide back up details if requested. There is no prescribed format for the certification statement but it must include minimum data elements as listed in Annex 5-A.

Country of Origin statement can be included on the commercial invoice and electronic format may be used with e signature.

I just participated in another very informative KPMG webcast. The topic was The USMCA Trade Deal- The Way Forward. Here are some highlights from my notes:

• USMCA is not NAFTA 2.0, it is much more complex
• Full ratification is expected by all 3 countries when Canada completes review by early March 2020
• In force 3 months later most likely July 2020
• Summary of outcomes includes 5 areas…. Labor, Dispute Settlement, Environmental Provisions, Intellectual Property Rights, Rules of Origin
• Overview of Agreement; 34 chapters, 13 annexes, 12 side letters
• Includes uniform regulations and marking rules (not yet released) for all 3 countries

In the biggest differences with the NAFTA agreement, USMCA includes new regulations in the areas of digital trade, e commerce, rules of origin, express shipments, de minimis allowance, and environmental standards. No doubt these changes will have a big impact on supply chains. Trade professionals will be challenged as they get up to speed.

Just participated in a KPMG Tax Watch webinar on Country of Origin- Substantial Transformation.

The presenters did an excellent job, as usual, covering a lot of detail. Some of the information served as a refresher to me, while other segments offered new material. Here are my takeaways:

• Marking rules of origin- Part 34….articles wholly obtained from one country.
• Rules of origin- Part 102…pertain to NAFTA and other FTAs
• Preferential rules of origin can be found in FTA General Notes…HTUS
• Other…Product of Jurisprudence applies substantial transformation test
• Note- 2 sets of rules can apply to same transaction…marking or tariff rules

Substantial Transformation Rule….used to determine country of origin if articles or components are not wholly obtained from one country…Does article have new name, character, or use?

• Change in character- altered physical characteristics of article or components. Were changes cosmetic? What was the process that resulted in change?
• Change in use- Is end use of article interchangeable with end use of components? Is end use of component predetermined at time of importation? What was the process that resulted in change of use? Predetermined end use generally precludes substantial transformation but subject to specifics of article/components in question.
• Change in name- this is the least compelling of the factors supporting substantial transformation. Do components retain original name after processing?
• Subsidiary/Additional Factors- extent and nature of operations (complex or simple); value added and/or cost incurred during transformation process; essential character of article (components transformed into finished product); change from producer to consumer good; tariff shift.

The Role of Software of Firmware

• Mere downloading of software or firmware does not generally result in substantial transformation.
• Software development location is given more weight than where downloaded.
• Software which enhances existing functionality is generally not considered substantial transformation.
• PCB manufacturing is complex and each situation needs to be considered separately re: Country of Origin and Substantial Transformation.

KPMG Recommended Action Steps for Importers

• Develop well documented analysis or obtain binding rulings before importation.
• Train suppliers and trade partners and communicate plans.
• Conduct periodic internal audits and risk assessments.
• Documents policies and procedures.

Canada Border Services Agency has updated their customs tariff effective January 1, 2020.

Canada is the 2nd biggest US trading partner, ranking just below China. Here is a link to the Canada Customs Tariff 2020. For 10 digit harmonized codes, the first 6 are universal and the last 4 differ from country to country.

https://www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/2020/menu-eng.html

For assistance contact mitch@52.91.45.227

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January is a good month to review harmonized codes. The United States International Trade Commission has updated the Harmonized Tariff Schedule of the United States effective January 1, 2020.

Using obsolete codes can result in customs delays, inaccurate  duty assessments, or fines and penalties so it is a good business practice to check the tariff. While you are at it are you sure EAR99 and NLR apply to your exports?

For assistance contact mitch@52.91.45.227

In a previous post we discussed how to determine ECCN (Export Control Classification Number). Here is some additional information from BIS which can help.

 While it is true that many exported commodities can be designated EAR 99 and NLR (No License Required), it is important to first check for an ECCN. The correct ECCN is necessary in order to determine if a license is required for your shipments.

There are three ways to determine ECCN: 1) self classify, 2) consult manufacturers of commodities, 3) request a classification by BIS.

Here is a link to the CCL (Commerce Control List) Index which is a good place to start:

https://www.bis.doc.gov/index.php/documents/regulations-docs/2329-commerce-control-list-index-3/file

Here is a link to manufacturers’ commodity classification info:

https://www.bis.doc.gov/index.php/documents/licensing-forms/237-commodity-classification-information-1/file

For immediate assistance contact mitch@52.91.45.227

The November 2019 edition of Logistics Management magazine includes an excellent article on trade compliance. 2020 Trade Update: More Complexity in Compliance by Patrick Burnson is a worthwhile read for trade professionals.

Some of the complex global issues to be monitored are the US-Mexico- Canada agreement, US-China tariffs, and the status of Brexit. Compliance managers and shippers are advised to get back to basics irrespective of international trade agreements.

Here are a few takeaways from the article:

Incoterms 2020 – changes can impact the price paid for materials and products. Shippers should review DDP contracts to make sure they are being accurately invoiced especially in light of the China 301 tariffs.

Antidumping and Countervailing Duties  (AD/CVD) – CBP has increased focus on imports subject to AD/CVD . Internal controls and periodic assessments can help reduce risk.

HTS Classifications – Review of HTS and Schedule B classifications is one of the most basic compliance tasks. Tariff numbers are frequently changed, updated, or deleted. Failure to keep on top of this can result in customs delays and/or inaccurate duty assessments.

Bond Sufficiency- Recent changes to duty rates, especially China 301 tariffs, are requiring shippers to increase their bond amounts. The difficulty is in projecting duties, fees, and taxes over the next 12 months.

Preparation and Planning- CBP reports an uptick in mistakes from traders who are trying new strategies to save on tariffs. Experts recommend looking at data in the same light as CBP does and then establishing compliance procedures. A strategic approach toward Section 301 tariffs could be analyzing the biggest dollar amounts paid to see where changes can be made in your supply chain.

In summary the challenge for compliance and logistics professionals is to both get back to basics and, at the same time, pay attention to new regulations.

For immediate assistance contact mitch@52.91.45.227

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Just participated in a webcast on Expanding Duty Drawback Benefits in a Turbulent Trade Environment presented by KPMG Tax Watch. The presenters provided a good overview of the different types of drawback and their value as an effective Section 301 Tariff mitigation strategy.

The Trade Facilitation and Trade Enforcement Act of 2015 went into effect in 2018. All drawback claims must now be filed electronically in CBP’s ACE system.

The final topic “Drawback Reimagined” included a number of best practices for managing drawback programs suggested by KPMG. This was an hour well spent as both a duty drawback refresher and an update on TFTEA Drawback Modernization.

for immediate assistance contact mitch@52.91.45.227

#internationaltrade

Just received my copy of Incoterms 2020 published by the International Chamber of Commerce. The book is well structured and clearly written. Incoterms are updated every 10 years so there are significant changes in each version.

Incoterms 2020 presents the rules and explanatory notes in simple language along with useful illustrations. The introduction informs the reader about what Incoterms rules do and do not do. For example, Incoterms rules describe obligations, risk, and costs between buyers and sellers. Incoterms do not deal with title or ownership of the goods, which is a common misperception.

Some of the changes made to Incoterms 2010 rules in the Incoterms 2020 rules include:

• Bills of Lading with an on-board notation and the FCA rule
• Costs, where they are listed
• Different levels of insurance coverage in CIF and CIP
• Arranging for carriage with seller’s or buyer’s own means of transport in FCA, DAP, DPU, and DDP
• Change in the three-letter initials for DAT to DPU
• Inclusion of security-related requirements within carriage obligations and costs
• Explanatory notes for users

This post is not a book review but an introduction to a valuable resource for anyone involved in trade. I plan to study Incoterms 2020 and incorporate some formal training in the next few months so that I can provide guidance to clients.

contact mitch@52.91.45.227

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Are you a Deemed Exporter?

Engineering firms, software companies, researchers, manufacturers, and universities need to be aware of the “deemed export” rules. They may be engaged in export transactions without even knowing it.

Check out the Bureau of Industry and Security’s newest online training video, “Deemed Exports,” now available on the BIS Online Training Room at https://www.bis.doc.gov/index.php/online-training-room.