The Canada-United States-Mexico Agreement (CUSMA) is a crucial trade agreement between Canada, the United States, and Mexico. If you are a Canadian company that exports, imports, or otherwise trades with North American partners, it’s a good idea to understand what CUSMA is, and why CUSMA was created.
A significant requirement of this agreement is the certification of origin, which is necessary for claiming preferential tariff treatment and avoiding higher duties.
Quick Overview of CUSMA
CUSMA establishes clear rules and regulations governing the movement of goods and services across borders. It aims to encourage economic cooperation and maintain fair competition among businesses.
Dubbed ‘NAFTA 2.0,’ it was developed to address various trade-related issues and shortcomings of the North American Free Trade Agreement (NAFTA). The key difference between NAFTA and CUSMA is the inclusion of updated provisions related to labour, environmental standards, and intellectual property rights.
More About Origin Criteria
The purpose of a certification of origin is the qualification of goods, as detailed in Article 4.2 (Originating Goods). The origin of products and services are marked as A, B, C, or D (depending on the type of goods) and are employed to ascertain the country of origin of an item intended for export.
A is used when the good is “wholly obtained or produced entirely” in the CUSMA region. This means all components and processing occurred in Canada, the United States, or Mexico.
B is for goods produced in the CUSMA region but using materials from outside the region. The goods must satisfy the product-specific rules of origin outlined in annex 4B of the CUSMA agreement.
C is used for goods produced in the CUSMA region entirely from originating materials.
D applies when a good is produced in the CUSMA region and does not meet the requirements of criteria A, B, or C, but does meet other specific requirements laid out in the CUSMA agreement.
The person or entity completing the certification must describe why the product qualifies for the agreement’s benefits. The form must explicitly mention specifics of the CUSMA Rules of Origin to ensure the agreement’s terms are followed to prevent any customs-related issues or delays.
Impact of the Origin Criterion in CUSMA
The origin criterion in CUSMA provides Canadian businesses with preferential tariff treatment, translating into significant cost savings and heightened competitiveness in the North American market. These savings can be reinvested in product enhancements or passed on to consumers, bolstering market presence. The well-defined rules and transparency in the origin certification process benefit Canadian businesses by reducing compliance risks and ensuring smoother cross-border trade.
However, this criterion also poses challenges. It requires businesses to assess its impact on their imports and exports. Identifying products previously benefiting under NAFTA and ensuring compliance with CUSMA rules may require additional resources, too. Non-compliance can lead to customs delays, emphasizing the need for careful adoption.
Tips for Businesses
While the origin criterion offers substantial advantages, it demands thorough analysis and possibly process adjustments to maximize CUSMA’s benefits. Here are some ways to make the most of it:
Conduct a Thorough Analysis
Begin by conducting a comprehensive analysis of your imports and exports. Identify products that previously enjoyed preferential duty treatment under NAFTA and confirm that they still qualify by meeting the updated rules specified in CUSMA. This analysis will help you understand which products are eligible for preferential tariff treatment and which ones aren’t.
Consider how CUSMA compliance impacts your supply chain and explore opportunities to optimize your supply chain to align with the new rules of origin. Some products may no longer qualify for preferential tariff treatment under CUSMA, leading to increased import costs. Businesses need to plan for these changes and adjust sourcing and pricing strategies accordingly.
Educate Your Team
Provide training to your employees who are involved in the certification process–they should be knowledgeable about the specific origin criteria that qualify your goods for preferential tariff treatment. This will help avoid errors in the certification process.
Organize workshops or seminars focusing on CUSMA’s rules of origin and certification requirements. The sessions should be led by experts or industry professionals who can provide practical insights and real-world examples. Use case studies to illustrate the application of origin criteria in real-world scenarios; these practical examples help team members grasp the concepts more effectively.
Leverage Technology
Consider using trade compliance software or tools that can automate and help streamline the certification process and minimize the risk of errors. Trade compliance software can generate certificates of origin based on predefined templates, reducing the manual effort required. This streamlines the process, minimizes the risk of errors, and accelerates the documentation workflow.
Many trade compliance software solutions offer integration with other business systems, such as inventory management and supply chain software. Integration streamlines data exchange and ensures that origin criteria are consistently applied across various aspects of the business.
Consult with Experts
Consulting with CUSMA compliance specialists, including trade experts and customs professionals, can be highly advantageous for businesses handling intricate international trade. These experts conduct risk assessments to pinpoint compliance vulnerabilities and proactively mitigate potential issues. Their global trade expertise provides strategic insights, aiding in market discovery, international impact assessments, and informed expansion or diversification decisions.
disqus comments