Rules of Origin

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WCO Revenue Conference
Mexico’s 20 years experience
of implementing the NAFTA agreement,
Rules of Origin
July 1st, 2014
CONTENTS
GENERAL INFORMATION
NAFTA TRADE VOLUME AND TRENDS - GDP
VERIFICATION SYSTEMS
VERIFICATION PROCEDURES
VERIFICATION CASES
COMMON IRREGULARITIES DETECTED
GENERAL INFORMATION
Until today, Mexico has signed 11 Free Trade Agreements with a total of
45 countries, containing each of the agreements their own verification of
origin procedures .
No.
TREATY
DATE OF SIGNATURE
1
NAFTA
12/17/1992
2
Colombia
06/11/1994
3
Chile
04/17/1998
4
EU-Mexico Free Trade Agreement (TLCUEM)
03/23/2000
5
Israel
04/10/2000
6
European Free Trade Association (TLCAELC)
11/27/2000
7
Uruguay
11/15/2003
8
Japan
09/17/2004
9
Peru
04/06/2011
10
Costa Rica, Salvador, Guatemala, Honduras y Nicaragua
(Central America-Mexico)
11/22/2011
11
Panama
03/04/2014
GENERAL TRADE VOLUME AND TRENDS - GDP
Mexico relies on international commerce to sustain its economic stability. The imports combined with the
exports form a core component of our economy. Trade transactions in Mexico accounted for 63.1% of
the GDP 2013.
Commercial Flows and its relation to GDP (2003-2013)
(billions USD)
962.40
1,034.12
1,075.49 1,106.24 1,108.92
1,028.73 1,007.90 1,049.62
972.30
960.03
866.50
50.6%
53.1%
487.2
509.9
2003
2004
55%
568.8
57.1%
58%
58.2%
613.7
641.5
645.5
59.5%
52%
578.9
61.9%
62.9%
63.1%
637.0
633.9
662.1
2011
2012
2013
450.5
2005
2006
GDP
Source: INEGI data (2013) - http://www.inegi.org.mx/sistemas/bie/
2007
2008
2009
2010
Comercial Flows (Imports + Exports)
NAFTA TRADE TRENDS
•
•
Within the block of North America, Mexico's trade, along with its partner countries, went from 30.7% of
the region's total in 1993 to 46.9% in 2013, reflecting the importance of Mexico as a trading partner of
Canada and the United States.
In 2013 the imports from the NAFTA region represent 53% and exports 81% of the total, (the USA
accounts for 96% of the commercial flows).
Imports and Exports from the NAFTA Region (USA and Canada) (1993 – 2013)
(billions USD)
600.0
500.0
400.0
300.0
200.0
100.0
0.0
1993 1994
1995 1996
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
2011
2012
2013
Year
Exports NAFTA
Source: Ministry of Economy. 2014
Imports NAFTA
(Imports + Exports)
NAFTA TRADE TRENDS
•
•
In 2013, the trade flows between Mexico and Canada presented a decrease of 2.5%, reaching $20,299
million USD. This value represents a growth of 741% in trade since NAFTA came into force, translating
into an annual growth rate of 11.3% between 1993 and 2013.
Regarding trade statistics between Mexico and the USA, in 2013 the exchange of goods presented an
increase of 2.9% reaching $486,790 million USD. This represents a growth of 552% since NAFTA came
into force; reflecting an annual growth rate of 9.6% between 1993 and 2013.
(billions USD)
600.0
25.0
500.0
20.0
400.0
15.0
300.0
10.0
200.0
5.0
100.0
0.0
0.0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Comercial Flows USA
Source: Ministry of Economy. 2014
Comercial Flows Canadá
2011
2012 2013
Canadá
USA
Imports and Exports from the NAFTA country’s (1993 – 2013)
NAFTA TRADE TRENDS
During 2013, over 75% of NAFTA’s commercial flows concentrated in three sections: 31.78% correspond to
section XVI-Machinery, 25.10% to section V-Animal products and 21.57% to section XVII-Transport
equipment.
NAFTA trade flows in 2013
Percentage
13.9%
4.33%
3.26%
31.78%
21.57%
25.10%
Section XIV Precious Stones & Articles
Section II Vegetable Products
Section XVII Transport Equipment
Section V Animal Products
Section XVI Machinery
Others
Source: Ministry of Economy. 2014
TOP FIVE COUNTRIES BY IMPORT & EXPORTS
VALUE
•
In 2013, the United States remains our top trading partner (in terms of imports and exports) with
78.7%.
•
During 2013, 77% of the total imports originated from 5 countries, the U.S.A. represented 49.1% of
the total imports, followed by China and the European Union (16.1% and 11.2% respectively).
Exports
78.8%
Imports
49.1%
16.1%
11.2%
USA
5.2%
2.7%
1.9%
UE
Canadá
España
1.7%
China
USA
China
UE
4.5%
3.5%
Japan
South
Corea
Source: Ministry of Economy 2013 - http://www.economia.gob.mx/comunidad-negocios/comercio-exterior/informacion-estadistica-y-arancelaria
NAFTA’S JURISDICTION- VERIFICATIONS OF ORIGIN
The Jurisdiction on NAFTA
Origin Verifications is exclusive
to the Tax Administration
Service
Within SAT, NAFTA Origin
Verifications are the
responsibility of the General
Administration for Foreign Trade
Audit
(SAT for its acronym in Spanish)
(AGACE for its acronym in
Spanish)
VERIFICATIONS OF ORIGIN
Verification of origin procedure according to NAFTA: :
•
The processes are carried out in accordance with Article 506
are questionnaire and verification visits.
•
The questionnaire is sent in English, as well as an official
document in Spanish, accompanied by a courtesy
translation(this document has no legal effect)
•
SAT’s contact information of who is in charge of
conducting the audits is contained within the official
document, including email, phone number, address and fax
numbers.
•
There is no specific time frame for Origin Verifications, it can take up to 4 months average. However, this
depends on products, number of transactions subject to the audit and the complexity of the rule of origin.
Verifications can take up to 10 months.
•
For more information in English on origin verifications can be found on www.sat.gob.mx.
VERIFICATION SYSTEMS
NAFTA IMPORT PROCEDURES
Manufacturers
Manufacturer and/or Exporter
Signs a C.O.
Goods are
imported to
Mexico subject
to a 0% import
tax
Mexican importer receives the C.O.
and files it before Mexican Customs
NAFTA provides a preferential tariff treatment for goods which
originated from Mexico, Canada and the United States.
VERIFICATION PROCEDURES
In order to determine the goods to which a preferential tariff treatment applies to,
NAFTA provides the following set of rules:
 Uniform Regulations, which will reassure
 Advanced rulings issued by the National
the application,
administration and
coherent interpretation of chapter IV and V.
 A uniform certificate of origin, including
the requirements of certification and
procedures which will need to be followed
by importers and exporters who claim a
preferential tariff treatment.
 Importers and exporters appeal rights
are common.
Customs Authority of the importing
country.
 A tri-national group that will be in
charge of any modifications to the rules
of origin as well as uniformed regulations.
 Specific timeframes to provide a prompt
solution to the controversies which
emerge between the signatory countries,
regarding the rules of origin.
VERIFICATION PROCEDURES
VERIFICATION OF ORIGIN PROCEDURES IMPLEMENTED BY
FREE TRADE AGREEMENTS TO WHICH MEXICO IS SIGNATORY
Types of Verification of Origin:
1. VO questionnaire addressed to the exporter/producer: Written
questionnaires are conducted to collect information and
documentation related to the origin of goods and later sent through a
special courier. (For instance, NAFTA, Chile and Colombia)
2. VO visits to the exporter/producer facilities: The factory or plant
where goods are produced receive a visit intended to acquire all the
necessary documentation. (For instance, NAFTA, Chile and Colombia)
3. VO applications to the authority of the country of exports or
production: the VO is executed by the authority of the exporter or
producer and the results are sent to the importer’s authority. (For
instance, NAFTA, Chile and Colombia)
VERIFICATION PROCEDURES
QUESTIONNAIRE TO THE EXPORTER AND/OR PRODUCER
The questionnaire is
notified
By courier (DHL, FEDEX,
UPS, etc.)
A sample of documents
can be filed within 30
days, followed by the rest
on a negotiated date
30 days to respond
No answer
Answer
(Denial intent of
Preferential tariff treatment)
30 days to
respond
OK
Subsequent
questionnaire notified
Additional
information request
(Denial intent of
Preferential tariff treatment)
Final resolution of origin
( 4 to 10 months)
Information or
documents not
accurate or
insufficient
30 days to
respond
VERIFICATION PROCEDURES
98% of the total procedures completed in the NAFTA region during the fiscal
year of 2013, where executed on imports from the USA.
Year
VO Questionnaires
VO Visits
USA
CANADA
USA
CANADA
2008
86
5
25
0
2009
148
7
35
0
2010
253
18
28
0
2011
267
4
20
0
2012
245
22
20
0
2013
158
4
3
0
2014
55
0
44
0
Sensitive industry sectors:
TEXTILE - FOOTWEAR – ELECTRONICS - STEEL
VERIFICATION CASES
Analysis on Rules of Origin

Annex 401 of NAFTA provides the specific rule of origin which is applied to determine
whether a good qualifies as an originating good under the terms of NAFTA.

Most of NAFTA rules of origin for Textile and Apparel goods are “Yarn Forward” and
“Fiber textiles Forward” meaning that depending on the case the fabric must come
from NAFTA yarn or NAFTA Synthetic or natural Fibers Textiles, and the good
must be cut (or knit to shape) sewn or otherwise assembled within NAFTA territory.
e.g. Crude polyester staple fiber,
is not required to be originating.
Synthetic textile fibers as well as
yarn for fibers, shall be NAFTA
originating.
Cutting and sewing of the
fabric, shall be done within a
NAFTA country.
The producer and/or exporter that signs a Certificate of Origin shall have the knowledge and necessary
documents in order to proof all prior conditions.
VERIFICATION CASES
EXPORTER / PRODUCER RESPONSIBILITIES DURING AN
ORIGIN VERIFICATION
Exporters/producers must cooperate with authorities during
the procedures and send complete and accurate information.
Exporters/producers must have the documents and necessary
information to demonstrate their knowledge regarding the
origin of goods.
In a timely manner, exporters/producers must answer the
questionnaire or visit proposal as well as inform importers
regarding any change that might affect the certification.
MOST COMMON IRREGULARITIES DETECTED
DURING ORIGIN VERIFICATIONS
Thank you!
General Administration for Foreign Trade Audit
International Affairs Central Administration
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