Barnes/Richardson attorney Lawrence Friedman during a Georgetown Law School event last week said the largely exporter-driven process can leave importers in legal limbo.
The North American Free Trade Agreement’s (NAFTA) current origin verification system is too exporter-driven, and legal responsibility for certifications of goods doesn’t sufficiently transfer to the import venue, Barnes/Richardson attorney Lawrence Friedman said Thursday during the Georgetown Law School 2018 International Trade Update event.
“A company that relies on a bad certificate of origin ends up being the party that ends up paying the duties, makes the government whole,” Friedman said in response to an audience question that touched on differences between NAFTA’s verification structure and those of more modern agreements. “I understand that [as a government], you can only get money from who you can get money from, but I’m not sure that that’s an insoluble problem, if you’re negotiating [NAFTA].”
A senior Trump administration official declined to comment on whether the U.S. is seeking through the NAFTA renegotiation to change the pact’s rules for certification of origin.
The U.S., Canada, and Mexico on March 5, in Mexico City, finished the seventh round of the NAFTA renegotiation, which started in August. The eighth round of NAFTA talks is tentatively set for early to mid-April.
CAFTA-DR and the Korea-U.S. Free Trade Agreement (KORUS), for instance, expressly state that no country party to those agreements may require “an exporter or producer” to “provide a written or electronic certification to another person.”
Any one of several different forms of evidence can be used to validate goods’ origin for purposes of CAFTA-DR and KORUS preferential tariff treatment.
Under both more recently concluded deals, importers may submit duty-free claims based on written or electronic certifications by the importer, exporter, or producer; or based on the importer’s knowledge that the good originates within the free trade agreement’s territory, including “reasonable reliance” on information in the importer’s possession that the goods are originating.
NAFTA, however, generally requires that exporters, not importers, complete and sign a certificate of origin to validate the location of where the goods were produced for preferential tariff treatment purposes.
NAFTA also provides for producers to voluntarily furnish completed and signed certificates of origin to exporters for verification purposes.
Under NAFTA, origin verification is “done in a foreign country,” Friedman said.
“The problem from the trade perspective is that, then, enforcement and liability doesn’t follow that,” he said.
NAFTA currently puts importers “at the mercy” of obtaining information from the exporter, and it would benefit the trade community for NAFTA governments to adopt “better guidelines” for their ability to rely on supplier representations with regard to customs enforcement actions,” Friedman said.
“I know that from a governmental and enforcement standpoint, that that’s a tall order, but why can’t you?” he said. “What an importer will tell me is, ‘I got a certificate of origin. My broker looked at it, and said it’s OK. There’s nothing obvious[ly aberrant] in the four corners of the document. Why am I responsible for that?’ It’s tough.”
Speaking from the audience, Daimler Trucks North America senior manager for international trade compliance Roberta Major noted that most suppliers, who are further removed from the trade process, aren’t aware of NAFTA rules of origin.
“Working with suppliers, you find out in talking with them that they merely copied from whoever else was doing it before,” she said.
She added that traders normally “can’t rely” on origin representations “without the belt and suspenders to actually go back and validate that that supplier knows,” and that Daimler regularly conducts training exercises for best verification practices.
Friedman responded that that approach isn’t always realistic for importers.
“When you talk about an environment that is increasingly driven by ecommerce, by situations where people are buying on a short turnaround for just-in-time delivery, possibly with suppliers that they don’t know…not every company can do what you’re doing, which is exactly the right thing to do, and exactly what we would advise everyone to do,” he said. “But it’s not necessarily realistic for the entirety of the importing world.”
NAFTA origin process can be streamlined, lawyer says
