In October 2014, Integration Point hosted a webcast on the topic of US Foreign-Trade Zones (FTZs) and NAFTA exporting.  The presenter, Rebecca Williams, Managing Director for the Rockefeller Group’s Foreign Trade Zone Services, spent the hour going through how companies using zones could also benefit from NAFTA qualifications when exporting.  During the webcast there were several questions that were not able to be covered due to time constraints.   Part 1 of the questions are below and deal with NAFTA benefits and eligibility. You can also view an on-demand version of the webcast here.

 

Q1. We manufacture items in our facility that qualify for NAFTA benefit.  After the zone is activated, do we lose this benefit? If so, why?

A1. The FTZ in and of itself does not preclude a producer from producing goods in the U.S. that qualify for NAFTA when imported into CA/MX.  If application of the NAFTA Rules of Origin to the U.S. produced goods still results in a determination of NAFTA eligibility, then the U.S. producer can certify the goods’ NAFTA qualification for importation into CA or MX. However, goods produced in an FTZ are not NAFTA-eligible when withdrawn from the zone for consumption in the United States.

 

Q2.  Does this mean that goods produced in a US FTZ are not considered to be NAFTA eligible in Mexico and Canada, but if they were produced outside of the FTZ they could be eligible?

A2. No. If a good produced in the U.S. is determined to be NAFTA-eligible by the producer using the NAFTA Rules of Origin in Chapter 4 of the NAFTA/General Note 12 of the USHTS (e.g., tariff shift, RVC, or both), then the U.S. producer can certify the goods’ NAFTA qualification for importation into CA or MX regardless of whether the good is produced in an FTZ.

 

Q3. Is there any duty reduction available if you are exporting from the US to Canada and Mexico but you are not the Importer of Record (IOR) in these countries?

A3. Yes. Regardless of who is the IOR into CA or MX, if the FTZ is subject to the NAFTA Duty Deferral regulations (imported goods manufactured or changed in condition in FTZ and subsequently exported to CA/MX) and the FTZ chooses to file an 08 entry (NAFTA Duty Deferral Entry) because there is a benefit to doing so, then the  amount of U.S. duties payable at the end of the 60-day period after exportation can be reduced by the total amount of duties paid by the Canadian or Mexican IOR at the time of importation of the finished good into those countries. The U.S. FTZ producer/IOR/exporter is the party that files the 08 entry and therefore accrues the U.S. duty reduction benefit on the finished good withdrawn from the zone.  Any approved inverted tariff benefits (duty reduction) from FTZ production activities are built into the finished good as well.  The claim of duty reduction based on duties paid in Canada or Mexico must be supported by satisfactory evidence as noted in 19 CFR §181.53(a)(3)(ii).

 

You can view the full webcast and hear all the Questions & Answers on-demand here.