Reminder on NAFTA’s Affect on Duty Deferral Programs

Issue 11, January 21, 2009

DHL Global Forwarding would like to remind our clients of the requirement to process NAFTA Duty Deferral (NDD) on certain entries temporarily imported into the US from off shore and then exported to Canada or Mexico. NAFTA Duty Deferral applies to goods entered into the USA under Foreign Trade Zone (FTZ) entries, Bonded Warehouse entries, or under Temporary Importation Bonds (TIB) from non-NAFTA countries, processed in the United States, and exported to either Canada or Mexico.

Under NDD, when the processed goods are exported to another NAFTA country a NAFTA Duty Deferral entry must be filed within 10 days of the exportation. At the time of exportation the importer is required to pay the duty that would have been due if the importer did not use a duty deferral method. In other words, if the importation would have normally drawn a duty of $900 upon importation, under the NDD program that $900 would be paid when the good is exported to Canada or Mexico. This duty amount may be reduced by the amount of duty paid to Canada or Mexico upon the importation in that country. As an example, if the US party imports a product into the US under an FTZ entry, processes that product and sends it to Canada, the shipment will be subject to NDD. If the US duty would have been $900 and the Canadian duty will be $800 the importer owes U.S. Customs $100 and owes Canada $800. If the Canadian duty will be $1000, the importer does not owe U.S. Customs anything, but still must file the entry. The importer must file the claim for the reduction or waiver of the duty within 60 days of exportation. Antidumping Duty is not subject to waiver or reduction and will be charged in full.

Certain duty deferral activities do not attract NDD. They are:

1. A good traveling through the US under a transportation bond (T&E).
2. A good exported from the US to be delivered to a duty free shop, ship’s stores or international project between the US and the other NAFTA country.
3. A good being exported with duty drawback as not according to order.
4. A good that qualified as a NAFTA originating product when it was imported.
5. Raw cane sugar exported as processed sugar.
6. A citrus product exported to Canada.
7. A good used as a material in the production of apparel exported to Canada under Canada’s most favored nation rate.
8. A good exported to a NAFTA country in the same condition as imported into the U.S.

The term “same condition” includes goods that have been subjected to the following operations provided that the operation does not materially alter the characteristics of the good.

1. Mere dilution with water or another substance;
2. Cleaning, including removal of rust, grease, paint or other coatings.
3. Application of preservative, including lubricants, protective encapsulation or preservation paint.
4. Trimming, slitting, filing or cutting.
5. Putting up in measured doses, packing, repacking, packaging or repackaging.
6. Testing, marking, labeling, sorting or grading.

If your shipment falls under the NDD rules, you must notify your Customs Broker at the time of importation and make arrangements for a NAFTA Duty Deferral export entry and your request for waiver or reduction of the duty if appropriate.

For more information please contact your DHL Global Forwarding representative.

Sincerely,
Karl F. Krueger
Regulatory Compliance Consultant
Licensed Customs Broker
NCBFAA Certified Customs Specialist