NAFTA for Entrepreneurs

One of the most controversial and hotly debated trade measures in recent memory, The North American Free Trade Agreement (NAFTA) was ratified in 1994 to speed, simplify and increase trade among the United States, Canada and Mexico.

Essentially, NAFTA eliminates tariffs and quotas on goods

traded in North America -- as long as the goods originate in one of the three countries. That sounds simpler than it is. For example, blue jeans assembled in Mexico and sold in the United States may or may not qualify for NAFTA benefits depending on where the fabric, zippers, buttons and various other parts were produced.

Irrespective of the charges and counter charges concerning NAFTA's possible negative effects on the U.S. job market, NAFTA has a dramatic impact for small companies hoping to engage in import-export activities. Basically, NAFTA makes trade within North America much simpler and less expensive than importing and exporting offshore.

NAFTA Compliance
NAFTA compliance is primarily a matter of good documentation and attention to detail. The Certificate of Origin is the most important NAFTA document. You must have a Certificate of Origin in your possession at the time you declare your goods to Customs, but you do not have to actually present it unless it's requested.

Depending on the complexity of your operations, obtaining the proper certificates and forms from each and every supplier throughout North America can be a time-consuming and expensive endeavor. It's virtually impossible to clear a shipment through customs without actually being there in person or paying an agent or broker to take care of all the paperwork.

Record Keeping
It's very important to keep a copy of the Certificate of Origin on hand -- even after goods have been cleared through customs. Mexico requires companies to hold on to certificates for 10 years. Canadian officials require importers and exporters to keep the certificate for six years, while the United States enforces a five-year holding period for the certificate and for associated records (invoices, packing lists) that support that the materials and production comply with NAFTA.

Goods of low value are exempt from the Certificate of Origin requirement. Mexico defines low value as $1,000 or its equivalent in any other currency, Canada's low value definition is less than $1,600 Canadian dollars and the United States defines low value as less than $2,500.