Avoid NAFTA Penalties

Customs can reassess duty against the imported goods if they do not qualify for the NAFTA. Interest and penalties may also be charged.
Customs can reassess up to 6 years plus the current calendar year; similar to income tax. NAFTA includes provisions allowing foreign Customs officers to visit the producer for the purposes of determining whether or not goods qualify.

Liability and penalties
The importer is legally responsible to Customs in the event that there is an error in the certificate of origin. The importer will have to pay any additional duty, interest and penalties arising from that error. In Canada, this liability is covered by the Customs Act. Failure to pay the additional duty, etc. may result in the seizure of future imports.
The importer must keep records pertaining to Customs importation, including copies of certificates of origin, for a period of 5 years or longer.

Protection
The importer should include a statement on all purchase orders that "properly completed certificate of origin as required under NAFTA must be provided".
The importer may have recourse against the supplier in a civil court.
The importer must ensure that they and/or their customs broker have all certificates of origin.
The importer should review all existing certificates of origin for obvious errors such as Origin Criteria A for processed goods, no rule of origin stated and wrong tariff classification. The certificate must also show the tariff classification, which should agree with the tariff classification used at the time of import.
Advise North American suppliers of the necessity to maintain proper records such as purchasing and manufacturing records. Ask suppliers to complete a certificate verifying that they are knowledgeable about the NAFTA rules of origin and the Harmonized System of Tariff Classification. If in doubt, the importer should ask their Customs broker to review the certificate and the supplier's records. This work can be done on a confidential basis.
One option is to require that the supplier act as "importer of record"; thereby, assuming the responsibility to Customs for any errors.

Liability and Penalties
Must keep records pertaining to the origin of the goods for a period of five years or longer. Allow visits by Customs personnel from the importing country for the purpose of verifying that goods meet origin requirements. If supplier refuses to allow such a visit, preferential treatment of their products will be denied.

Protection
Engage a Customs professional to assist in the preparation of certificates of origin. This will ensure that rules are properly interpreted and applied.
Review all existing certificates of origin for obvious errors such as Origin Criteria A for processed goods, no rule of origin stated and wrong tariff classification. The certificate must also show the tariff classification, which should agree with the tariff classification used at the time of import.
Apply for an advance ruling from the appropriate Customs department.
Set up a procedure for periodic review of certificates and application of rules of origin. In particular, purchasing and engineering should be aware that changes in procurement or design might have an impact on whether or not goods continue to qualify for NAFTA.
If critical components are purchased from a third party, including domestic suppliers, request a properly completed certificate of origin. On the purchase order state that "goods must originate within the territories as specified within the NAFTA rules of origin".
Ensure that their North American clients have all necessary certificates. If the exporter is responsible for customs clearance in the country of import, ensure that their Customs Broker has copies of all NAFTA certificates.
Maintain records that provide documentary evidence of country of origin and compliance with the rules of the NAFTA.
If in doubt, ask the Customs broker to review NAFTA certificates and exporter's records.

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