| Title: | FACT SHEET 10 |
|---|---|
| Date: | 1993-12-21 |
| To: | abi |
| Links: | previous, next |
TO : ALL ABI BROKERS.
FROM : ROBYN DAY
SUBJECT : NAF-FACT SHEET 10
DATE : 12/20/93
4351073
DECEMBER 17, 1993
CATEGORY: NAF CO:TO:T:T LAC
TO : REGIONAL DIRECTORS FOR COMMERCIAL OPERATIONS, DISTRICT AND
PORT DIRECTORS
FROM : DIRECTOR, NAFTA IMPLEMENTATION TASK FORCE
SUBJECT: FACT SHEET 10: INDICATOR FOR MERCHANDISE WHOSE REGIONAL
VALUE CONTENT WAS CALCULATED USING THE NET COST METHOD
BACKGROUND:
THE RULES OF ORIGIN OF THE NORTH AMERICAN FREE TRADE AGREEMENT
(NAFTA) DETERMINE WHICH GOODS ARE ELIGIBLE FOR REDUCED DUTIES UNDER
NAFTA. SOME RULES OF ORIGIN REQUIRE THAT A GOOD HAVE A MINIMUM
REGIONAL-VALUE CONTENT (RVC) TO QUALIFY FOR THE NAFTA RATE OF DUTY.
THERE ARE TWO METHODS FOR CALCULATING THE RVC: THE TRANSACTION VALUE
METHOD AND THE NET COST METHOD. THE NET COST METHOD CALCULATES THE RVC
AS A PERCENTAGE OF THE NET COST TO PRODUCE THE GOOD. THE NET COST IS
THE TOTAL COST TO PRODUCE THE GOOD MINUS SALES PROMOTION, MARKETING AND
AFTER-SALES SERVICE COSTS, ROYALTIES, SHIPPING AND PACKING COSTS, AND
NON-ALLOWABLE INTEREST COSTS THAT ARE INCLUDED IN THE TOTAL COST.
MANY OF THESE COSTS ARE AVERAGED ON A YEARLY BASIS AND CAN ONLY BE
ESTIMATED AT THE TIME THE GOOD IS EXPORTED. CUSTOMS NEEDS TO IDENTIFY
THOSE GOODS WHOSE RVC WAS CALCULATED USING THE NET COST METHOD BECAUSE
THERE IS A RISK THAT THE RVC WILL CHANGE WHEN THE FINAL COST FIGURES
ARE CALCULATED AT THE END OF THE PRODUCER'S ACCOUNTING PERIOD. AN
INDICATOR IS NEEDED FOR AVERAGED ENTRIES SO THAT CUSTOMS IS AWARE THAT
ORIGIN IS BEING CLAIMED BASED ON AN RVC THAT IS PROJECTED OR ESTIMATED.
A PARTY PREPARING A CERTIFICATE OF ORIGIN MUST INDICATE IN BLOCK
9 OF THE CERTIFICATE THAT THE NET COST METHOD WAS USED TO CALCULATE THE
RVC. THE CERTIFICATE, HOWEVER, NEED NOT BE SUBMITTED WITH THE ENTRY
SUMMARY PACKAGE. THEREFORE, TO NOTIFY CUSTOMS THAT A PARTICULAR ENTRY
SUMMARY INCLUDES MERCHANDISE WHOSE RVC WAS CALCULATED USING THE NET
COST METHOD, THERE WILL BE A NEW HEADER LEVEL INDICATOR ON THE EI
(ENTRY SUMMARY) APPLICATION THAT WILL INDICATE THAT THE NET COST METHOD
IS BEING USED. THIS INDICATOR IS KNOWN AS THE "NAFTA-NC INDICATOR."
BECAUSE THIS CHANGE IS MANDATED BY THE NAFTA, IT WILL BE
EFFECTIVE JANUARY 1, 1994.
ACTION:
1. EFFECTIVE JANUARY 1, 1994, ABI BROKERS MUST TRANSMIT A NEW DATA
ELEMENT REPRESENTING A NAFTA NET COST CONDITION IF THE RVC OF ANY
OF THE MERCHANDISE INCLUDED IN THAT ENTRY SUMMARY WAS CALCULATED
USING THE NET COST METHOD. THE NAFTA NET COST INDICATOR CODE IS
THE ALPHA CHARACTER "A" IN THE EI RECORD IDENTIFIER 30 (INPUT)
RECORD, POSITION 40. NOTE: IF RECORD IDENTIFIER 30 (INPUT) HAS
BEEN PROVIDED AND THE NAFTA NET COST CONDITION IS NOT APPLICABLE
FOR THE TRANSACTION, THEN THIS DATA ELEMENT SHALL BE SPACE
FILLED.
2. THIS SPECIAL INDICATOR SHOULD NOT BE USED FOR ENTRY TYPES 11 OR
12.
3. FOR PAPER SUMMARIES, INCLUDING NON-ABI ENTRY SUMMARIES, THE
"NAFTA-NC" INDICATOR SHALL BE PRINTED IN BLOCK 33 OF CUSTOMS FORM
7501 UNDER THE INDICATOR FOR RELATED PARTY TRANSACTIONS.
QUESTIONS REGARDING THIS MESSAGE MAY BE DIRECTED TO THE NAFTA
HELP DESK AT (202)927-0066.
MARIA P. REBA